The euro is reaching parity with the dollar, benefiting sectors such as tourism, but making imports more expensive and making the fight against inflation more difficult
One euro, one dollar. For the first time since December 2002, the most traded cross in the foreign exchange market has reached parity. Moreover, the euro has sometimes lost that “one-to-one” this week, given the prospect that the Federal Reserve (Fed) will even outpace the European Central Bank (ECB) in the cycle of rate hikes that started this year to curb inflation.
The single currency’s path has been full of obstacles in a year when it has already lost more than 12% against the dollar, from the $1.13 it was moving at the start of the year. But what factors explain this behavior and how will it affect consumers’ wallets?
You have to go back many years to see a similar bleed from the single currency in its intersection with the dollar, the most traded – and also one of the most stable – on the foreign exchange market, operating 24 hours a day, seven days a week. . “In times of uncertainty, investors often turn to investments and currencies that are considered safe, such as gold or, in this case, the US dollar,” say analysts at Allianz Global Investor.
That safe-haven factor partly explains the dollar’s greater strength. But what has undoubtedly set the trend is the aberrant pace that central banks’ monetary policy has taken to counter inflation, much more vigorously in the US as the Fed kicked off the cycle of rate hikes from March onwards. Three walks totaling 25, 50 and 75 basis points. The ECB, on the other hand, will start raising the money price in July. And he has been much more laudable in his speech to defend his fight against inflation without triggering a recession.
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
