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Euro stands on the verge of parity with US dollar due to recession fears


A financial trader monitors data on a computer screen as a television desktop shows euro banknotes at the Frankfurt Stock Exchange in Frankfurt, Germany.

Martin Leissl | Bloomberg | beautiful pictures

The euro hovering roughly equal to U.S. dollar on Tuesday, as the eurozone energy supply crisis and economic woes continue to affect the single currency.

The euro was trading 0.3% lower around $1,0007 at 9:35 a.m. London time on Tuesday morning.

Recession fears have grown in recent weeks due to increased uncertainty over the bloc’s energy supplies, with Russia threatening to further reduce gas flows to Germany and the broader continent.

The prospect of a more severe economic slowdown has also cast doubt on whether European Central Bank will be able to tighten monetary policy strongly enough to curb record-high inflation without deepening the economic pain.

Jeremy Stretch, head of G-10 FX strategy at CIBC Capital Markets, told CNBC’s “Street Signs Europe” on Tuesday: “It’s an important psychological level and it’s clearly very much at stake here. this.

Stretch said the prospect of the euro falling below this level is a reflection of growing recession fears across the eurozone. It comes amid growing concern about the prospect of a permanent cut in Russian gas supplies and a slower pace of monetary policy tightening by the ECB than other major central banks.

“The ECB is in a very, very difficult situation. You could argue that the ECB is pretty late both in terms of ending their bond purchases but also looking at tightening monetary policy,” Stretch said. speak.

He added while the ECB “clearly missed a trick” Last meetingmedium-term inflation expectations have retreated to the central bank’s target threshold.

“It’s an indication that perhaps in the medium to long term those inflation expectations aren’t necessarily going to be materially depressing, but it’s clear from the ECB’s policy signaling standpoint… The need for action and urgent action is clear,” says Stretch.

This is a developing news story and will be updated shortly.



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