The USD/EUR exchange rate fell to 1.03, reflecting the economic and political uncertainty weighing on the eurozone.
A 0.4% slide in morning trading on January 2 took the euro to a low not seen since November 2022 - when the EU faces a winter of energy shortages after the bloc banned Russian fossil fuels.
Germany, once Europe’s industrial powerhouse, is in deep recession, with GDP set to shrink in 2023 and 2024. Once Europe’s industrial powerhouse, Germany has struggled with rising energy costs since cutting off Russian oil and gas supplies. The Bundesbank forecasts just 0.2% growth this year, while major companies such as Volkswagen and Bosch have been forced to cut production in 2024.
Not only economic, political instability is also shaking the position of the euro. After the collapse of the German and French governments at the end of last year, the entire EU is worried about the threat of tariffs from US President-elect Donald Trump.
In addition, the European Central Bank (ECB) cut interest rates four times last year and is expected to continue easing monetary policy into 2025, further weakening the euro.
According to Bloomberg, many experts predict that the euro could slide to parity with the USD this year - something that has not happened since early 2022, when the Russia-Ukraine conflict broke out.
The euro's fall came a day after Britain reported its sharpest fall in manufacturing output in 11 months and less than two weeks after the government forecast zero growth in the final quarter of 2024.
The euro's plunge is not just a financial indicator but also a warning about the big challenges facing Europe - from the energy crisis and industrial decline to internal divisions and external pressure.
