As of today, EURUSD reached a price of 1.0 on the charts. This occurrence calls for special attention because the last time this event materialised was in November 2002, approximately 20 years ago.
Since June of 2021, the euro has been depreciating relative to the US dollar, suffering a 17% decline in price from 1.2150 to 1.0. This downturn accelerated especially during the preceding months starting from February.
The depreciation of the euro is a transpicuous reflection of the recent Russian invasion-caused recession in the eurozone. As we have highlighted in previous articles, Russia was a major supplier of gas for the majority of EU member states.
Fear of potential Russian retaliation against western countries had already pressured the euro negatively. Furthermore, since the full-blown Ukraine invasion, 12 EU countries have suffered a partial and even total depletion of Russian gas supplies. This led to current market conditions, with the euro trading at a 20-year low against the US dollar.
One of the implications of this euro shock is that imports become costlier for eurozone countries, while exports become cheaper.
The European Commission is set to present its updated economic forecast on Thursday, in which a new downward revision regarding the current situation is expected.