Euro rate falls to one dollar: what does this mean for consumers?

Created: 07/12/2022, 12:26 p.m

By: Lisa Mayerhofer

Breaking news from IPPEN MEDIA.

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The euro has been falling for months.

Now the energy crisis has accelerated the downward trend again.

For the first time since 2002, one euro costs just one dollar.

Frankfurt/Main – The fall of the euro continues: For the first time in about two decades, the euro is worth exactly one dollar again.

On Tuesday afternoon, the common currency fell to exactly one dollar, falling to par for the first time since 2002.

This means a one-to-one exchange ratio.

The euro rate falls to one dollar: inflation is fueled

The euro has been under pressure on the financial markets for some time.

The reasons are the effects of the Ukraine war, which hit Europe particularly hard, and the European Central Bank's comparatively cautious fight against inflation.

"Fears of recession in Europe are growing," commented analysts at Commerzbank. 

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 further.

Euro rate falls to one dollar: what does this mean for consumers?

When the euro exchange rate falls, consumers have to dig even deeper into their pockets to cover their living expenses.

Above all, energy and raw material prices threaten to rise further.

Holidays in many countries without the common currency are likely to tend to become more expensive as the euro falls.

After all: German goods become cheaper for other countries with a falling euro exchange rate.

A surge in demand due to the exchange rate could therefore lead to the feared economic slowdown being at least slowed down.

However, it must be taken into account that the economic situation in many other countries is similarly unfavorable to that in Germany.

Foreign demand is therefore more likely to fall than rise for economic reasons – which at least slows down the positive demand effect from the weak euro.