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The weak common currency

Aug 23, 2022

The EURO has now fallen to a 20 year low against the USD. The reasons are all clear and interlinked: the relative strength of the US economy, a more hawkish Fed compared to the ECB, higher US rates, the energy choc and the proximity to the Ukrainian war. We also read that Asian countries, who were buying their own currencies in the face of a rallying greenback, are now buying back USD by selling Euros to rebalance the Forex holdings. The strong USD increases the headache of European companies who import USD denominated goods ( including raw materials ) for their production. The fact that European exporters get more competitive in global markets is the only small positive we can find. No reason to cheer in Europe.

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