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Euro hits new 20-year low as recession looms ever larger

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(Photo: Envato Elements)

LONDON — The euro dived to a new two-decade low against the dollar and European stock markets fell Tuesday as weak economic data raised fears of recession amid an energy crunch.اضافة اعلان

The single currency tumbled to $0.9901, but later clawed back losses to return above parity with the dollar in afternoon trading as the greenback was hit by poor US economic data.

The dollar had strengthened this week against other currencies ahead of a speech later this week by US Federal Reserve (Fed) chief Jerome Powell, as markets speculate that the central bank will further tighten its monetary policy.

Higher interest rates boost the greenback as they make dollar-denominated debt more attractive to investors.

But the euro is also weighed down by a gloomy outlook for the eurozone economy as Russia’s war in Ukraine has sent energy prices soaring.

The shared unit had already plunged below parity Monday on recession fears to plumb the lowest levels since 2002, when it came into physical circulation.

In the latest blow, S&P Global’s closely watched monthly composite purchasing managers’ index (PMI) showed that eurozone economic activity fell for the second month in a row in August.

“Eurozone PMIs ... confirm concerns of an impending recession in Europe on the back of high inflation and energy crunch, as they signal declining activity for two months in a row,” warned Citi analyst Luis Costa.

“The energy crunch remains an overarching threat to economic stability in Europe,” he added.

European equities slid amid stubborn worries that the Fed will carry on ramping up interest rates to fight inflation.

On Tuesday, European natural gas prices fell, although they remain elevated on fears of a halt to Russia’s gas deliveries.

The Dutch TTF Gas Futures contract stood at 268.45 euros per megawatt hour, down from Monday.

Gas had spiked to record peaks in March after key producer Russia launched its invasion of neighboring Ukraine.

That has sparked surging domestic energy bills, fuelling decades-high inflation that has prompted tighter monetary policy around the world.

Meanwhile, US natural gas prices hit a fresh 14-year high on Tuesday.

“As it has become painfully obvious, natural gas is a much more effective weapon in the hands of Russian politicians than the Kalashnikov in the hands of their soldiers,” noted PVM analyst Tamas Varga.

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