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As the US economy went into meltdown during the 2008 global financial crisis, one euro was worth about 1.6 times the US dollar. Now a combination of Europe’s front-line exposure to Russia’s war in Ukraine and the European Central Bank’s tardiness in raising interest rates have driven it nearer to parity, or a 1:1 ratio with the dollar. It’s the first time it has sunk to that level since 2002, in the early years of the euro’s existence.
1. Why is the euro sinking?
Europe suffers most from the war, which has sparked an energy crisis and could lead to potentially a long and deep recession. That places the ECB in a difficult position — trying to curb inflation and cushion a slowing economy — as it aims to raise borrowing costs for the first time since 2011. At the same time, the US Federal Reserve is raising interest rates much faster than the 19-nation euro area. That makes yields on US…
