Euro Rapidly Approaching Parity with USD: What’s Next?

The euro collapse remains the hottest topic on global markets, and this is why it’s worth revisiting it more often than ever before. Indeed, the euro is apparently hurtling towards scandalous parity with the U.S. dollar for the first time since its early years of existence. Investors are betting it could get a lot worse for the common currency. The euro plunged more than 11% against the greenback over the last six months and 14.75% compared to a year ago. The descent adds to the eurozone’s inflation woes and complicates the European Central Bank’s plans for unwinding its pandemic stimulus.

Concerns continued to increase among investors prompted by soaring inflation and recession fears across the Eurozone and the U.S. In response to jumping consumer prices, the Federal Reserve and the European Central Bank both ramped up the pace of interest rate hikes, however, promptness of their reactions has been different – and the ECB’s lingering seems to have materialized as the single biggest blame and its sole responsibility for such a precarious situation.

The DXY U.S. Dollar Index, which, as we know, measures the value of American currency against six major foreign currencies, has jumped nearly 12% this year to a two-decade high.

Today, on July 8, the euro extended losses against the USD to briefly sell below $1.01 and stand around a 20-year low that was recently registered.

The euro tumbled 0.61% against the dollar at the time of writing to even more rapidly approach to parity at 1.01572. Closes below 1.0072 would suggest it could return to the record low at 0.8228 when traders are just beginning to get excited about a parity test.