The US dollar is close to the parity: the ominous sign of the EU?

Reference News Network reported on July 9th

According to the "Japan Economic News" reported on July 7, European currency euro is depreciating sharply. On the 5th, the exchange rate of the euro to the US dollar reached 1 euro against 1.02 US dollars, which was a low position since December 2002. The background factor is that the Ukraine crisis leads to rising energy prices, and people's concerns about the decline in European economic economic recession are increasing. In addition, considering the southern European economy under the condition of fragile fiscal conditions, investors believe that Europe is difficult to raise interest rates as much as the United States, which is also a factor.

The euro has fallen to 20 years

In the European market on the 6th, the euro exchange rate against the US dollar hit a new low in 20 years: 1 euro against $ 1.01.

Euro (Visual China)

Since the conflict between Russia and Ukraine, the market's concerns about the European economy have been increasing. The consumer price index (initial value) in the euro zone in June increased by 8.6%year -on -year, setting a new high since 1997 that can be traced back to statistics. This is because the risk of unstable supply has led to the surge in various commodities such as energy and food, and the tightening of the wallet by the family, and the concerns of energy shortage caused the stagnation of corporate activities.

The US Goldman Sachs estimates that the probability of recession in the euro zone will fall into a decline in the next year, higher than the United States (30%). Goldman Sachs pointed out: "The biggest risk facing Europe is the chaos in energy supply." The overall trade income and expenditure of the euro zone worsen due to high energy prices. As of April, the euro zone has been losing money for six consecutive months, which is also a factor that prompted the euro depreciation.

Structural weakness is difficult to resolve

Many people point out that the reason why the European economic recession is stronger than the United States because of structural problems in Europe. The number of members of the euro zone has expanded from 12 in 2002 to 19 to the present. The financial policy within the euro zone is not uniform. There are financial issues in Greece and Italy, and economic gaps are prone to major countries such as Germany and France.

The differences between Europe and the United States are directly related to the differences between financial policies. The United States has raised interest rates three times in a row since March, and decided to raise interest rates 75 basis points in June, the maximum of about 27 years. The United States has rapidly promoted interest rate hikes and stepped up to inhibit inflation.

On the other hand, the European Central Bank finally decided to raise interest rates 25 basis points in June. After the council meeting, the national bond yields in southern European countries skyrocketed and forced to take measures to suppress the decline in the price of government bonds. It was difficult for Europe to raise interest rates as much as the United States. The European Central Bank President Christina Lagarda said: "(We) must ensure that there is no hindering monetary policy transmission to the split of the entire euro zone."

Robin Brooks, chief economist of the International Financial Association, speculates: "The European Central Bank will not raise interest rates sharply, which will exacerbate the depreciation of the euro. Perhaps it will fall below the level of 1 euro against 1 US dollars."

The euro performed weak shortly after the birth of 1999, and fell below the end of the same year at a parity level of 1 euro against 1 US dollars. By 2002, the euro currency began to circulate, and the exchange rate of the euro to the US dollar resumed to a parity level. After that, the euro continued to appreciate, reaching a high level of about $ 1.6 in 2008. However, since then, economic concerns such as the European debt crisis have spread, and the exchange rate of the euro to the US dollar has declined.

Even in countries with strong economic situations such as the United States, the concerns of great interest rate hikes have led to the spread of economic recession. The European economy has structural weaknesses, and people are more vigilant about their trends. Even if the European Central Bank's steering euro exchange rate is lower, the status quo reflects the deep -rooted European economic issues.

EU risk risk risk rises

According to the Spanish "World Daily" website reported on July 6, the euro and the US dollar approaching the price may be another sign of the EU's weakness and risk of recession.

The combination of these factors is not fatal, at least not fatal, but it is indeed more and more destructive and dangerous. These factors include: the growth that has not been fully recovered after the new crown is popular; the response of the unresolved supply crisis; the Ukrainian war, and its impact on the world trade, transportation, stability, investment, food and goods; The Ukrainian war broke up for a long time before the outbreak of the war, but accelerated by the Russian bomb; and closer to concerns about Russia's total supply of total supply; the end of the era marked by extremely low or even negative interest rates; Bond income exceeds long -term bonds); the United States and Europe responded to the number and speed of response; the increase in inflation rates in economies with 10%to 20%of economies in just a few months ago. All of this is reflected on a curve, that is, the exchange rate curve of the euro to the US dollar. The curve has not appeared close to the level in the past 20 years.

The entire generation of Europeans does not know what it feels like living with the US dollar and euro. This not only shows the weakness of the euro under the problem of uncertainty and downward risk, but also the issue of the circulation of the US dollar, which may indicate the global recession. Once again. The US 10 -year bond yield fell for the third time this year to lower than the 2 -year bond yield level. The history of the year will be seen that this has always been a indicator of recession in Washington. The recession does not happen immediately, but within a range of no more than 24 months.

Investors on both sides of the Atlantic Ocean have been weakened recently. This is because inflation is much longer than the central bank's expectations, but also because economic growth prospects are much worse than expected.

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