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Euro is forecast to be worth less than a dollar after Lagarde's 'kamikaze' rate rises

Section: Daily Dispatches

By Szu Ping Chan
The Telegraph, London
Sunday, December 25, 2022

The euro will collapse below parity with the dollar next year as the European Central Bank "kamikaze" rate rises backfire and a scramble for energy supplies pushes the bloc into a prolonged economic downturn, City economists have said.

JP Morgan, ING, Capital Economics, and Barclays all believe the single currency will drop below parity against the dollar within months to a fresh 20-year low.

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They forecast for a 10% fall in the euro, taking it down to a 20-year low of $0.95. One euro is currently worth $1.05.

The gloomy predictions come despite hawkish talk from Christine Lagarde, president of the European Central Bank, and predictions that interest rates will climb close to a record high next summer.

Jonas Goltermann, senior economist at Capital Economics, said expectations of higher rates had already exposed highly-indebted Italy to a borrowing shock that risks reverberating throughout the eurozone.

He said: "What they're doing is a kamikaze policy. They're pressing on with rate hikes just because inflation is high no matter what the bond market does and no matter the implied impact on the economy. It's not sustainable." ...

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