05.09.2022 –You know this from the supermarket and from advertising: goods that are supposed to appear visually cheap end up being priced at 99 cents. After all, 9.99 euros instead of 10 euros is a huge difference. Psychology. Of course, this looks like cheap junk that has to go. The same is true of the pan-European soft currency: the euro has just fallen to its lowest level in almost 20 years.
A truly sad anniversary. Will this trend – here the daily chart – turn around soon? The euro is showing signs of weakness, while the dollar is bursting with strength. On Monday morning, the Neo-Lira temporarily fell to 0.9879 U.S. dollars – the last time a euro cost less was at the end of 2002. The European Central Bank (ECB) had set the reference rate at 0.9993 dollars on Friday.
Source: Bernstein Bank GmbH
Commentators naturally blamed the gas crisis in Europe and Russia cutting off supplies for the development. There’s something to that: energy prices are skyrocketing, and oil and gas are paid for in dollars. America has both, Euroland rather little. In addition, the market sees the suicidal energy policy of old Europe – delivered to Russia, nuclear power is demonized. A blackout in winter is possible, which will hit industry and weaken exports – and thus the euro again.
Energy, Fed, domestic situation
In addition, the Federal Reserve is forging ahead with its tightening policy, while the European Central Bank is lagging behind – we have covered this topic several times here.
That leaves one issue that is rarely covered in the quality media: The risk of an uprising in Europe. Unlikely? That’s what our noble feathers thought before the fall of the Berlin Wall and the end of the GDR. In any case, high inflation is hitting the poorest households. And they could soon be in a bit of a rage, because the crisis is largely homemade by the ECB’s zero interest rate policy for years, as well as by an insane energy turnaround; moreover, the agony has been aggravated by the Corona measures and now by the Ukraine war.
Republicans as enemies of the state
To be sure, there is also ferment in the United States. Sleepy Joe Biden recently declared Republicans in Pennsylvania to be de facto enemies of the state – a group that mostly comes from the middle class, dutifully pays its taxes and has to watch left-wing radicals rage while woke dreamers ruin the big cities with open borders. By the way, Texas strikes back and carts many migrants to Chicago, New York or Washington D.C., directly into the leftist social paradise. In other words, to cities with enormously high murder rates, even though – or because? – they have tough gun laws. Biden spoke framed by two Marines in front of a wall illuminated in blood red. The intended association: hellfire, the Army is on my side. If only he wasn’t mistaken about that. We are curious to see if the situation escalates during the midterms.
But in a crisis, big investors will be careful to put their money where there is less risk of sovereign default and bonds will be repaid. And the U.S. still appears far stronger than Europe. We keep an eye on the situation and wish successful trades and investments!
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