The euro is at parity with the dollar.
Photo by INA FASSBENDER/AFP via Getty Images
The euro fell enough to achieve parity with the dollar again. Don’t be surprised to see more weakness in the euro ahead.
In early trading, the euro dropped 0.4% to 0.9997 versus the dollar, finally falling below parity. It was a moment long waited for, as the common currency briefly dropped below that level back in mid-July. The last time the euro was worth less than the dollar at the close was in December 2002, according to FactSet.
The euro’s weakness has only compounded the dollar’s strength, with the Dollar Index up 0.2% Monday morning, and 13% in 2022. The dollar’s strength is a reflection more of the problems overseas—high inflation, slow growth, and, of course, oil shortages caused by the Russia-Ukraine War, as it is about U.S. strength. “The end of summer sees the euro back under pressure, partly because the dollar is bid and partly because the Damoclean sword hanging over the European economy isn’t going away,” writes Société Générale’s Kit Juckes.
Don’t expect the dollar to slow down. NatAlliance Securities’ Andrew Brenner noes that, while the currency is overvalued, that won’t keep it from breaking higher, perhaps to $116, where it was in 2022.
The Dollar’s strength makes it a great time for Americans to travel abroad, but it could mean tough times for the U.S. stock market. Morgan Stanley recently noted that a 16% jump in the dollar would imply an 8% decrease in U.S. corporate earnings. “Watch out!” writes Mark Grant, chief global strategist at Colliers Securities.
It’s just one more thing for investors to worry about heading into Jackson Hole.
Corrections & Amplifications: The euro traded at parity with the dollar briefly in July. An earlier version of this article incorrectly said this was the first time since 2002.
Write to Ben Levisohn at ben.levisohn@barrons.com
Source: finance.yahoo.com