Euro kisses parity with US dollar for first time in two decades

The euro kissed parity with the US dollar for the first time in 20 years today.

Fears of the Continent tipping into recession have strengthened recently due to bets that Russian president Vladimir Putin will choke energy supplies to the bloc.

The currency used by 19 countries – soon to be 20 when Croatia adopts the euro in January – fell to $0.9999 very briefly today.

European – especially German – businesses are heavily reliant on Russian gas to produce goods and services. A large proportion of energy consumed by households is also provided by Russia.

Weaker gas flows from Russia would reduce energy supplies and raise prices beyond their already elevated levels, chilling economic activity in the area.

Inflation is already running at a record high in the eurozone, hitting 8.6 per cent last month.

Steep rate hikes by the US Federal Reserve has also made dollar-denominated assets more attractive, prompting investors to ditch the euro.

The European Central Bank has resisted raising interest rates despite living costs rising at more than four times its two per cent target.

The pound has also come under intense pressure due to Fed chair Jerome Powell and co accelerating rate rises. It is trading at around a two-year low against the greenback.

“There’s no good news for the euro at the moment,” Michael Hewson, chief market at CMC Markets UK, told City PM, adding he thinks the euro will drop to $0.96.