China – 2024/10/24: In this photo illustration, a woman from Yahoo Finance browses to check … More EUR/USD exchange exchange courses on your laptop. (Photo illustration of Serene Lee/SOPA Images/Light rocket via Getty Images)
SOPA picture/Light dryet via Getty Images
The exchange rate of the Euro-USD rose from 1.03 at the beginning of the year to around 1.14, with President Trump's recent tariff threats excited by global markets. The uncertainty in the context of the tariff war, especially between the United States and China, and the potential negative effects on the US economy in the almost-to-MID-IT season have made us extremely volatile in recent weeks. In addition, the conversations about a potential downgrading from US debts and government bonds frightened the investors, so that they are looking for “safer” investment opportunities and the euro reasonably, even if the stock markets go in one day and the next day in a different direction. If you are too volatile for your current stock market conditions for your taste, you can explore our High quality portfolioPresent This aims to limit oversized losses while exceeding the S&P 500 and have achieved the return of more than 91% since the beginning.
All in all, the current rally in the euro/USD is not sustainable and will probably end with an abrupt crash soon. Why?
Because the exchange rates reflect long -term economic basics
In essence, the euro/USD exchange rate reflects the long-term expectations of the relative demand for goods and services between the euro zone and the United States. If the US economy has exceeded Europe in growth, innovation and resilience, the dollar typically strengthens. Conversely, when Europe leads, the euro wins. At the moment, the strength of the euro seems to be separated from these underlying basics.
The US economy has better numbers
A comparison of the most important economic indicators underlines inequality between the USA and the euro zone. In 2024, the US economy recorded a real GDP growth of 2.8% compared to 0.9% for the euro zone. And the current unemployment rate in the USA is 4.2% compared to a level of 6.1% in the euro zone. The inflation levels are also comparable, at 2.4% for the USA and 2.2% for the euro zone.
However, the euro zone benefits from a better debt situation, since the ratio of debts to GDP is less than 88% compared to uncomfortable 124% for the United States, but then the goals of President Trump to reduce the country's trade deficit, to promote domestic production and to reduce other countries in order to lower their recently carried out tariff moves. And as long as the global investors continue to believe that American debt titles are “risk-free”, the debt-BIP number is not really a problem.
And the challenges of Europe exist
In addition, the structural problems of Europe are not taken into account. The continuing Russia Ukrain War and the conflict between Israel-Hamas continued to provide a shadow over European stability. In addition, there was no significant leap in European innovations or growth -friendly reforms. In contrast, the United States continues to show economic resilience.
Historical patterns indicate an impending crash
We have seen this film too often.
- The euro rose in 2017 and rose from about $ 1.04 to 1.25 compared to the dollar. What did this rally drive? A mixture of optimism over Emmanuel Macron's Pro-Eu election, the fears about the fragmentation of the euro zone and the improvement of economic data from Germany and France. The markets believed that Europe was back. Until the beginning of 2018, the rally was when the European Central Bank (ECB) held in the interest rate increases, even when the Fed continued to worsen. The US tax cuts under Trump have driven growth and capital inflows into the dollar, and soon the EUR/USD fell back to around 1.12–1.14 by the end of 2018.
- Then it occurred in 2020. After the first Covid crash, the euro rose again -this became from around 1.06 to almost 1.23 in early 2021. Investors were in the investors in relation to the European Pandemic Recovery Fund and the ability of the region to coordinate the control stimulus, while the Federal Reserve and a historical qe program began and weakened. But the reality until mid -2021, when the Fed started, was rejuvenated, while Europe's recovery stuttered. The problems of the supply chain lingered. Energy prices moved. The ECB stayed behind the curve. Once again, the capital flowed back to the dollar and the euro slipped back below 1.10 by the beginning of 2022.
These episodes show a clear pattern: The initial optimism in relation to the prospects of Europe leads to a euro rally but structural disadvantages – growth of the thrust, political paralysis and a reactive central bank – ultimately pull it down. The current rally in the euro shows signs of the same separation.
This shock may feel unique, but the pattern is unmistakable
Every economic shock feels unprecedented at the moment. However, the wider context – a larger, stabilizing system – remains consistent. This system forces a pattern: an initial shock (such as Trump's tariff threats), a time of adaptation and finally a return to the basics.
- After the initial shock, the markets often enter a phase of rejection or over -optimism. Media stories can be based on the underlying problems and investors could hope for quick resolutions. However, when the dust is done, the reality of economic foundations becomes obvious, which causes a re -evaluation to re -evaluate the assets, including exchange rate dots.
- Finally, political decision -makers and markets indicate that previous strategies do not result in the desired results. In this scenario, President Trump can recognize the limits of guidelines on a tariff basis, which leads to negotiations and political changes.
- When these adjustments occur
The strength of the euro is in the borrowed time
Sure, the Euro rally could extend a few more weeks, since investors react to every “breaking news” in connection with the tariff war. But even if you don't believe that the story is repeated, you have to admit that it rhymes. And all the signs indicate a crash in the euro/USD change course in the not too distant future.
While you can look at various options to make money with potential Euro USD transactions, a long-term investment option that you can examine is High quality -hq portfoliothat is rooted in quality, which is looking for reliability, predictability and growth in improvement. With a collection of 30 shares, it has a success story of The S&P 500 exceed comfortably in the last 4-year period. Why is that? As a group, HQ portfolio shares did better returns with less risk compared to the benchmark index. less a roller coaster ride, as obviously in HQ portfolio -performance metrics