Euro slips to 20 year lows against dollar as recession fears

Euro slips to 20-year lows against dollar as recession fears mount

A euro currency symbol is on display in the visitor center of the European Central Bank (ECB) building in Frankfurt.

Alexander Kraus Bloomberg | Getty Images

The euro fell to its lowest level in two decades on Tuesday, falling over 1% to $1.0283 during the session.

Fears of a eurozone recession are mounting, gas prices are rising and the Ukraine war shows no signs of abating.

Euro-zone inflation hit a record 8.6% in June, prompting the European Central Bank to advance markets at its July meeting of its intention to raise interest rates for the first time in 11 years.

However, growing recession fears could limit the central bank’s ability to tighten monetary policy. The July Sentix economic index showed on Monday that investor sentiment in the 19-nation euro zone fell to its lowest level since May 2020, signaling an “inevitable” recession.

Record inflation in Europe has been fueled by skyrocketing gas prices in recent months.

Natural gas prices in Europe continued their inexorable rise on Monday, climbing to highs not seen since early March as planned strikes in Norway added to market concerns over Russian supply cuts. The front-month gas price on the Dutch TTF hub, a European benchmark for natural gas trading, was last up 7.8% to 175.5 euros ($180.8) per megawatt-hour.

All of these factors hit the euro hard. The euro zone currency has lost over 9% against the dollar since the start of the year.

Meanwhile, the dollar’s strength continues as risk-averse investors seek safe haven and the US Federal Reserve embarks on what appears to be an aggressive rate hike regime.

After raising interest rates by three-quarters of a percentage point in June, Fed Reserve Chair Jerome Powell said the central bank could raise interest rates by a similar magnitude next month.

— CNBC’s Sam Meredith contributed to this report