The cost of one Euro is now almost US$1.20. The single currency has not been at $1.20 since January, 2015 or a long time ago.
Yesterday, we wrote about the other side of this coin: so what is
happening in the United States. To be able to see the whole picture, we
need to look at what is happening on in Europe.
Most investors are now looking at Europe and are determining that things don’t look that bad particularly when compared to the United States.
In a quick snapshot we see that all the countries in the European Union are growing and the unemployment rates are coming down.
Mario Draghi, President of the European Central Bank, has hinted that the quantitative easing operations at the ECB are nearing their end. We believe, as do many investors that Mr. Draghi would even give some hints out about the future of the ECB’s monetary policy at the recent central bank leaders meeting at Jackson Hole, Wyoming.
The next crucial date in this saga will come in September when the next meeting of the ECB takes place. It is expected that at that meeting that Mr. Draghi and the ECB will announce that the quantitative easing is done and that interest rates will be moving up soon.
So in the near future the ECB monetary policy will be moving in the same direction as the Federal Reserve in the US rather than producing policies that are going in opposite directions. In other words, monetary policy in the European Union will be tighter than the monetary policy in the US, than it has been for several years and this will make for a stronger Euro against the US dollar rate.
But, not everything impacting the foreign currency markets these days is economic in nature. We see that politics is playing a big role in what is happening in the financial markets specifically the foreign exchange markets.
By far the most important political contributor to the strengthening of the Euro is what is happening in Germany (Europe’s largest economy).
Polls are projecting an Angela Merkel triumph in the September elections, which will give Ms. Merkel a fourth term as Chancellor. This is important in providing continuity on the European continent but also seems to provide the rest of Europe with greater and stronger leadership.
Most investors are now looking at Europe and are determining that things don’t look that bad particularly when compared to the United States.
In a quick snapshot we see that all the countries in the European Union are growing and the unemployment rates are coming down.
Mario Draghi, President of the European Central Bank, has hinted that the quantitative easing operations at the ECB are nearing their end. We believe, as do many investors that Mr. Draghi would even give some hints out about the future of the ECB’s monetary policy at the recent central bank leaders meeting at Jackson Hole, Wyoming.
The next crucial date in this saga will come in September when the next meeting of the ECB takes place. It is expected that at that meeting that Mr. Draghi and the ECB will announce that the quantitative easing is done and that interest rates will be moving up soon.
So in the near future the ECB monetary policy will be moving in the same direction as the Federal Reserve in the US rather than producing policies that are going in opposite directions. In other words, monetary policy in the European Union will be tighter than the monetary policy in the US, than it has been for several years and this will make for a stronger Euro against the US dollar rate.
But, not everything impacting the foreign currency markets these days is economic in nature. We see that politics is playing a big role in what is happening in the financial markets specifically the foreign exchange markets.
By far the most important political contributor to the strengthening of the Euro is what is happening in Germany (Europe’s largest economy).
Polls are projecting an Angela Merkel triumph in the September elections, which will give Ms. Merkel a fourth term as Chancellor. This is important in providing continuity on the European continent but also seems to provide the rest of Europe with greater and stronger leadership.
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