The downward spiral over the past few weeks has been rapid and brutal – and it doesn’t have to be the end. Because there are good reasons, and shortly after its introduction, the European single currency was already weaker than it is today.
With its expansive monetary policy, the European Central Bank is ensuring that the euro is becoming weaker and weaker.
“The euro is collapsing like an emerging market currency” – as far as some observers put it with a pointed tongue, it is not yet. But the European single currency is not showing its strong side these days, after it even fell below one dollar in international forex trading on Tuesday and thus to its lowest level in over 20 years. This price mark may attract media attention, but it is actually no different from any other and is relatively irrelevant in that sense.
What matters is the trend in price development and the speed at which it is happening. Ultimately, these two factors say a lot about how the geo, financial and economic conditions in the USA and the euro area are developing in relation to each other in this case – or about what investors and companies expect and expect from these aspects what they adjust to. This is exactly what ensures the corresponding capital flows, which particularly affect the exchange rate in the short term.
In fact, the euro’s downward spiral over the past few weeks has been rapid and brutal, considering that in February it took just under $1.15 to buy one unit of the single European currency. Since then, the dollar has benefited from the general uncertainty on the international financial markets, from faster and more significant interest rate increases in the USA than in Europe and last but not least from the strong Navy in the background, while the lax European Central Bank, Russia’s brutal attack on Ukraine and rapidly increasing energy and raw material costs are affecting Europe’s growth prospects.
This constellation can weigh even more heavily on the euro, exchange rate parity or not. Shortly after his introduction he was already weaker.