Euro falls below parity with the dollar

&gt; German economy, among the most exposed to disruptions in Russian gas supply, is &quot;likely&quot; to suffer a recession over the winter if the energy crisis continues to deepen<p>At this point I feel the EU is pretty much done and the war just showed how weak the EU leadership is along how individual member nations acting sometimes totally against each other (see France doubling down on nuclear while Germany does the opposite). Like I don&#x27;t see any positive outcome for the Union no matter what happens in the war, unless you see the US having an even greater influence over Europe as a positive thing. Personally I&#x27;m extremely pessimistic.

This is great for German exports. Expect to see more Mercedes Benz in the streets of America.<p>It generates some inflation as imports are pegged to the dollar(somebody mentioned that it is hedged, it is just by some extent), but overall is actually good for the economic block. The EU needs to export to survive.<p>The EU has been fighting a possible deflation for most of the 2010s, this is actually not so negative as people might think.<p>If ECB would raise interest to the same rate as the FED, Euro would become too strong. Inflation is already decreasing in Germany even with that 0% interest rate.<p>The main inflation concern is the gas prices for this winter and this isn&#x27;t fixable with monetary policy. If we have no gas, no amount of money will be able to buy it.

Another interesting thing is that many countries are experiencing lower inflation than the US, but their currency is getting weaker, so the USD&#x27;s purchasing power is increasing two-fold. I&#x27;ve been planning a trip to Malaysia because while their exchange rate against the dollar has fallen, they&#x27;ve only experienced ~3% inflation, so not only are all of their products 22% as expensive, they also haven&#x27;t meaningfully changed in price since 3 years ago (from the dollar perspective), whereas the dollar&#x27;s purchasing power in the US is basically down 25%.

“Let&#x27;s be honest here: Europe&#x27;s a museum, Japan&#x27;s a nursing home and China&#x27;s a jail. We don&#x27;t need to worry about those currencies being some kind of major threat to us.” - Larry Summers

I assume this should be good for EU economy on the long run?<p>Like exports from EU to US are now more profitable.<p>Or am I missing something? Can someone with more understanding&#x2F;background explain how this might effect production and exports?

EU is lucky they invested in rail lines and trains. The average person can at least attempt to stop using gas guzzlers and keep living their life.<p>If the USD falls and oil prices rise, we in America are screwed. We almost had it handed to us this summer.

Can someone explain to me how raising interest rates combats inflation? Doesn&#x27;t it do the opposite? If rates go up, financing becomes more expensive, meaning I&#x27;ll need more money to do business, meaning I&#x27;ll have to raise my prices to match?

Wow EUR&#x2F;CAD is below 1.30 as well. Glad I switched (against my will) to working remotely for a California company from a German one.

Every article about the EUR&#x2F;USD ratio talks about gas prices.<p>But the current rise of the Dollar started 15 years ago.<p>Over these 15 years, it has become more and more apparent, that software is eating the world. And the US keeps extending their lead in this area.<p>I would not be surprised if that contributes to a long term trend in the EUR&#x2F;USD ratio.<p>(I&#x27;m sitting in a cafe in Germany, writing this text on laptop made by a US company, running an operating system maintained in the USA, into a browser made in the USA and posting it to a website of a US company.)

Honestly, There probably needs to be a Federal type government for Europe, much as the US is setup. The EU kind of reminds me of the US when the US was run under the Articles of Confederation before the current Federal system was adopted. It was very messy.

Last time a major war was in Europe, currencies tanked much more. I&#x27;m glad the EUR is as stable as it is while Europe is bombed by Russia.

The idea of Merkel and the useful greenies in Germany is simply one of the most perplexing geopolitical decisions of the 21st century.<p>I&#x27;ll never understand. If anybody knows the train of thought, please tell.<p>If Germany was more energy independent, Russia would be crushed this winter.

Just for fun, I took a look at GBP&#x2F;USD and it looks like that is tanking as well.<p>Meanwhile the ruble is stronger than it&#x27;s been in 4 years.<p>For people in the EU&#x2F;UK, how has this currency slide impacted your day to day?

I guess no one here has heard there is no more gold dollar?<p>All that is left is the petro dollar. This is the result.

The title of this makes me annoyed. What parity? They&#x27;re both abstract made up units that happened to be even on a random scale for a while. This is financial numerology :-(<p>(yes, I know there&#x27;s more content and &quot;this week&#x27;s currency summary&quot; sounds less fun and I should chill out)

Nothing to see here! Back to work! Put away the pitchforks! Keep voting! Move along now...

The headline is &quot;Gas crisis sends euro back below parity against dollar.&quot;<p>Yet the article does not explain how a &quot;gas crisis&quot; leads to a weaker currency.<p>What does lead to a weaker currency? On the EU side, central bank accommodation in the face of inflation ripping higher. Germany recently logged a 37% YoY annual increase in producer prices:<p><a href="https:&#x2F;&#x2F;www.reuters.com&#x2F;world&#x2F;europe&#x2F;german-economic-outlook-gloomy-finance-ministry-says-2022-08-18&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.reuters.com&#x2F;world&#x2F;europe&#x2F;german-economic-outlook...</a><p>And the ECB has done basically nothing about it. Deeply negative real rates and little indication that the ECB has the stomach for any substantive action.<p>On the US side, there have been sizable interest rate hikes, which will continue at least until the midterm elections get underway. Real rates are still deeply negative.<p>That difference in rates attracts a lot of capital that might otherwise be parked on the EU side.<p>The US doesn&#x27;t need to be a pillar of financial responsibility to attract the world&#x27;s capital. It just has to be the cleanest dirty shirt in the hamper.

Germany and Russia playing a Kindergarten war with Nordstream. Putin throttles Nordstream-1 and says he&#x27;d supply via Nordstream-2. Germany refuses to open Nordstream-2.<p>For Germany, apparently gas flowing through Nordstream-1 is ideologically pure, but gas flowing through Nordstream-2 is evil.<p>The West will continue to celebrate its hawkish Ukraine policies as a success. Looks like Taiwan will be the next success.