Euro drops to 20-year low against the dollar

The euro fell to a 20-year low against the dollar on Tuesday as investors scaled back expectations for more aggressive tightening by the European Central Bank.

At 1245 BST, the euro was down 1.2% against the dollar at $1.0297, hitting its worst level since December 2022.

A survey released earlier showed that eurozone growth slowed sharply in June as the dominant services sector started to cool, highlighting the risk of recession.

The final S&P Global eurozone PMI Composite Output Index fell from 54.8 in May to 52.0. That represents a 16-month low although the print was marginally higher than both the flash estimate and consensus of 51.9.

S&P Global said the manufacturing sector had seen its first reduction in output for two years, while the Services Business Activity Index fell to 53.0 from 56.1. The services output prices index eased slightly, to 63.2 from May’s 64.6, but remains near record highs. Inflation in the Eurozone is currently at 8.6%.

Neil Wilson, chief market analyst at Markets.com, said: "The euro is in dire straits now as the central banks is so far away from its objective and now has an even bigger problem in terms of fragmentation."

He added that unless the ECB "gets its act together", the euro could soon be at parity with the dollar.