Recession announced: euro and pound plunge against the dollar

Around 08:50 GMT (10:50 a.m. Paris), the pound plunged 0.89% to $1.1161 after falling to $1.1151, a level not seen since 1985, while the euro lost 0.79% to 0. .9758 dollar after falling to 0.9751 dollar, a threshold not reached since 2002.

Since the start of the year, against the steamroller of the dollar, the euro has fallen by 14% and the pound by 17%. Directly affected by the surge in gas prices since the start of the conflict in Ukraine, European economies are accumulating signs of weakness.

In the euro zone, the decline in economic activity accelerated in September in the private sector, according to the PMI index. Across the Channel, the Bank of England estimates that the United Kingdom has already entered recession in the third quarter.

A gloomy picture that diverts investors from the euro and the pound, despite marked rate hikes in September by central banks.

Conversely, “the United States is in a unique position, with high inflation and growth that persists better than elsewhere, which means that the United States Federal Reserve (Fed) has both reasons and means of raising its rates faster and further than its peers”, explains Mark Haefele, analyst at UBS.

The yen is resisting

“The trend of the euro-dollar pair will not change as long as risk appetite is absent from the market due to concerns about the Ukraine-Russia conflict”, which benefits the greenback, a safe haven, abounds Francesco Pesole , analyst at ING.

The yen fell for its part by 0.23% to 142.72 yen, resisting a little better than the European currencies. On September 22, the Bank of Japan maintained its ultra-loose monetary policy but the Ministry of Finance declared that it had intervened in the foreign exchange market to support the yen.

“The move worked, but the question is for how long,” warns Ricardo Evangelista, analyst at ActivTrades. “Continued support for the yen will require continued intervention for an extended period and will be a test for the resolve and capacity of the Japanese authorities,” he said.


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