Its value continues to fall: the euro fell further on Tuesday, August 23, to levels not seen for twenty years against the dollar, the contraction of activity in the euro zone this month confirming traders' fears about the consequences of the energy crisis.

Around 9:15 a.m. GMT (11:15 a.m. in Paris), the euro lost 0.04% to $0.9939, after falling to $0.9901, a level not seen since December 2002 and the year of its circulation.

The composite flash index of global activity, which measures private sector activity, fell in August in the euro zone to 49.2, its lowest level in 18 months, marking a contraction in activity.

“These data confirm our scenario of a necessary tightening of the policy of the European Central Bank even as the economy falls into recession”, warns Jack Allen-Reynolds, analyst at Capital Economics.

The pound was doing a little better (+0.17% to $1.1775) as the British PMI remained above 50 points in August, but the currency is not far from its lowest since the beginning of 2020 reached in start of the session at 1.1718 dollars.

“We can question the rationality of these unprecedented movements”

The two currencies plunged for several sessions after the announcement of a halt in Russian gas deliveries via the Nord Stream 1 gas pipeline between August 31 and September 2.

"Faced with the risk of a shortage hanging over Europe this winter, we note a certain price sensitivity to the slightest bad news. Yesterday is a very good example, and we can question the rationality of these unprecedented movements. “, wonders Guillaume Dejean, analyst at Western Union.

He points out that the euro is also in difficulty against the Australian and Canadian dollars, and that the currency is also at its lowest since 2015 against the Swiss franc, a safe haven.

The question now is how far the tumble of the euro can take him.

“The strength of the dollar depends in part on the idea that the Federal Reserve will issue a message on a strict monetary policy during Jackson Hole”, where the central bankers will meet at the end of the week, recalls Lee Hardman, analyst at MUFG.

With AFP

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