Euro falls to 2-decade low amid recession fears

LONDON: The euro slumped to a two-decade low on Tuesday as the latest surge in European gas prices added to the region’s recession worries and a rebound in US Treasury yields sent the dollar on another tear. Many currencies were under pressure. The euro’s 1.2 per cent drop took it to its weakest since the end of 2002, Reuters reported

Economists said the risks of Europe backsliding into a recession were clearly growing after another big 17 per cent jump in natural gas prices in both Europe and in Britain looked set to push inflation even higher.

Concerns about how the European Central Bank will react were gnawing at sentiment after German Bundesbank chief Joachim Nagel had hit out at the ECB’s plans to try and shield highly indebted countries from surging borrowing rates.

“It will continue to be very difficult for the euro to rally in any meaningful way with the energy picture worsening and risks to economic growth increasing notably,” said

MUFG’s head of global markets research Derek Halpenny.

Frontline traders who spoke to Reuters said there had also been a major dollar order in early trading, perhaps as U.S. markets had been closed on Monday for the July 4th holiday.

One said that coupled with the energy price angst it caused a chain reaction, spilling into equity markets and bond markets as then speeding the euro’s fall as it broke through its 2017 low of $1.0340. The heavy volatility also saw the shared currency drop to the lowest against the Swiss franc since the Swiss National Bank abandoned its currency cap in 2015. It fell against sterling too, although the pound’s own economic and political worries had left it below $1.20 again.