The euro reached its lowest level against the US dollar in more than two years, reaching 1.03 EUR/USD. This fall comes against a backdrop of persistent economic stagnation in Germany and an EU-wide energy crisis.
The euro fell 0.4% against the greenback on Thursday January 2, 2025, reaching 1.032 at midday in Europe. The European currency has not been this low against the dollar since November 2022, when most of the EU was bracing for winter gas shortages following the bloc’s embargo on Russian fossil fuels.
The German economy is still suffering the effects of this embargo. It contracted in 2023 and 2024, while the country’s central bank forecasts modest growth of 0.2% this year. Once Europe’s industrial powerhouse, Germany has faced soaring energy costs since cutting itself off from Russian oil and gas. Major German manufacturers, such as Volkswagen and Bosch, have announced spending cuts in 2024.
Economic and political instability hits the Eurozone
Political instability has also exacerbated the euro’s woes, with the German and French governments collapsing at the end of 2024, and the entire EU bracing for tariffs promised by the president-elect American, Donald Trump.
The European Central Bank cut interest rates four times last year and is expected to announce further cuts in 2025.
According to Bloomberg, this combination of factors has led analysts to believe that the euro could slide towards parity with the dollar this year. The last time the euro traded below parity with the dollar was in early 2022, shortly after Russia’s aggression against Ukraine.
The fall came a day after Britain recorded its biggest drop in manufacturing output in 11 months, and less than two weeks after a new government estimate put growth at 0% for the final quarter of 2024.
Belgium
