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EUR/USD collapses to parity as EU faces economic catastrophe

The euro just keeps on dropping as investors are selling the single currency due to several economic issues.

Another day, another new low for the single currency as the freefall continues. This time, the EUR/USD pair traded at 1.00 for the first time in twenty years, and it looks like the euro could fall further lower as the real situation in Europe is really that bad.

Europe is currently in increased danger of experiencing an energy catastrophe. On Monday, German Economy Minister Robert Habeck stated that it was impossible to predict whether the Nord Stream 1 gas pipeline would resume operations following the maintenance.

German economy is facing a massive collapse

Meanwhile, the Economic Sentiment Index fell to -53.8 in July, according to the German ZEW headline statistics, below expectations of -38.3.

The Current Situation sub-index came in at -45.8 in July vs. -34.5 forecasts.

The current month’s reading of the Eurozone ZEW Economic Sentiment Index was -51.1 as opposed to the previous reading of -28.0 and the predicted reading of -32.8.

β€œThe current major concerns about the energy supply in Germany, the ECB’s announced interest rate hike, and further pandemic-related restrictions in China have led to a considerable deterioration in the economic outlook. As a result, expectations for energy-intensive and export-oriented sectors of the economy have fallen particularly sharply, and private consumption is also assessed as significantly weaker.” the survey said.

Moreover, this winter, cities all around Germany intend to utilize sports stadiums and exposition halls as “warm-up zones” to assist chilly residents who are unable to afford soaring heating expenses.

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Last but not least, due to a decline in Russian gas shipments, Germany’s largest residential landlord, who owns over 490,000 units, is planning to implement energy rationing that will prevent renters from having heat at night. As a result, hot water will also be a luxury in Germany.

On the US dollar side, according to the Federal Reserve Bank of New York’s monthly Survey of Consumer Predictions, which was released on Monday, US consumers’ expectations for inflation over the next year increased from 6.6 percent in May to 6.8 percent in June. The three-year inflation predictions dropped from 3.9 percent to 3.6 percent, but the dollar still outperformed its competitors.

Additionally, White House Press Secretary Karine Jean-Pierre informed reporters that she anticipated the Consumer Price Index (CPI) print to be “highly elevated” prior to the release of Wednesday’s CPI data.

Once the euro falls below 1.00, there might be another lower, targeting 0.95 in the near term.

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