1 Euro = 1 Dollar, For First Time In Two Decades In Brutal Slump

The euro has suffered a swift and brutal slump this year, and now its crossed a major threshold for the first time in more than two decades: parity with the dollar.

The euro has suffered a swift and brutal slump this year, and now it's crossed a major threshold for the first time in more than two decades: parity with the dollar. Shortly after Russia invaded Ukraine, we predicted the Euro would fall through parity. The war is a body blow to the Euro zone. It undercuts Germany's economic model, which for decades was built on cheap Russian energy. Without German growth, the Euro zone is in real trouble... pic.twitter.com/xwdwVig5qq

The 12% decline is the result of multiple pressures, from the war in Ukraine to an energy crisis and the growing risk that Russia cuts off gas exports and pushes the euro area into recession. Add in central banks moving at vastly different speeds and an in-demand dollar, and some analysts say parity may not be the end point, but merely a stepping stone to further weakness.

The common currency slipped as much as 0.4% Wednesday to touch a low of $0.9998. The latest leg lower came after US inflation accelerated in June by more than forecast, boosting bets on Federal Reserve rate hikes. It bounced back to trade at around $1.002 as of 2:10 p.m. in London.

The downward spiral hasn't been accompanied by the type of existential doubts that hung over the euro when it plunged during its infancy in the early part of this century, or when the sovereign debt crisis took hold a decade ago. However, it's still a problem for the European Central Bank.