1 euro is equal to 1 US dollar for the first time in 20 years

Image Source: AP/FILE PHOTO The change means that European companies and consumers will pay more for the goods and services they import, while European exports become immediately cheaper in international markets.

Euro News reported that the euro and dollar have reached parity for the first time in 20 years, reflecting market sentiment that the European economy is heading into a deep recession as a result of Russia’s invasion of Ukraine.

Today, 1 EUR is equal to 1 USD. The change means that European companies and consumers will pay more for the goods and services they import, while European exports become immediately cheaper in international markets. The euro has experienced a dramatic loss of value since the beginning of February when it was priced above $1.13.

Euro News reported that the decline accelerated in recent weeks as fears spread that Russia, the EU’s main energy provider, was going to cut gas flows completely in retaliation for Western sanctions. All eyes will be on the euro to see if it falls below the US dollar. The last time this happened was in November 2002, when the euro was priced at $0.99.

Since then, the euro has risen steadily, reaching nearly $1.60 in the summer of 2008, when the Great Recession was wreaking financial havoc across the US. But Russia’s full-scale attack against Ukraine has turned all the tables, taking a huge toll on the EU economy. Euro News reported that the attack has upended energy markets and sent gas bills to all-time highs.

The sudden jolt has triggered record-breaking inflation across the eurozone, along with a gradual slowdown in economic activity, which peaked at 8.6 per cent in June. The combination of both factors has brought back the ghost of stagflation, a dangerous mix that stifles growth while goods remain excessively expensive for consumers and companies.

The European Central Bank has already raised interest rates to contain inflation and plans to continue if the situation worsens. But some analysts have criticized the ECB for moving too late compared to its counterparts in the US, UK and Canada.

Robin Brooks, chief economist at the Institute of International Finance (IIF), wrote on Twitter: “Perhaps at some level, the euro versus US dollar parity is just a number.” “But markets are made of humans who care about levels, which gives a special psychological significance to equality, at least not since we haven’t seen[equality]in 20 years. It’s a big deal.”

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