Euro tests 20-year low vs dollar, and it may get worse

The euro sank on Tuesday to its lowest levels against the dollar since December 2002, sandbagged by the combination of a strong greenback and euro zone growth fears.

Why it matters: Europe's troubled common currency has been on a dizzying downward spiral for all of 2022, victimized by a resurgent dollar, which has been bolstered across the board by the higher interest rates and safe-haven buying.

• Inflation fears and slowing growth has put the U.S. economy in a glum mood. But things in the euro zone are hardly more encouraging, and some say are arguably worse.
• Investor confidence in Germany -- the largest economy in the 19-nation currency bloc -- plummeted last month, data revealed on Tuesday. That news was enough to push the euro to the psychologically-important $1 threshold, with further losses in the offing.
• Meanwhile, a feared energy squeeze may make Europe's economy, which is heavily reliant on Russian oil and gas, go from bad to worse.

Zoom out: Year-to-date, the euro is down about 18%, but it's hardly the biggest loser against the muscular dollar. The Japanese yen is now perched at its weakest level since 1998 around ￥137.

What they're saying: Analysts at JPMorgan warn that the euro is "vulnerable to further downside over the medium-term" which could drag it below parity.