Euro reaches parity with Dollar: Who it benefits and how it impacts
The Euro has been losing strength versus the Dollar since the beginning of the year, when it was hovering at $1.13, owing to the US Federal Reserve's strong inflation-fighting campaign, as well as larger global disruptions caused by Russia's invasion of Ukraine. It's a combination of causes, the most prominent of which being the war in Ukraine.
FollowFor the first time since the Euro's inception over two decades ago, the Euro and the US Dollar are trading at practically one-to-one exchange rates. The rising Dollar is excellent news for Americans planning a trip to Europe or purchasing items overseas. It has the ability to cut commodity prices, such as grain, and hence help to alleviate the unrelenting inflation that has sent consumer and corporate spending skyrocketing. However, many believe the Euro's decline indicates a slowing of global commerce, which adds to recession fears.
The Euro has been losing strength versus the Dollar since the beginning of the year, when it was hovering at $1.13, owing to the US Federal Reserve's strong inflation-fighting campaign, as well as larger global disruptions caused by Russia's invasion of Ukraine. It's a combination of causes, the most prominent of which being the war in Ukraine.
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The battle disrupted food supply and pushed global energy costs skyrocketing, notably in the European Union, where many nations rely significantly on Russian fossil fuel imports. The European Union tried to wean itself from Russian oil as part of a pressure campaign against its eastern rival, while Moscow significantly curtailed gas deliveries. This increased the expenditures for Europeans who were already reeling from the outbreak.
In the United States, the Federal Reserve has been rapidly raising interest rates, driving Treasury bond yields higher and making the dollar more appealing to investors than the euro. America's central bank hiked rates three times in 2022 and has indicated that four more rises are expected as part of its attempt to manage inflation. The Dollar is regarded as a safe haven, and its value has risen as investors navigate an uncertain economic landscape in Europe and abroad.
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Traveling overseas and spending in US dollars will become more expensive for Europeans and anyone earning in euros. For Americans who consider Europe to be a popular vacation destination, the near 1-to-1 ratio implies they will not only have an easier time comprehending costs, but will also have more buying power while visiting eurozone countries such as France, Germany, Spain, Italy, and Greece. Currency dynamics may also benefit Americans travelling outside of the eurozone. Over the previous month, the US Dollar has gained ground versus the Mexican peso, the Canadian and Australian currencies, and the South Korean won.
