Europe hasn't been this cheap for Americans in decades. These are the reasons

Russian gas cuts affect the European Union 0:52

London (CNN Business) --

If you're an American planning to visit Italy, Greece or Spain this summer after the travel disruption during the COVID-19 pandemic, you're in luck: Food, hotels and tours in Europe are cheaper now in dollars than they have been in two decades.

Why?

The euro slumped and was trading at $1.03, down more than 8% against the dollar so far this year.

It is now at its lowest level since late 2002.

• Germany declares gas crisis as Russia cuts supply to Europe

And for most analysts, the euro has not yet bottomed.

It is expected that it could even reach parity, in which a dollar has the same value as a euro.

"I see a downtrend with the euro until I read a headline that tells me global growth is going to pick up big," Jordan Rochester, a strategist at Nomura, told me.

He believes that the euro will reach parity at the end of August.

What does it mean?

What's good for American tourists is hard on European companies that need to buy energy, raw materials and components priced in dollars.

The rising cost of imports could continue to weigh on prices in the 19 countries that use the euro, where annual inflation reached a record 8.6% in June.

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And what is causing the fall of the euro, the second most used currency in the world?

Analysts point to several factors.

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The first is the economic outlook.

Recession fears are rising around the world.

But Europe's proximity to the war in Ukraine, and its historical dependence on Russia for its energy needs, have made it more vulnerable than the United States.

• Germany declares gas crisis as Russia cuts supply to Europe

Natural gas prices in Europe are at their highest level since March.

Russia has cut off gas flows to Europe, and the important Nord Stream pipeline is about to undergo maintenance.

Workers in the energy sector in Norway have just gone on strike, threatening further restrictions on supply.

"There is a winter crisis looming for the euro zone and I anticipate that energy prices will remain very high," Rochester said.

The euro tends to misbehave when risk appetite among investors declines.

The end of traveling to Europe without paying a visa is coming 0:46

Another problem is trade.

Germany just posted an unusual monthly trade deficit, a sign that high energy prices are hurting manufacturers in Europe's export powerhouse.

A weaker euro is then necessary to make the bloc's exports more competitive.

Europe has also lagged behind the United States in raising interest rates, although the European Central Bank (ECB) expects to start doing so this month.

That means investors are more likely to put their money in the United States, where they can get better returns.

• How much will the rise in US interest rates impact the world?

As interest rates rise, there are fears that the bond markets of countries with large debt burdens, such as Italy and Greece, could come under strain.

The ECB has said it will work to avoid what it calls "fragmentation", but it remains a risk that traders are watching closely.

Clients "are very concerned about everything related to Europe," Kit Juckes, a strategist at Societe Generale, said on Tuesday.

"Yesterday's German trade data was poor, and the feeling that the current account surplus is being hit by energy prices is widespread. Add concerns about fragmentation and fears that the global economy will it's getting colder, it's hard to be the least bit optimistic about the euro.

Eurozone economyEuro