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Euro nears five-year low as growth fears mount

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The Euro stayed flat on Monday, close to a five-year low against the safe-haven Dollar, on escalating global growth slowdown fears.


The economic impact of the war in Ukraine – predominantly surging food and energy inflation – has weighed on the single currency, which so far this year has weakened against the Dollar by more than 8%. The difference in response to surging inflation by the Federal Reserve and European Central Bank (ECB) has also impacted the Euro, Reuters reports.


Data published at the end of last week revealed inflation in the eurozone increased to a fresh all-time high, fuelling the case for the ECB to hike rates this month.


Jeremy Stretch, head of G10 FX strategy at CIBC forecasts headwinds on the Euro to continue as the ECB is expected to increase rates on 21st July by “a mere 25 basis points.”


“ECB action remains moderate when compared with a 75bps Fed hike. Beyond ECB monetary policy discussion, the primary European Union risk variable relates to the energy sector,” he stated.


The single currency was trading at $1.0423 at the time of writing, just above the five-year low of $1.0349 recorded in May.


Global recession concerns have bolstered the Dollar, despite markets reducing their rate hike forecasts. As it stands, the market is pricing in an 85% chance of another 75 basis points rise in July, with rates at 3.25% to 3.5% by the end of the year, before cuts are made in 2023.


The Dollar index increased 0.1% to 105.140, not far from June’s 20-year high of 105.790.


Moreover, the Australian and New Zealand Dollars both fell to two-year lows on Friday, and remained not far from these levels on Monday, Reuters reports.


“The Aussie and other commodity currencies and even Euro and Sterling will likely decline even more into the week, given markets currently are super-focused on the risk of a sharp slowdown in the global economy,” stated Carol Kong, Commonwealth Bank of Australia currency strategist.


Elsewhere, Sterling dropped to a two-week low of $1.1976 on Friday and stood at $1.21170 at the time of writing.

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media contact

About

deVere Group – Foreign Exchange’s Public Relations Department deals with all areas of the media and external communications including international, national, regional, local, trade, consumer, print, broadcast, social and online. The Department aims to provide a helpful service to journalists, broadcasters and editors, amongst others, and reply to all media enquiries, including urgent enquiries out of hours, within agreed deadlines.

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Our press office does not have access to client details and will not be able to assist with individual client enquiries. Please contact deVere Group – Foreign Exchange’s Head of Public Relations on [email protected] or call +44 2071220925.