Euro Sinks to a 19-Year Low as the Dollar Continues to Strengthen, For How Long?

by Mish Shedlock, Mish Talk:

The US dollar is still rising. When will that stop?

Peak Euro

The Euro continues it’s plunge towards parity with the US dollar.

In 2008, it took 1.60 dollars to buy one Euro. Now it takes 1.03 dollars.

US Dollar Index 


Dollar chart courtesy of StockCharts.Com annotations by Mish

Dollar chart courtesy of StockCharts.Com annotations by Mish

Unsurprisingly, if the euro is weak, the US dollar rates to be strong.

The Euro is 57.6 percent of the US Dollar Index

US Dollar Index Components

US Dollar Index chart courtesy of ICE Futures. 

US Dollar Index chart courtesy of ICE Futures. 

Strength in the US Dollar is Easy to Explain

I discussed the dollar on June 30 in Strength in the US Dollar is Easy to Explain

The Euro is 57.6% of the index, the Japanese Yen 13.6%, and the British Pound 11.9%.

That pretty much tells you all you need to know. Here are some related details.

  • The ECB and Bank of Japan still have negative interest rates.
  • The Fed is on a huge rate hike and QT rampage
  • Japan has pledged to defend its 10-year rate to under 0.25 percent.
  • The ECB will not start QT until some time in the third quarter with no hint of when.

For the First Time Since 1991, Germany’s Trade Surplus Vanishes

Also note For the First Time Since 1991, Germany’s Trade Surplus Vanishes

The US has the strongest economy and is moving the fastest on rate hikes and QT.

Question of the Day

Q: When does the dollar rise stop?
A: When the Fed stops tightening as much as expected (hikes and/or QT) or the ECB starts tightening more than expected.

But with Powell’s repeated insistence on bringing down inflation, a strong US dollar aids that purpose.

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