LONDON (AP) - The euro's descent saw it hit a new one-year low against the dollar on Tuesday, but the currency risks snapping back higher this week if the European Central Bank fails to back up its recent talk of stimulus with action.
Analysts said the risk to euro zone growth posed by the Ukraine conflict and stubbornly low inflation should keep the pressure on the European Central Bank to provide further stimulus at some stage, if not this week.
Markit said the slowdown likely reflected the impact of rising tensions between the European Union and Russia over the future of Ukraine, as well as growing doubts about the effectiveness of euro-zone economic policy and its likely future course.
There was further evidence Tuesday that the euro zone's economic stagnation has taken its toll on neighboring countries, with Switzerland reporting that its economy failed to grow in the second quarter, partly as a result of slowing exports.
The best pound euro exchange rate (GBP/EUR) of 2014 was back in contention at the start of the new month for those looking to buy euros. However a sudden reversal in GBP's fortunes has come following news that the UK could be about to be split up.
The euro is on its way to parity with the dollar by the end of 2017, say analysts at Goldman Sachs Group Inc. The currency has dropped 5.75% since hitting a 2014 high in March, closing on Friday at 1.3133.