text/Shabin
The euro to the US dollar exchange rate, which just set a lowest historical record more than a month ago, has recently been refreshed.
On August 22, the euro fell below parity against the US dollar again; on the 23rd, the spot exchange rate of the euro against the US dollar was at a minimum of 0.9899, the lowest in 20 years.
Overall, the downward trend of the euro against the US dollar has continued for more than one year. On August 23 last year, the euro against the US dollar closed at 1.1746, down 15.7% in one year.
Why did the euro fall against the US dollar?
JLL Chief Economist and Head of Research Department of Greater China, Pang Ming told China News Service that compared with other major economies, the euro zone has weak growth and structural problems "common" and the market's concerns about the fragmentation risks brought about by economic imbalances in its region, these are the fundamental reasons behind the sharp drop in the euro exchange rate.
"The high inflation pressure in the euro zone, the haze of the energy crisis, the differences in monetary policies between Europe and the United States, and the conflict between Russia and Ukraine, and the political instability of Italy are the direct incentives to lower the performance of the euro. The recent strong rise of the dollar index is the technical reason that caused the euro to fall below historical lows." Pang Ming said.
Sheng Songcheng, professor of economics and finance at China Europe International Business School, believes that the weakening of the euro may be an inevitable long-term trend. It is not unexpected that the euro's recent continued weakness is mainly affected by two factors.
On the one hand, the US dollar has strong recent trend. The Fed's rapid and intensive rate hike pace this year has attracted global capital to concentrate on the US dollar market, pushing the US dollar to strengthen. The US dollar index has recently exceeded 109.
On the other hand, the continued weakness of the euro was mainly dragged down by the Russian-Ukrainian conflict and the energy crisis triggered by it.
can the euro fight a "turnaround battle" in the future?
At present, the euro zone economy can be said to be "troubled".
JD Group chief economist Shen Jianguang believes that the economic recovery of Europe after the interruption of the Russian-Ukrainian conflict has caused Europe to fall into a dilemma of "stagflation". The Russian-Ukrainian conflict has caused a shortage of energy and food in Europe, and inflation levels have risen to historical highs, thus restricting corporate production, weakening consumer confidence, and deteriorating trade revenue and expenditure.
At the same time, the Russian-Ukrainian conflict has led to a significant weakening of the momentum of Europe's economic momentum. As uncertainty increases, the confidence of residents and enterprises cools down, affecting consumption and investment behavior.
He said that in the face of the "difficult choice" of high inflation and economic downturn, the ECB unexpectedly raised interest rates by 50 basis points in July, showing a firm attitude towards fighting inflation. In the future, Europe may at the cost of falling into an economic recession to ensure that the inflation level can drop to the long-term goal of 2% as soon as possible. But if the energy crisis in Europe cannot be alleviated, the European Central Bank's interest rate hike alone will not be effective.
Pang Ming pointed out that in the short term, the euro may experience a technical rebound, but overall, it is highly likely that it will continue to be under pressure.
From an internal perspective, no matter how the European Central Bank chooses to raise interest rates to curb inflation and moderate tightening to protect growth, it will influence the euro trend. However, considering the continued problem of energy shortage, whether the surge in inflation can be effectively controlled is still questionable, and starting from negative interest rates, there is not much room for the ECB to implement a monetary policy beyond expectations to guide the market curve.
From the perspective of external factors, the European economic and financial cycle lags behind the United States, and the US dollar curve still has momentum to rise to the right. If the Federal Reserve continues to take a hawkish stance and aggressive interest rate hikes, it is likely that it will be difficult for the European Central Bank to follow up simultaneously. The interest rate spread and the "safe haven" attributes of US dollar assets will push the US dollar to continue to maintain a strong position against the euro.
Pang Ming also said that in the medium and long term, it can be said that the performance of the euro is likely to continue to be dragged down by weak economic fundamentals in the region, hindered from the normalization of monetary policy and the continuous decline in international competitiveness.
What will happen to the RMB exchange rate trend?
Euro depreciation is closely related to the uncertainty of the international environment and the Fed's monetary policy shift.
Since the beginning of this year, the exchange rate of major non-US currencies against the US dollar has been under certain depreciation pressure. The RMB exchange rate also depreciated in August, and both onshore and offshore RMB exchange rates have fallen below 6.8 recently.
Pang Ming bluntly stated that compared with the euro zone, under the new normal of two-way fluctuation elasticity and amplitude, the many positive factors behind the RMB exchange rate will exist for a long time, and reflect the successful practice and effective balance between China's economy in the tasks of stabilizing growth, adjusting structure, controlling risks, and promoting reform.
Pang Ming said that, first, China's macroeconomic maintains a stable recovery trend, the marginal strengthening effect of policy support is obvious, the endogenous growth momentum is enhanced, market entities are full of vitality, strong resilience, and great potential, the employment and price situation is generally stable, the economic fundamentals are good, the basic situation is stable, and the basic situation is good;
Second, China's foreign exchange policy is closely coordinated and organically linked with policy measures in monetary policy, fiscal policy, industrial policy and other aspects to ensure that the three major goals of monetary policy autonomy, free capital flow and exchange rate stability are achieved in dynamic equilibrium;
Third, China continues to unswervingly promote all-round reform and high-level opening up through all-round reform and high-level opening up Advance in high-quality development, further optimize the business environment and investment environment, promote the accelerated inflow of cross-border capital, and also help the RMB exchange rate to continue to appreciate, push up the asset price denominated in RMB, and attract funds to continue to flow into the Chinese market;
Fourth, in the long run, China has improved the construction of the market system, reshapes the momentum of economic development, and taps structural potential in the macroscopic direction; enhances the vitality, ability and confidence of market entities at the microscopic level; actively participates in cross-border cooperation, participates in establishing order, and participates in setting rules internationally, and continuously improves the comprehensive national strength and competitiveness, which will inevitably lead to further marketization of the RMB exchange rate formation mechanism and accelerates the internationalization of the RMB, which will inevitably enable the RMB exchange rate to maintain market-oriented, elastic and two-way fluctuations at a reasonable and balanced level.
From: Guoshi Express
Editor: Chen Haoxing
Editor: Wei Xi
Editor: Wei Xi
