The euro falls to the minimum in 20 years, approaches parity with the dollar

The euro hit a 20-year low and neared parity with the dollar on Monday on concerns that an energy crisis could push the bloc into recession, while the US currency was buoyed by expectations that the The Federal Reserve will raise rates faster and higher than its peers.

The largest pipeline carrying Russian gas to Germany, Nord Stream 1, began annual maintenance on Monday and flows are expected to stop for 10 days, but governments, markets and companies are concerned the shutdown could spread due to the war in Ukraine.

“The closest concern for the markets is whether or not Nord Stream 1 will come back online,” said Bipan Rai, head of North America forex strategy at CIBC Capital Markets in Toronto, adding that “markets will likely price in a recession” for the region if it doesn’t.

The euro sank 1% to $1.0056, the lowest level since December 2022.

The dollar gained 1% against a basket of six currencies, hitting 108.14, the highest since October 2002.

The US currency has advanced on expectations that the Fed will continue to hike rates aggressively as it tackles soaring inflation.

Markets expect the Fed to raise rates by 75 basis points at its meeting on July 26-27. Fed funds futures traders expect the benchmark rate to rise to 3.49% in March from the current 1.58%.

Consumer price data to be released on Wednesday is the main US economic focus this week. Economists polled by Reuters expect the index to show prices rose at an annual rate of 8.8% in June.

Cryptocurrencies were lower, with bitcoin BTC=BTSP shedding 1.88% to $20,458.

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