The United States Dollar (USD) exchange rate to European common currency (Euro) was the exact same in the early hours of Tuesday for the first time in 20 years.
The Euro-USD exchange rate opened at 1.003 on Tuesday and dropped to 0.999 before moderating to 1.0036 at the time of writing.
The slowing global economy amid rising interest rates has made the United States Dollar attractive to global investors who were looking to avoid the negative impact of the projected economic recession and ensure they have in their possession operating capital for possible re-entry at lower price levels or to avoid the impact of persistent increase in borrowing costs (interest rates) in the near-term.
As shown below, the Euro-USD pair started declining on February 10, 2022 when the United States announced that Russia was planning to invade Ukraine.
The invasion, which eventually happened on February 24, has disrupted the global economy, bolstered commodity prices, and increased global risks and uncertainties. In an effort to rein in the high inflation rate, economies started raising interest rates in a move to curb escalating inflation rates.
These aggressive increases have started dragging on new investments, new job creation, consumer spending, retail sales and export orders. And financial experts are now predicting it could get worse with Russian sanctions.
Western nations are working on imposing additional oil sanctions on Russia. This, JP Morgan predicted could push oil prices above $350 a barrel and further complicate the global economy.
All the aforementioned are responsible for the increase in dollar strength against Euro and other global currencies to over 20 years high.
