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The euro is stuck under a lot of pressure as its economy stumbles towards a recession.
After a brief dip below that level earlier this month, it is still above parity with the dollar. There is mounting pessimism about the euro area's economy. It has fallen more than 10% against the dollar this year, and many analysts think it will fall further.
The economic gloom is caused by the disruption of Russian energy supplies to Europe. There is a 50% chance that the euro region will fall into a recession in the next six months. It might already be in one.
Italy is worried about political turmoil that led to the departure of the Prime Minister. The S&P Global Ratings lowered its outlook on the country's debt, and a key gauge of risk, the spread of Italian bond yields over Germany's is the highest since 2020. Credit default swaps show up with nerves over Italy leaving the euro.
The low for the euro in 2012 was $1.20, and it's worse now. After falling to 99.52 US cents on July 14, it was back up to $1.02.
It could slide as low as 95 cents given Europe's exposure to the energy crisis, according to two banks. The odds of a drop to parity by the end of the year are 70%, according to option pricing. There is a consensus forecast for the year end.
When high debt levels and soaring bond yields led to speculation that the region could break up a decade ago, there wasn't much talk about it. At the time, the European Central Bank president said he would do "whatever it takes" to protect the euro. The European Central Bank has moved faster to keep markets in check.
Themos Fiotakis said that the situation is more dire than it was a decade ago. There is less of a problem for the integrity of the euro. Growth could be a bigger issue in the future.
The poor economic backdrop is a factor in the currency's depreciation. Germany, Europe's No. 1 economy, was stagnant while inflation in the 19-member currency bloc soared to a new record.
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Monetary policy divergence is also included. The Federal Reserve tightened its benchmark interest rate by 75 basis points on Wednesday after raising it by 50 basis points a week earlier.
Euro-zone break up predictions are still being made. A euro-dollar rate of 80 cents is the target of the founder of EDL.
The European Central Bank is being proactive as they are. Along with its rate hike this month, it unveiled a new tool meant to prevent the spread of debt between euro members.
Nicolas Forest said that the main risk is inflation. The most important message was how to get the situation normalized. The idea is to not fix anything.
Italian politics are complicating the job of the European Central Bank. The country will hold an election in September and the rightwing alliance is in the lead. It's difficult for the European Central Bank to say market moves are unwarranted because of the shift in bond prices.
According to officials familiar with her thinking, the leader of the far-right plans to stick to the EU budget rules. According to investors, it is unlikely that Italy will jeopardize access to European Union funds.
That support is due to be paid as part of the NextGenerationEU program, a breakthrough in fiscal sharing that separates the EU from past crises.
Rohan Khanna said that no-one thought Europe could cross the Rubicon. There was a high point in European integration at that time. It is a very different world than it was in 2010.
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