The euro’s fall against the dollar continues Wednesday after it broke through a symbolic barrier in early trading.
The euro slipped below $US1.1747, the rate at which it was valued when it launched in 1999. The last time it was this low was in 2006, 9 years ago.
It’s not the first time the euro has been far below its launch value. The last time was around the turn of the century when the euro depreciated almost immediately, falling to lows of around $US0.85. But it’s spent the vast majority of the last decade higher.
The recent fall follows the announcement from the European Courts of Justice that Outright Monetary Transactions (OMT), the programme credited with ending the euro crisis, is legal.
It’s extremely unlikely that the decline of the euro is going to stop soon. The Federal Reserve and European Central Bank are diverging in policy, which should strengthen the dollar and weaken the euro. The ECB still likely has a quantitative easing programme to come too, which could bring down the value of Europe’s currency by introducing extra euros into the market.
Goldman Sachs are even predicting that the euro and dollar will be back at parity by the end of 2017. That would be the first time since 2002, if Goldman are right.