The dollar strengthens its change above the euro

The exchange rate of the euro against the dollar, which fell yesterday for a short period For the first time since 2002 it is less than the value of a “green ticket”, Weakness continued this Thursday in the face of deteriorating economic outlook for the Eurozone and uncertainty over the political situation in Italy.

In this way, the euro It dropped to $0.9952down more than 1% compared to yesterday’s close, and which extends to more than 12% the cumulative decline of the single European currency against the United States so far in 2022.

In Schroders, Director Robbie Boukhoufane notes that the US economy is more self-sufficient (than the eurozone) when it comes to commodity markets, especially natural gas, while High inflation is weighing on global growth, This leads investors to seek safety in the US dollar.

Most central banks Rushing in the application of neutral rates to contain inflation. However, the Federal Reserve (Fed) is moving much faster than the European Central Bank, which has resulted in interest rates differential by about 3% based on current market rates,” he explains.

In fact, the Fed began normalizing its monetary policy last March, with an increase of 25 basis points, followed by increases of 50 and 75 basis points, respectively, in the next two meetings, while the European Central Bank will launch its first session. Eleven year rate hike next week, When will you raise the price by 25 basis points?

On the other hand, the European Commission, on Thursday, published its new macroeconomic forecast, which expects an escalation At “historic” inflation levels of 7.6% In 2022, while they cut GDP growth forecasts by a tenth, to 2.6%. For 2023, Brussels expects inflation to moderate to 4% in the eurozone, which is an increase compared to the 2.7% forecast in May, and that GDP will limit its expansion to 1.4%, compared to 2.3% previously forecast.

“The foreign exchange market is already putting its prices in a pessimistic growth scenario for Europe, but if gas rationing becomes a reality, the trend of the euro against the dollar will be even more negative,” Bukhovan says.

However, the expert expects that with weak economic data and moderate inflation, any sign that the Fed is close to reaching the maximum monetary tightening will relieve some of the upward pressure on the dollar. “However, we are not yet at that point,” he warns.

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