Photo by Ibrahim Boran on Unsplash

The euro sank to its lowest level in two decades on Tuesday as fears of a eurozone recession grew, with gas costs skyrocketing and the Ukraine conflict showing no signs of abating. The euro fell 1.55 percent versus the dollar during the session, reaching $1.0259. The dollar index rose 1.32 percent to 106.53.

Inflation in the eurozone reached a record 8.6 percent in June, forcing the European Central Bank to notify markets ahead of time that it intends to raise interest rates for the first time in 11 years at its July meeting. However, rising recessionary risks may constrain the central bank’s ability to tighten monetary policy. The July Sentix Economic Index, released on Monday, revealed that investor morale in the 19-country eurozone has fallen to its lowest level since May 2020, pointing to an “inevitable” recession.

In Europe, record-high inflation has been aided in recent months by surging gas prices.

Natural gas prices in Europe continued their steady increase on Monday. Price reaching highs not seen since early March, as planned strikes in Norway exacerbated market concerns over Russian supply cuts. The front-month gas price at the European benchmark for natural gas trading was seen trading up 7.8 percent to 175.5 euros ($180.8) per megawatt-hour last spotted trading. Since the beginning of the year, the eurozone’s currency has lost more than 9% of its value against the US dollar.

Meanwhile, the dollar’s gain continues as risk-averse investors seek a safe haven and the United States Federal Reserve starts what appears to be an aggressive rate hiking program.

After hiking benchmark interest rates by three-quarters of a percentage point in June, Fed Chair Jerome Powell predicted the central bank could hike rates again next month.

The euro sank fractionally against sterling, trading at £0.8595 by mid-afternoon. Plummeted by approximately 1.2 percent against the Japanese yen.

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