Since the outbreak of the Russia -Ukraine War in February this year, the euro has depreciated all the way. On July 12, the euro ushered in the lowest point worth nearly 20 years. The exchange rate against the US dollar reached 1 to 1.0002, which was close to parity. Slowly climbed slowly, and as of now, the exchange rate of the euro against the US dollar has remained at 1 to 1.0027.
There are two main reasons behind the euro exchange rate of the US dollar.
First, it is devalued to promote economic recovery. For a long time, currency depreciation is the basic monetary policy tool that has obtained a competitive advantage to get rid of the crisis. This idea is simple: if your currency value is lower, your product is cheaper and easier to enter the market, which will revitalize exports and drive economic development.
Second, the Federal Reserve raises interest rates sharply. Facing the Russian and Ukraine War has caused large -scale inflation, since March, the Fed has announced its interest rate hikes three times in a row. Rating, that is, the benchmark interest rate is raised, in order to cut part of the funds in the bank, that is, reducing the amount of currency supply in the market, and the value of the corresponding currency will also increase.
On the one hand, after the new crown epidemic, in order to expand exports, boost the tourism industry, and stimulate the economic recovery to choose to actively depreciate the euro. On the other hand, in the face of inflation, the Federal Real Estate raised interest rates have led to an appreciation of the US dollar. In this way, the euro and the US dollar are almost cheap.
Will the euro continue to depreciate? The answer lies in the next measure of the Central Bank of Europe. Faced with inflation, the European Central Bank did not take strong interest rate hikes before. But at the moment, in the face of the soaring prices and oil prices, European society generally complains, can the European Central Bank still hold it? Can it stop the trend of the depreciation of the euro depends on how long the European Central Bank can take out the interest rate raising measures corresponding to the Federal Reserve. Essence
Post time: Jul-13-2022