Euro and Dollar Reach Parity for First Time in 20 Years

For the first time in almost 20 years, the exchange rate between the euro and the US dollar is equal. This comes after the euro fell nearly 20% in value over the past year compared to the US dollar.

In the last two decades, the euro has always traded above the US dollar, even reaching a value of $1.60 during the 2008 financial crash. Indeed, over the past decade, the euro’s value has been, on average, $1.18.

Now, the eurozone’s economy is slowing, and recession fears are growing. EU countries have also been hamstrung by an energy crisis brought about by Russia’s attack on Ukraine. The energy crisis has created so much instability that a European recession is likely, according to many analysts. 

Another important factor behind the euro’s downfall has been the inability of the European Central Bank to act as aggressively against high inflation as its US counterpart, the Federal Reserve. 

What does this mean for me? 

This year, the US dollar has won significant ground against most major currencies, as the Fed’s interest rate hikes have made the dollar a safe haven for investors seeking respite from red-hot global inflation.

For Americans, the dollar’s rise should lessen the pain caused by 40-year high inflation; but for Europeans, the sliding euro will make travel more expensive and compound the effect of rising consumer prices.