Since this week, the euro has continued to decline against the dollar. According to data released by the German Frankfurt Exchange on the 11th, on the European foreign exchange trading market, the euro against the US dollar fell to 1 euro and 1.0034 US dollars, the lowest level since December 2002.
Euro exchange rate continues to fall. The web page information of the American consumer news and business channel (CNBC) shows that on the morning of Beijing time (12th), the euro fell to 1.0007 against the US dollar. The US dollar continues to strengthen and is approaching the exchange rate with the euro 1:1.
Euro to US dollar exchange rate (East Time) CNBC screenshot
US Consumer News and Business Channel believes that the euro is now sliding towards parity with the US dollar and may continue to fall.
Due to the increase in uncertainties such as the energy crisis , the market's concerns about the euro zone economic recession are continuing to intensify; at the same time, the expectation of an economic slowdown in the euro zone also makes people worry about whether the ECB can tighten the monetary policy to control record high inflation. Due to factors such as strengthening the US dollar and safe-haven assets, the euro will continue to be under pressure.
Deutsche Bank Global Forex Research George Saravelos believes that as the United States enters a technical recession, the "safe-haven" trend against the US dollar may become "more extreme", which further increases the downward pressure on euro-dollar trading.
"We have concluded that the euro-USD exchange rate may fall to 0.95-0.97, which is comparable to the extreme level that the foreign exchange market has experienced since the end of Bretton Woods system in 1971... If Europe and the United States fall into a more serious recession in the third quarter, and Fed is still raising interest rates on , then it is likely to reach these levels."
At the same time, the dollar index (DXY) is rising all the way. It has now broken through the 108 mark and has risen by more than 12% since the beginning of the year. In the market, the unilateral strength of the US dollar has driven the trend of arbitrage trading, which will continue to be under pressure from the euro exchange rate. Citi analyst Tom Fitzpatrick said in a recent report to clients that he "full recommendation" to short the euro against the dollar.
USD Index CNBC Screenshot
How do you view the strengthening of the US dollar and the relatively weakening of the euro in this round?
Xia Guangtao, a researcher at the Center for International Finance and Economics (CIFER), the National Institute of Finance at Tsinghua University, told Observer.com that the current continuous high inflation pressure in the entire developed economy is very high, especially in the United States. The Fed's entire monetary policy is now rapidly shifting, and the expected implementation of tightening policies such as buying cuts, interest rate hikes, and balance sheet reduction are all rising.
Tightening monetary policy will push up the US dollar exchange rate to a certain extent.
From the perspective of economic fundamentals, the high inflation pressure of the euro is no less than that of the United States, or even higher than that of the United States. Because it is now facing geopolitical conflicts, it directly causes rapid rise in energy and oil prices and faces food security threats. The supply of daily necessities is relatively in short supply, and the cost of living will increase. If inflation in the entire euro zone has been rising, then the real purchasing power of the euro will decline. Compared to the US dollar, its exchange rate drops faster and the euro faces more risks.
From a policy perspective, in order to ensure their economic recovery momentum since the epidemic, the eurozone has relatively less than that of the United States in order to ensure their economic recovery momentum since the epidemic. Generally speaking, when austerity monetary policy is implemented, the currency's exchange rate will be pushed up. The degree of currency tightening in the euro zone is weaker than that of the United States, which will lead to a depreciation of the euro against the dollar, and the euro will significantly weaken compared to the strong appreciation of the dollar.
In addition, geopolitical conflicts, high energy prices, and uncertainty in international political and economic trends are increasing, which leads to an increase in global demand for safe assets. The United States is the world's most important provider of international security assets, and the strong global demand for US dollar and other US dollar security assets will push up the US dollar.
