But even when policymakers begin, it will probably take more than one policy meeting to get one of the key interest rates above zero. It would be the first increase in more than a decade. In comparison, the European Central Bank has only just begun to send strong signals that it will begin to raise rates, possibly as soon as July. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. It “screams safe haven and it screams the dollar.”Īlso in the dollar’s favor is the aggressive action of the Federal Reserve. “It’s a pretty grim outlook for the global economy,” Ms. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East. There are recession risks in Europe and growing predictions of a recession in the United States next year. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy.

There are plenty of reasons investors are looking for safe places to park their money. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. “The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. They expect the currency to reach parity in the third quarter.Įconomists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months.įor the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. Below that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING.

Exchange rates usd to eur