Euro tumbles to 20-month low as experts warn it could soon equal the dollar

The single currency has dropped by 0.25% on Thursday to $1.052, a 20-month low

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The Independent Online

The euro has fallen to its lowest level against the US dollar since March 2015, as the US currency continues to strengthen following the latest robust economic data.

The single currency has dropped by 0.25 per cent in early trading on Thursday to $1.052, a 20-month low, before mustering a slight recovery to trade at $1.0551.

The confirmation that German growth halved to just 0.2 per cent in the past three months has not helped the currency to bounce back.

The euro’s latest slide comes as the dollar continues to strengthen, as traders are betting on higher US interest rates and inflation.

The dollar's surge is based on a belief that Donald Trump's presidency will witness a bump in inflation that will drive US interest rates higher and potentially see substantial dollar capital brought home by US corporates.

The President-elect ’s plan to spend $1 trillion on rebuilding infrastructure in the US is also pushing the euro down against the US dollar.

Kathleen Brooks of City Index said: "The prospect of fiscal largesse under a Donald Trump presidency, and a multi-billion stimulus plan, potentially as early as next year, is a key driver of the stronger dollar right now, as it could free up the Fed to hike interest rates in 2017 at a faster pace than most in the market think is likely."

Michael Hewson, of CMC Markets, said the euro could sink to parity against the US dollar.

"To stabilise we need to see a recovery back through the 1.0730 area. If we can’t sustain a recovery we could well head towards new multi-year lows towards parity.“

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