The euro has reached parity with the dollar, for the first time since its introduction

On Tuesday, July 12, the euro fell to one dollar, a threshold not reached since the year it was traded two decades ago. The single European currency is affected by the risk of cutting off Russian gas supplies to the European Union.

Investors favored the US currency, which has risen nearly 14% since the start of the year and briefly traded at $1 to €1 when questions about the new single currency weighed on its price.

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The market is worried about a major energy crisis on the Old Continent, which calls into question Russia’s restoration of gas flows after a maintenance outage on the Nord Stream 1 gas pipeline. This situation is raising fears of a recession in Europe.

Energy from Russia ‘At the heart of Europe’s turmoil’ Canada’s announcement on Saturday that it will return Nord Stream gas pipeline turbines to Germany to ease an energy crisis with Russia. It has no positive effect.comments Jeffrey Haley, an analyst at Oanda.

Nord Stream 1 gas pipeline under maintenance

Russia’s major energy group Gazprom on Monday began 10 days of maintenance on the Nord Stream 1 gas pipeline, and Germany and other European countries are waiting to see if gas can be reconnected. The main question is whether the gas will return after July 21. Looks like the markets have already made up their minds.”Mr. Haley notes. For Mark Hefel, analyst at UBS, the end of Russian gas shipments to Europe “It would cause a eurozone-wide recession with three consecutive quarters of economic contraction.”. Consequently, the European Central Bank (ECB) will find it difficult to tighten its monetary policy to combat accelerating inflation without worsening the economic situation.

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The US Federal Reserve (FED) has more freedom to continue raising interest rates, as employment figures released on Friday showed that the US economy is improving so far. The slide of the euro could continue.

Difficulty against the Swiss franc

On Wednesday, inflation data from France, Germany and the United States may raise investor concerns about the divergence of economies on both sides of the Atlantic. “If US inflation is stronger than the market expects, it could benefit the dollar”Fouad Razakzadeh, analyst at Forex.com, said investors are betting that the Fed will have to move faster to raise its rates.

The Euro rose very slightly after hitting $1, and it was trading around 12:10pm for $1.0024. Investors struggle to cross the token parity threshold And to drop the euro below that level, estimates Walid Godmani, an analyst at XTB. “This slow pace proves that this is a long-term movement, selling the euro and buying the dollar, not market manipulation.”Mr. Razakzadeh adds.

The euro is also in trouble against the Swiss franc, which is also a safe haven: it fell to 0.9836 Swiss francs, the lowest level since 2015. The dollar also shines against other currencies considered vulnerable: the pound fell to 1.1807 dollars, the lowest since March 2020, when the Covid-19 epidemic in Europe, in the midst of the Brexit negotiations, began to push the British currency to its lowest level since 1985.

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The world with AFP

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