The euro traded at a two-decade low of 0.9903 against the U.S. dollar Tuesday morning, with analysts predicting the single currency will continue to slide.
“Our outlook and our trades and our position on the strategist side are definitely biased towards further euro depreciation from where we are now,” Luis Costa, head of CEEMEA strategy at Citibank, told CNBC’s “Squawk Box Europe” on Tuesday.
“This is the primary point of euro vulnerability now,” Costa said.
There are multiple factors at play when comparing the euro and the dollar, working in tandem with the ongoing conflict in Ukraine and mounting inflation across both regions.
Wholesale gas prices in Europe rose sharply on Monday after Russia announced unscheduled maintenance on its main pipeline to Germany, Nord Stream 1, while heat waves have put additional strain on energy supplies.
For the full picture, you also have to look beyond Europe and the United States, says Costa.
“Let’s not forget there is an additional layer of complexity here from the China slowdown which obviously hits Europe with a much higher magnitude when compared to the impact in the States,” he said.
China missed GDP expectations with growth of just 0.4% in the second quarter. The world second-largest economy has struggled with the aftermath of the country’s worst Covid-19 outbreak since the start of 2020.