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Euro trades at two-decade low against dollar and it could slide further


Traders work on the floor of the New York Stock Exchange during morning trading on August 15, 2022 in New York City.

Michael M. Santiago | beautiful pictures

The euro trades at a two-decade low of 0.9903 vs U.S. dollar Tuesday morning, with analysts predicting the single currency will continue to slide.

Luis Costa, head of CEEMEA strategy at Citibank, told CNBC’s “Squawk Box Europe” on Tuesday: “Our outlook and trade and our position on the strategist side are definitely tilted. about the euro will depreciate further than it is now.

“This is the main point of the euro hole right now,” Costa said.

There are many factors at play when comparing the euro and the dollar, working in tandem with conflict in Ukraine and increase inflation on both regions.

Wholesale gas prices in Europe surged on Monday after Russia Unscheduled maintenance notice on the main pipeline to Germany, Nord Stream 1, while heat waves have put additional strain on energy supplies.

For the full picture, you also have to look beyond Europe and the United States, Costa said.

“Don’t forget that there’s an extra layer of complexity here since China’s slowdown It is clear that the impact on Europe is much more intense than the impact in the United States, he said.

China GDP expectations are missed with a growth rate of only 0.4% in the second quarter. The world’s second-largest economy has been grappling with the aftermath of the country’s worst Covid-19 outbreak since early 2020.

According to Costa, until May, markets were “considering hawkish routes” for the European Central Bank and the Bank of England, but those plans have “failed” in recent months.

“Talking about the ECB rate hike… It’s clear that the ECB rate hike will be minimal,” he said.

ING’s Roelof-Jan Van den Akker . Global Financial Institution made similar predictions on CNBC’s “Squawk Box Europe” last week, showed a widening of the interest rate differential between the US dollar and the euro, as well as further weakness in the currency.

“[The dollar] broke below the 103.60 support. It is a very important horizontal support… And I suggest that more downside is likely. Van den Akker said the long-term target is between $0.80 and $0.75 in the coming months.

“It confirms there is strength in the dollar as well as weakness in the euro,” he told CNBC.

The projections echo fears that inflation will continue to rise and a recession in Europe is now inevitable.

However, the dollar’s strength may not last, according to Kit Juckes, Societe Generale Macro Strategist.

“It is possible, in general, that the dollar rally has run as far as it can,” he wrote in an email Tuesday morning.

“That’s not to say Europe’s energy disaster, China’s economic weakness and policy easing, and US employment/inflation data can’t send it any further, but when I read that buying dollars is the ‘easiest trade in FX’ my neck warned me to be careful,” wrote Juckes.

And Europe will be able to recover from those “woes”, according to the strategist.

“I still can’t see how it could recover much on anything other than short-term offsets, but if risk markets don’t intervene, the euro could find a base here,” he said. he wrote.



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