The single European currency plunged on Tuesday, July 5, to its lowest level in almost twenty years against the dollar, approaching parity, carried away by tensions over energy in Europe caused by the war in Ukraine.
At less than 1.03 dollar for one euro, the euro is moving to a level not seen since the end of 2002, in its first days, when the unknowns were still multiple on the new currency. From now on, it is the risks caused by the Russian invasion of Ukraine and the surge in gas prices that it causes, which weigh on the euro.
The German central bank also expressed doubts on Monday with regard to the ECB’s plan to limit the spreads between borrowing rates of the various euro zone states and thus the risk of a new debt crisis.
On the bond market, government bond rates in Europe, which have been very volatile in recent weeks, remained stable after their sharp rise on Monday.
Controlling rising prices without dealing a fatal blow to the eurozone economy
In addition to government debt, the ECB is facing the double challenge of controlling the rise in prices as quickly as possible, while not dealing a fatal blow to the economy of the euro zone, already hard hit by the war in Ukraine. and its consequences on raw materials.
The price of Dutch TTF, the benchmark for natural gas in Europe, reached 176 euros per megawatt hour on Tuesday, more than double its level in early June. Before the Russian invasion of Ukraine on February 24, it was trading well below 100 euros per megawatt hour.
In Norway, a country which pledged to sustainably increase its gas deliveries to the EU in June, a strike threatens to cut exports by nearly 60% from Saturday.
The European Central Bank (ECB) has little leeway to tighten its monetary policy, since a rise in rates could make the debt of certain countries too heavy to bear. In this context, any recovery of the euro must be seen “like a short-term rebound”explains to Agence France-Presse Fawad Razaqzada, an analyst at StoneX, who fears that without major change on the Ukrainian front or the ECB, the euro will continue to fall.
At 12:45 p.m. (Paris time), the euro fell 1.16% to 1.0299 dollars, after sinking to 1.0281 dollars. Since the start of the year, it has lost 9.4% against the greenback.