The persistence of the price of the euro below the dollar does not seem to be an anecdote and could become a problem for the European economy. Yesterday in the middle of the afternoon with one euro you could only change 0.99 dollars. That means that buying goods and services in the US currency is becoming more expensive for Europeans every day. This minimum also occurs in a scenario with the price of electricity skyrocketing to its maximum level in Spain since the corrective measures were taken.
The floor reached yesterday is the lowest level at which the common currency is trading in 20 years. Since the highs of July 2008, when one euro obtained more than 1.5 dollars, there has been a 37% drop. "Although due to purchasing power parity the dollar should be at the level of 1.5, it is the Fed's superior determination in raising interest rates with respect to the ECB that makes the dollar appreciate", reflects Jaume Puig, general director of GVC Gaesco Management. Luis Benguerel, a partner at Anattea Gestión, adds that "the situation in Germany does not help", especially after the Bundesbank's warning that it may enter a recession and inflation will persist. "In the end, everything seems to indicate that the US is going to come out before the crisis," he clarifies.
From AFI, the currency analyst José Manuel Amor points out that the loss of the parity is the culmination of a process that started in 2021. He does not see a revaluation of the common currency in the short term and places as the main causes "the differential of rates between the two economies, the elections in Italy or gas prices”.
Yesterday those prices continued to rise, reaching 276 euros per megawatt, after they soared on Monday due to Russia's announcement to close the Nord Stream 1 gas pipeline for three days for "maintenance" from August 31. Precisely the continuous rise in these energy costs has led to the price of electricity in Spain today standing at 436.24 euros per megawatt hour. It is the highest level since the European Commission agreed to put a cap on the price of gas that sets the electricity price on June 15 in the Iberian Peninsula.
Amor points out that from the AFI analysis service they believe that the euro will move in a range between 0.97 dollars and 1.03. Just yesterday, throughout the day the currencies were jumping from the parity continuously. For analysts, losing the level of one dollar for one euro is something anecdotal and they warn that the risks have been in the market for months. Puig recalls that in the end "the masses of investors' money buy those strong currencies that pay more." Benguerel also does not see a rebound in the euro in the short term because the conditions are the same on the European side.
This week the Bundesbank warned that "the probability that the GDP will decrease in the winter semester has increased significantly" and added that it expected the inflation rate to reach "new highs in the autumn", when price increases in the country could reach “the order of 10%”, reports Europa Press.
Last week, the German representative on the board of the European Central Bank (ECB), Isabel Schnabel, recognized that the signs pointing to a slowdown in growth in the euro zone open the door for the region's economy to enter a technical recession , while it will probably take some time for inflationary pressures to dissipate. In this way, with a view to the meeting of the Governing Council of the ECB next September, Schnabel was in favor of the entity acting decisively again.
In the case of the United States, at the end of this week representatives of the United States Federal Reserve and other central banks will meet in Jackson Hole. It remains to be seen if further action is taken in the US market. The markets are very aware of that meeting.
Yesterday the Ibex left 0.71% in the session with strong increases in Acerinox (3.82%), Repsol (3.63%) or Arcelormittal (3.15%). Meanwhile, the losses of Cellnex (-3.59%), Grifols (-3.15%) and Rovi (-2.79%) stood out. In this scenario, the main markets of the Old Continent closed with mixed behavior. London's Ftse 100 fell 0.61%, Paris's Cac 40 fell 0.26% and Frankfurt's Dax fell 0.26%, while Milan's Ftse Mib rose 0.97%.
Composite Purchasing Managers' Indices (PMI) were released yesterday. The PMI for the euro zone showed that the deterioration in private sector activity in the region has intensified in August.
