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Why did the Euro rise and US dollar fall?

Published on 7 July 2017 in News - Pages by Raffick Marday

Euro proliferate while the USD receives a massive Blow
According to the European Central Bank, the US dollar is suffering a massive decrease while the Euro steadily increases. The Euro sky-rocketed to a nine-day increase above the US dollar. President of the European Central Bank, Mario Draghi commented on the matter. Not only the US dollar but the Euro also surged over a number of other currencies. For example, the single currency leaped to a 8 month high over the pound sterling. The US dollar has weakened in the last couple of months, and the weakest level was reached yesterday morning against the euro and krona. Global attention occurred on the matter and widespread disappointment of the Trump administration. Poor effort in terms of economic reform and tax reduces was said to be the result of this calamity.

On the other hand, the euro region is more happy and surprised as they have observed growth since the ending of last year. Europen Central Bank President, Mario Draghi announced that he has seen the development of confidence in growth aggrandizement, which resulted in the strength of the euro.

Why did the Euro rise and US dollar fall?

  1. Determination of Mario Draghi- Draghi said that he strives to reduce deflation risks and aims for reflation. Also, he commented about removing stimulus. The vice president of the ECB, Victor Constancio said Draghi's speech is actually on track and linked to the thinking of the ECB.
  2. Trumpcare is actually collapsing- In the US, house republicans said that they will be canceling a vote on a bill to replace Obamacare. Legislation on health care is very hard for the Trump administration. To continue with Trumpcare a lot of trade-offs will occur and it will disrupt people's life. Therefore, a failing healthcare program implies no actual progress on taxes, which markets desire or want to see fall.

Some other key points to know why the Euro sky-rocketed was because

Growth is gradually firming in the European region. Spending has been rising while debt decreased.Labour supply is more elastic due to the fact that immigration is non-stop in countries such as Germany and France. The rate of underemployment dropped significantly over the past 8 months.* Less importation

The IMF revised the growth forecast of the US Dollar and said it tumbled against the pound in the past two days, lowering the GDP expectations for 2017 from 2.4 percent to 2.1 percent. At the beginning of January, the IMF also stated that the expectation of Trump's presidency would promote growth with his pledges and reduce taxes, so that the economy will grow, however, 6 months into his presidency the Trump administration has failed to show any progress. They announced that the Trump administration is losing political capital, which results in the sliding dollar.

Even though the dollar fell over the last two weeks significantly, investors were alerted and political worries erupted in Europe. Commodities weakened with the U.S crude oil trading below $50 per barrel.

Adding a few points the dollar dropped 0.5 percent to 110.78 yen after earlier falling 110.67. The US dollar also dropped low to the Swiss franc and was down 0.4 percent at 0.9745 franc.

In conclusion, these recent statistics show that the dollar is taking a plunging dip in its value, while other currencies are gradually and steadily increasing.

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