The economy today
The euro at parity with the dollar: how far will the slide go?
Audio 03:55
For the first time since October 2000, the euro and the dollar have reached the symbolic threshold of parity.
© AFP
By: Dominique Baillard Follow
3 mins
A euro is now worth a dollar, at least.
This is the course observed briefly Tuesday, July 12 on the foreign exchange market.
Since then, it has risen slightly but the trend is downward.
The European currency has almost never been so weak against the greenback.
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The strict parity between the euro and the dollar is a symbolic, even psychological, extremely strong threshold.
The last time this happened was in October 2000, the US economy was in great shape while the euro zone was slipping, the fall in the euro mainly reflected this contrast between the two major western economic regions.
It's kind of the same thing happening right now.
Even if the threat of recession hangs over the two continents, the world's largest economy appears to be in much better shape than the euro zone.
Moreover, the rise in the Federal Reserve's key rates attracts investors, so there is a
rush
right now on US currency.
Rather than a drop in the euro against the dollar, it would be more accurate to speak of the improvement in the greenback.
Since the beginning of the year, the euro has lost 10% against the dollar but has remained stable against other currencies.
A parity that reflects the fear for the economy of the euro zone
The process was set in motion with Russia's war against Ukraine.
Europe has almost no oil and first suffered the surge in hydrocarbons, then inflation.
The crumbling of the euro was the next logical step, anticipated for several months.
The euro is a bit like a pressure valve that jumps under the accumulation of bad news.
Its existence appearing in danger at the time of the debt crisis in the 2010s, it is not called into question today.
But its value is fading.
And no one knows today how low the single currency can go.
Bad news for the trade balance?
For countries in chronic deficit and very dependent on oil imports like France, this is very bad news.
The bill will soar and this surge will fuel inflation.
Overall, 60% of imports into the euro zone are invoiced in dollars, so this is largely negative for the trade balance.
Major exporting countries such as Germany or Italy can benefit, but only moderately, since most foreign trade is internal to the euro zone.
On the other hand, the tourist countries of the euro zone, all the countries around the Mediterranean, will appreciate the presence of American tourists.
They will be able to spend more with the same amount of dollars.
And this will partially offset the increase in the oil bill.
What can the European Central Bank do to defend the euro?
It can, it must raise its key rates to lower the pressure.
It has not started this essential operation to curb inflation while the Fed has already made three consecutive hikes.
The problem is that it can also precipitate the recession.
It is therefore a difficult question that will be asked at the next meeting of the Governing Council of the ECB.
It is scheduled for next week.
Chance of the calendar, it is also on that day that we will know whether or not Russia reopens the gas tap to Europe, cut at this time for annual maintenance.
The resumption of Russian deliveries is the defining issue for the Eurozone economy.
► In brief
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The legal battle is coupled with a communication battle that takes place, guess where?
On Twitter !
Where Elon Musk has already reacted with derision to this new episode, he is followed by 100 million people.
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