The Euro continued to fall on Wednesday, hitting a new 20-year low below US$1.0200 and is on track to reach the cash level (1.0000) soon on growing concerns that Russia may cut off supplies of gas to Europe, contributing to the entry of the Eurozone into recession, which would make it difficult for the ECB to carry out its planned policy of raising interest rates to control record inflation.

The single European currency fell below $1.0200 to $1.0170 on Wednesday, a new low for the euro since December 2002.

The euro fell to a new 7-year low below 0.9900 Swiss francs for the first time since the Swiss National Bank abandoned its so-called "currency ceiling" in 2015

Euro/dollar chart

The key Nord Stream 1 gas pipeline must be shut down between July 11 and 21 for the so-called annual "maintenance", with fears that Russian gas supplies could then be completely cut off, thus jeopardizing the EU's goal of filling 80% of gas storage capacity before the start of winter.

Analysts also expect an imminent resumption of oil gains despite Tuesday's sharp price drop as tight supply continues.

At the same time, annual inflation in the Eurozone hit a record high of 8.6% in June.

Consumers in the Eurozone cut their spending on food, drink and tobacco in May for the second consecutive month amid a surge in prices, according to Eurostat's EU retail sales released earlier today.

Yesterday, however, a weak business survey on economic activity in the Eurozone in June was released, with some of its components suggesting that there may be a fall in GDP in the third quarter.

ECB President Lagarde believes the Eurozone is unlikely to return to a low-inflation environment, while confirming a 25 basis point rate hike at the next meeting on July 21, although a number of central bankers have called for a sharper hike.

At the same time, the US Federal Reserve is expected to continue with its policy of aggressive interest rate hikes, raising the federal funds rate by 50 or even 75 basis points at its meeting on the 26th and 27th of this month.

This suggests a further widening of the interest rate differential between the ECB and the Fed and underpins the continued depreciation of the euro against the dollar.

The US dollar rose on Wednesday to a new 20-year high against the other leading currencies, such as the so-called dollar index rose to 107 for the first time since late 2002 as rising prices, the prospect of further US interest rate hikes and a worsening outlook for global growth weighed on investors' appetite towards risky assets.

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