The euro is cheaper than it has been for two decades. As of Tuesday afternoon, it was temporarily down to just a dollar, so the exchange ratio dropped to a one-to-one ratio. This mark is symbolic, but the so-called parity was actually achieved last Thursday.
The euro has been under pressure on the financial markets for some time. The reasons are the effects of the war in Ukraine, which hit Europe particularly hard, the European Central Bank’s comparatively cautious fight against inflation and the fact that the US economy is doing better than the European one. Experts assume that the devaluation of the euro could continue.
The weakness of the euro is inconvenient in the current environment with comparatively high inflation rates. Because the lower the exchange rate of the common currency, the stronger other currencies such as the dollar become in relation to it. As a result, goods imported into Germany become more expensive. This fuels inflation. When the euro exchange rate falls, consumers have to spend even more money to cover their living expenses. Above all, energy and raw material prices could continue to rise.