The Euro begins to dig the bottom of the barrel against the Dollar …
The energy crisis is getting stronger and this affects the weaker monetary element, namely the Euro. Today the euro continued its devaluation against the dollar, now heading towards $ 0.95, a new low in 20 years, and has fallen nearly 20% so far in the year, propelled by a stronger dollar as the Fed continues to make large hikes in interest rates and as recession prospects in Europe are on the rise due to the energy crisis. Here is the relative graph
Meanwhile, the ECB has already started the tightening cycle by raising key interest rates by 125 basis points since July and pledging to continue raising the cost of debt as inflation shows no signs of a peak. ECB President Lagarde recently reiterated that the central bank must continue to raise interest rates to tame inflation, even if the side effect of tighter policy will be weaker growth.
The fact is that the ECB's rate hikes risk being perfectly useless when the cause of the Euro's weakness is not monetary, but linked to the energy crisis and the scarcity of natural gas sources. It is no coincidence that this fall occurs precisely at the highlight of the current Russian gas crisis, with the NS1 and NS2 pipelines being shut down and the possibility that the flow through Ukraine will also be interrupted. The ECB forcibly wants to depress the economy to contain energy demand, but families and workers will pay the cost. The attempt to protect the European currency sacrifices European citizens.
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The article The Euro begins to dig the bottom of the barrel against the Dollar… comes from ScenariEconomici.it .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/leuro-inizia-a-scavare-il-fondo-del-barile-nei-confronti-del-dollaro/ on Wed, 28 Sep 2022 11:02:28 +0000.