A handful of American consumers—especially tourists visiting Europe—stand to benefit from the U.S. dollar’s recent strengthening against the euro, but the wider impact on the U.S. economy may not be as positive
handful of American consumers–especially tourists visiting Europe–stand to benefit from the U.S. dollar’s recent strengthening against the euro, but the wider impact on the U.S. economy may not be as positive.
At the same time, a weaker Europe could hit American exports, and in turn, that may hurt American jobs. Again, the numbers are big. The U.S exported $468 billion of goods and services to the E.U. in 2019, according to the Office of the There’s more good news: There is little chance of the weakness reversing anytime soon. Chandler sees little chance of the ECB intervening to halt the euro’s drop. “I think there are two chances: slim and none, and slim just left town,” he says.The euro’s decline is partly down to the different approaches central banks on opposite sides of the Atlantic have taken, and how investors have responded. Investors can get far better interest on their risk-free U.S.
But the ECB wasn’t around in the ‘70s, and there has been no similar period of inflation since the euro was launched a little over two decades ago. In addition, the ECB is generally hesitant to make policy moves that might weaken Europe’s financial sector, Clayton says. That’s why its efforts to raise rates massively lag the Fed’s despite European inflation rates being similar to the U.S. rate.could solve the ECB’s inflation problem, as a shrinking economy also tends to reduce inflation.
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