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Euro falls below parity with the dollar

reuters.com

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Re: Euro falls below parity with the dollar

#121

Post by simonh »

ElCheapo wrote: post #106
simonh wrote: post #64

Earlier quoted context omitted.

Nobody is willing to pay the price difference, that's why scaling up big tech in Europe natively doesn't happen. If someone were paying it, then we would have big tech natively in Europe, and we haven't.

Could you give an example of a technology that needs to be scaled up in Europe?

Competitors to Microsoft, Apple, Google, Facebook, Amazon/AWS, Netflix. The only thing we have that's even vaguely comparable that started in Europe is Spotify and it's 1/3 the size of Netflix, which itself is the smallest of the US tech giants.

Re: Euro falls below parity with the dollar

#122

Post by karatinversion »

clownpepe wrote: post #117
robjan wrote: post #108

Earlier quoted context omitted.

Borrowing becomes more expensive so it reduces the amount of cash sloshing around.

Just to clarify for the rest; the borrower (ECB) is literally printing new money every time they give out a loan.

The ECB is printing money to give out loans to itself?

Re: Euro falls below parity with the dollar

#123

Post by karatinversion »

mamonster wrote: post #119
rvense wrote: post #105

Can someone explain to me how raising interest rates combats inflation? Doesn't it do the opposite? If rates go up, financing becomes more expensive, meaning I'll need more money to do business, meaning I'll have to raise my prices to match?

In financial markets its pretty simple: When you raise interest rates, you increase the denominator in the DCF calculation, so most assets are repriced downward.

But asset prices aren’t included in inflation indices…

Re: Euro falls below parity with the dollar

#124

Post by trgn »

brundolf wrote: post #68
nine_zeros wrote: post #54

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. If the USD falls and oil prices rise, we in America are screwed. We almost had it handed to us this summer.

The problem they're having is with natural gas, which they need for winter heating

It's the difference between heating your house to 72 and walking around barefoot, or 68 and wearing a sweater and wearing loafers.

Those are the tradeoffs. Need for indoor heating has a lot of stretch. In Europe, there's a ton of stretch on personal mobility too, since there are viable alternatives for the car.

Europe can weather this crunch a lot better than America.

Re: Euro falls below parity with the dollar

#125

Post by HatchedLake721 »

jmnicolas wrote: post #78
KingOfCoders wrote: post #67

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

While it has the potential to become one, this is not a major war by any means, it's contained in south-eastern Ukraine.

What's the definition of "major war"? It's the biggest war on the continent since WW2 where two countries with 100,000s of soldiers fight each other with modern weapons.

Re: Euro falls below parity with the dollar

#126

Post by mamonster »

jacquesm wrote: post #109
fzfaa wrote: post #95

Earlier quoted context omitted.

It's time to inflict massive pain for the south. Can't spend any more decades wasting money.

They're not wasting money. They simply don't have the massive wealth of the North to jump off from or to cushion blows. On top of that a large quantity of what they do earn is spent on interest payments to the North.

They don't have this wealth because when they were given access to interest rates much lower than what they would have under independent central banks / currencies they went and spent it on consumer goods instead of investing into capital.

Re: Euro falls below parity with the dollar

#127

Post by wiredfool »

Jochim wrote: post #81
brundolf wrote: post #68

Earlier quoted context omitted.

The problem they're having is with natural gas, which they need for winter heating

Petroleum prices also spiked, probably related to the war in Ukraine but I'm not 100% sure.

Petrol/Diesel is flat to slightly down from a few months back, though it's _way_ higher than it was pre-ukraine.

In Ireland: ~1.50/l for Diesel -> 2.20, now back down to 1.89 or so. In northern Europe, I saw anywhere between 1.79 and 2.26 late July early Aug. (Including 2.26 and 2.02 on opposite sides of the motorway)

Re: Euro falls below parity with the dollar

#128

Post by iSnow »

odshoifsdhfs wrote: post #103
fzfaa wrote: post #95

Earlier quoted context omitted.

It's time to inflict massive pain for the south. Can't spend any more decades wasting money.

Thank you, we appreciate it. Specially when just a few weeks ago Central Europe wanted the south to be solitary with the rest of Europe and save gas, gas they don't get from Russia and always paid more for. This is why the EU is a stupid idea. When it is the south, they should suffer, when it is Central Europe, everyone should come together and sing kumbaya

Not so fast. The ECB should have raised rates like the Fed, but didn't to accommodate the Southern EMU members. If what you are claiming was true, the ECB would have just gone ahead and leave the south to fend for itself. Instead their policy is adding fuel to the inflation inferno to protect the south.

Re: Euro falls below parity with the dollar

#129

Post by b112 »

yuan43 wrote: post #59

The headline is "Gas crisis sends euro back below parity against dollar." Yet the article does not explain how a "gas crisis" leads to a weaker currency. 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: https://www.reuters.com/world/europe/german-economic-outlook... And the ECB…

Yet the article does not explain how a "gas crisis" leads to a weaker currency.

One thing I find weird (a touchy point?) is that the UK left. Yes, that was a few years ago, but my point is historical EU / Euro pricing is now diminished overall, in its up/down cycle.

COVID threw this asunder, so we did not see true fiscal results from UK leaving. And the UK left over a few years, making the departure less dramatic.

The UK comes in right after Germany:

https://www.investopedia.com/insights/worlds-top-economies/

and:

https://en.wikipedia.org/wiki/Economy_of_the_European_Union

Comparing the EU (18T) to the UK (3.4T) shows some impact here, around 20%. If the UK was still in the EU, I'd say the Euro wouldn't have dropped below parity.

Parity is an "OMG!" marker, and can cause cascading changes in perception to the strength of fiscal objects.

Re: Euro falls below parity with the dollar

#130

Post by paganel »

petesergeant wrote: post #118
gls2ro wrote: post #31

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

depends on how much the raw materials cost if they're coming from outside the EU, or if other people are competing on price for the raw materials

I'd wager most of the raw the materials come from outside of the EU, and there is indeed intense competition for them from outside economic entities (US, China etc). I mean, even if one were to "discover" a huge Lithium deposit in the Harz mountains (let's say), there's no way that is going to get mined. That actually happened in Serbia, not an EU country, and even there they couldn't open a Lithium mine.

In other words Europe depended on its (relatively) strong currency in order to sustain most of its remaining industry, if that currency strength is gone then things will become real bleak.

Or maybe the financialization of the remaining pieces of industry will save us all, even though I have very high doubts about it. In one of their recent issues The Economist was un-ironically suggesting that the people now producing actual fertilisers in Germany should switch careers and become "fertilisers consultants" or some such, seeing as the production process itself will have become too onerous.

Crazy times, wish we had more "experts" with their feet definitely on the ground compared to what it seems we have (or rather we haven't) right now, after all, parts of Europe have been through all this before (I'm from Eastern Europe, I should know), there should be some institutional knowledge about this type of processes.

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