Observers expect a further decline in the euro once morest the dollar due to the bleak economic conditions
Video duration 02 minutes 49 seconds
Paris- In a record drop not seen in 20 years, the price of the euro fell – today, Wednesday – to match the price of the US dollar, leaving serious repercussions and many repercussions on the European economy, inflation and the purchasing power of the citizen.
Yesterday, Tuesday, the European currency exchange rate reached below the level of one dollar in – for a short period – for the first time since 2002.
According to Bloomberg website data, the euro exchange rate fell by more than 0.7% to $1.0038, at a time when the dollar was strengthening due to its safe haven status and raising US interest rates.
Russian war
According to experts and observers, the Russian-Ukrainian wars and their fueled by a sharp rise in energy and fuel prices played a major role in this record decline of the euro once morest the dollar, especially in light of the economic downturn and the rise in the inflation rate in the euro area to more than 5% at the beginning of this year, which is The highest percentage for the European continent in 30 years, according to the latest figures published by the Eurostat Office of Statistics of the European Commission.
european economic recession
For his part, economic analyst and expert Daniel Melhem pointed out that the weakness of the euro price is not primarily a result of the weakness of the euro zone or the war, but rather the strength of the dollar and the increasing demand for it in global markets, and this is what drives it to this great rise.
He said that most energy prices in the global market are priced in dollars, and therefore the rise in energy prices automatically leads to an increase in the demand for the dollar, and as a result of all that, the dollar has become a safe haven in the market and the demand for it has increased.
He added – in an interview with Al Jazeera Net – “But despite this, the euro is not only weakening from these factors, but its weakness is also due to the weakness of economic activity in the euro area and weak growth in Europe, especially the recent negative indicators that appeared in Germany and several major European countries, It feeds the hypothesis that Europe will enter a state of economic stagnation, which will lead to a weakening of the value and price of the euro.”
For his part, economist and currency specialist Dr. Kamil Al-Sari believes that this decline was expected, because the economic sanctions on Russia directly led to this contraction and setback in the European economy, and the beginning was with the crisis in the German economy, and this of course directly affects the European currency.
He also stressed that the high energy prices and the crisis of gas supplies from Russia to Europe, make the economic situation better in the United States than in Europe, because Washington is not only a producer of gas and oil, but also exports them, and therefore there is no energy crisis.
The euro became legal currency on January 1, 1999, in 11 of the 15 countries that are members of the European Union at that time, and it started electronically only, and then took the form of banknotes and coins starting from January 1, 2002.
Today, the euro is the official currency for regarding 340 million people in 19 countries of the European Union, and Croatia will be the 20th country to adopt the euro as an official currency, following the European Union finance ministers approved its request yesterday, Tuesday, and the decision will enter on the first of January The second 2023 comes into effect.
Can we expect a bigger collapse of the euro?
At a time when fears are increasing regarding the development of deflation and economic stagnation, in light of high inflation and increasing uncertainty regarding the continuation of Russian gas supplies, the situation is becoming “very delicate” for European countries, given that nearly 50% of these countries’ imports are denominated in dollars, so can we expect a collapse The euro is bigger in the coming days, and what are the prospects for the European currency in light of this situation?
Al-Sari answers this question, saying to Al-Jazeera Net, “I expect the euro to fall in the coming months, because we are at the beginning of the gas supply crisis, because European countries currently have sufficient reserves of gas because we are in the summer, but with the advent of autumn and winter and the doubling of gas consumption, the situation will deteriorate more and therefore The euro will fall more, and this large rise in oil and gas is harmful to the European consumer, especially to European companies, and this boosts inflation and exacerbates the crisis further.
The currency expert stresses that the euro’s future prospects are ambiguous and bleak unless the European Central Bank or the US Federal intervenes, because the dollar’s strength is mainly due to the strength of the US Central Bank’s intervention, unlike the European Central Bank, which does not interfere much in the euro and therefore we find it exposed to problems and landing.
Is it an investment opportunity?
Despite the great fluctuations and pressures on the European currency, the decline in the growth rate in the euro area, and the rise in the rate of inflation to record levels that Europe has not seen for decades, the European Central Bank, which previously announced that it will meet on July 21, did not move, and did not raise The interest rate since 11 years, or taking preventive measures that would encourage foreign investments or reduce the rate of inflation.
The Central Bank of France considered at the end of May that the weakness of the euro might hinder the efforts of the European Central Bank to control inflation.
While observers see the possibility that the decline of the euro would constitute a good opportunity for investment in Europe, Melhem ruled out that this decline of the euro would be a target for any investor and a good opportunity for investment, because the economic climate is heading to a bleak and ambiguous atmosphere, especially with the serious threats to cut gas from Europe, and this, in his opinion, heralds a state of affairs. Large economic recession, because the environment is unsafe and not conducive to investment.
It is the same position as Camille Al-Sari, who noted that the global investor does not choose the transforming and ambiguous markets, because he monitors the currency rates on the stock exchange, but rather he will choose the strong economies that have promising future prospects, because he thinks regarding profits according to the future, and this applies to the price of the dollar and to the stability that The American economy and its promising profit prospects are witnessing it, and it does not apply to the shaky and ambiguous European economy as a result of the Russian-Ukrainian war.
Winners and Losers
Regarding the winners and losers in this record-breaking process of the euro once morest the dollar, the economist Daniel Melhem noted that:
- The sectors and companies that are produced in the euro are the first to gain, because they will practically benefit from exporting abroad and from the low cost of exporting.
- While the traditional industrial sectors such as the automobile and aircraft industries will be affected, because they import raw materials from abroad and pay with dollars.
- In general, the European economy will lose, because practically with the depreciation of the currency the rate of inflation will rise.
As for the currency expert, Kamil Al-Sari, he indicated that:
- The losers in Europe are the companies operating in the energy sector that use fuel and gas, because the cost of fuels within the production chain becomes high, especially petrochemical companies, and this we see daily in reality as these companies pay a double bill for the rise in energy prices and European sanctions on Russia, and it will be the first ram Fida.
