Latest news with #euro
New York Times
2 hours ago
- Business
- New York Times
As the Dollar Slides, the Euro Is Picking Up Speed
The chaotic rollout of President Trump's tariffs has prompted investors to question long-held assumptions about the safety and stability of the U.S. dollar, which has plunged in value this year. In the hunt for alternatives, many have turned to the euro. The euro has risen more than 11 percent against the dollar since the start of the year, reaching its highest level in four years, at $1.18. The euro has also gained against other major currencies over that period, including the Japanese yen, British pound, Canadian dollar and South Korean won, suggesting that its strength is more than a reflection of the dollar's weakness. Christine Lagarde, the president of the European Central Bank, said this moment was an opportunity for the euro to gain global clout. 'We are witnessing a profound shift in the global order: Open markets and multilateral rules are fracturing, and even the dominant role of the U.S. dollar, the cornerstone of the system, is no longer certain,' she wrote last week. The dollar's role as the world's reserve currency gives the United States an 'exorbitant privilege' — a term coined begrudgingly by a French politician in the 1960s. Because investors, governments and central banks around the world seek the safe, predictable returns of dollar-denominated assets like Treasury bonds, there is a robust, built-in demand for dollars. That makes it easier for the U.S. government to borrow and boosts the spending power of American consumers. The eurozone, which is made up of the 20 countries that use the euro and rivals the United States in terms of size and wealth, has never attracted investors in the same way. The euro ranks a distant second to the dollar in terms of global use. The euro's recent rise is a major reversal from just three years ago, when it dropped to parity with the dollar because investors feared the damage of surging inflation and Russia's invasion of Ukraine. And it is a world away from the eurozone debt crisis last decade, when at times it seemed like the currency union was at risk of crumbling. As welcome as the euro's recovery from those episodes has been — the euro is trading near a record high against the currencies of dozens of major trading partners — it is also possible to have too much of a good thing. The Euro Rises Up Index of the euro's value against a trade-weighted average of 41 currencies used by the eurozone's biggest trading partners. Source: European Central Bank By The New York Times As money flows into the euro and euro-denominated assets like German government bonds, economists and executives warn that the currency's strength could hurt exporters. They are already contending with Mr. Trump's tariffs making their goods more expensive for buyers abroad as well as increased competition from Chinese rivals in key markets. 'Further euro strength is likely to be self-defeating,' said Valentin Marinov, a currency strategist at Crédit Agricole, a French bank. Exports were already likely to weaken and become a drag on the eurozone economy because of U.S. tariffs and European government policies that would encourage more imports. After a surge in energy prices led to years of fighting to bring inflation down, the European Central Bank, which sets interest rates for the eurozone, now faces the prospect that inflation could be too low. The bank forecasts inflation to average 1.6 percent next year, notably below its 2 percent target. That's partly because of the impact of a strong euro, which makes imports cheaper. Some policymakers have said there is a risk of sluggish inflation becoming entrenched, which is a familiar problem for the region. For nearly a decade until 2021, the central bank kept its key interest rates below zero in hopes of spurring faster economic growth and encouraging prices to rise steadily. That, policymakers hoped, would feed through to higher wage growth and better living standards. E.C.B. officials are expected to keep interest rates steady when they meet this week, but analysts are adding to bets they could cut rates again later this year, if the economic outlook darkens or the euro's strength pushes inflation forecasts even lower. Reducing interest rates tends to weaken a currency, but the euro's recent strength has come, notably, as the E.C.B. cut rates eight times in a year. Luis de Guindos, the vice president of the central bank, said that if the euro climbed above $1.20, that 'would be much more complicated.' Some big European companies have warned about the effect of the strong currency on their earnings, especially in export-heavy Germany. SAP, a software firm that recently became Europe's most valuable public company, said that every one-cent increase in the euro-dollar exchange rate results in a 30 million-euro decline in revenues, without currency hedges. Adidas, the sportswear brand, said that a strong euro has 'negative translation effects' on its overseas sales. Daimler, a truck maker, said that fluctuations on the euro-dollar rate 'could significantly impact' its financial performance. Where the euro goes next is hard to predict. It is currently trading at around $1.17, and analysts surveyed by Bloomberg expect it to continuing strengthening, to $1.21 next year. But Mr. Marinov of Crédit Agricole said he believed that traders had gotten ahead of themselves: He expects the euro to fall back toward $1.10 next year. The currency's rally this year does not necessarily mean there will be a lasting shift toward the euro, in which it accounts for a larger share of central banks' reserves or is used in more cross-border payments. Ms. Lagarde of the E.C.B. said that seizing the moment for a 'global euro' would take a concerted effort to bolster the bloc's fragmented economy, streamline its governance and deepen its capital markets, among other things. 'A step towards greater international prominence for our currency will not happen by default: It must be earned,' she said.
Yahoo
14 hours ago
- Business
- Yahoo
Europe Inc braces for pain from a sturdy euro
A look at the day ahead in European and global markets from Ankur Banerjee The incredible rise of the euro this year is sure to play a part in Europe Inc's performance as a steady but unspectacular start to the earnings season kicks up a notch with results due from the region's largest software maker SAP. While tariff uncertainties linger ahead of an August 1 deadline, investors are pinning their hopes on resilient corporate earnings from Wall Street and European bellwethers to keep stocks and sentiment aloft. Investors will parse through quarterly results for any clues on the impact trade uncertainty has had on profitability and consumer demand, with the earnings so far described by RBC Capital Markets as "fine but not fabulous". SAP, which has been riding a boom in demand for its cloud-based offerings spurred by artificial intelligence, will report later on Tuesday as will UniCredit and Julius Baer. Focus will be on just how much the euro's rise has eaten into profits of the firms in the bloc's export-reliant economy after the single currency surged 9% in the April-June quarter. The euro is up 13% so far in the year as investors looked for alternatives to U.S. assets and to lower their dollar exposure in the wake of U.S. President Donald Trump's erratic trade policies. SAP had predicted back in April that for every 1 cent rise in the euro, its annual revenue could decline by around 30 million euros. The euro was last at $1.1688 compared to $1.1329 at the end of April. Earnings from luxury behemoth LVMH and drugmaker Roche this week will also be of interest. Tariffs and where they are headed remain on the agenda after diplomats said the EU is exploring wide-ranging "anti-coercion" measures which would let the bloc target U.S. services or curb access to public tenders in the absence of a deal. Trump has threatened 30% duties on imports from Europe if no agreement is signed before the August 1 deadline. Meanwhile, the 'will-he-won't-he' saga over Trump possibly firing Federal Reserve Chair Jerome Powell rumbles on. U.S. Treasury Secretary Scott Bessent said on Monday the entire Federal Reserve needed to be examined as an institution and whether it had been successful, further exacerbating worries about the independence of the U.S. central bank. Key developments that could influence markets on Tuesday: Earnings: SAP, UniCredit, Julius Baer Trying to keep up with the latest tariff news? Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
14 hours ago
- Business
- Reuters
Morning Bid: Europe Inc braces for pain from a sturdy euro
A look at the day ahead in European and global markets from Ankur Banerjee The incredible rise of the euro this year is sure to play a part in Europe Inc's performance as a steady but unspectacular start to the earnings season kicks up a notch with results due from the region's largest software maker SAP ( opens new tab. While tariff uncertainties linger ahead of an August 1 deadline, investors are pinning their hopes on resilient corporate earnings from Wall Street and European bellwethers to keep stocks and sentiment aloft. Investors will parse through quarterly results for any clues on the impact trade uncertainty has had on profitability and consumer demand, with the earnings so far described by RBC Capital Markets as "fine but not fabulous". SAP, which has been riding a boom in demand for its cloud-based offerings spurred by artificial intelligence, will report later on Tuesday as will UniCredit ( opens new tab and Julius Baer (BAER.S), opens new tab. Focus will be on just how much the euro's rise has eaten into profits of the firms in the bloc's export-reliant economy after the single currency surged 9% in the April-June quarter. The euro is up 13% so far in the year as investors looked for alternatives to U.S. assets and to lower their dollar exposure in the wake of U.S. President Donald Trump's erratic trade policies. SAP had predicted back in April that for every 1 cent rise in the euro, its annual revenue could decline by around 30 million euros. The euro was last at $1.1688 compared to $1.1329 at the end of April. Earnings from luxury behemoth LVMH ( opens new tab and drugmaker Roche (ROG.S), opens new tab this week will also be of interest. Tariffs and where they are headed remain on the agenda after diplomats said the EU is exploring wide-ranging "anti-coercion" measures which would let the bloc target U.S. services or curb access to public tenders in the absence of a deal. Trump has threatened 30% duties on imports from Europe if no agreement is signed before the August 1 deadline. Meanwhile, the 'will-he-won't-he' saga over Trump possibly firing Federal Reserve Chair Jerome Powell rumbles on. U.S. Treasury Secretary Scott Bessent said on Monday the entire Federal Reserve needed to be examined as an institution and whether it had been successful, further exacerbating worries about the independence of the U.S. central bank. Key developments that could influence markets on Tuesday: Earnings: SAP, UniCredit, Julius Baer Trying to keep up with the latest tariff news? Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here.
Yahoo
14 hours ago
- Business
- Yahoo
Europe Inc braces for pain from a sturdy euro
A look at the day ahead in European and global markets from Ankur Banerjee The incredible rise of the euro this year is sure to play a part in Europe Inc's performance as a steady but unspectacular start to the earnings season kicks up a notch with results due from the region's largest software maker SAP. While tariff uncertainties linger ahead of an August 1 deadline, investors are pinning their hopes on resilient corporate earnings from Wall Street and European bellwethers to keep stocks and sentiment aloft. Investors will parse through quarterly results for any clues on the impact trade uncertainty has had on profitability and consumer demand, with the earnings so far described by RBC Capital Markets as "fine but not fabulous". SAP, which has been riding a boom in demand for its cloud-based offerings spurred by artificial intelligence, will report later on Tuesday as will UniCredit and Julius Baer. Focus will be on just how much the euro's rise has eaten into profits of the firms in the bloc's export-reliant economy after the single currency surged 9% in the April-June quarter. The euro is up 13% so far in the year as investors looked for alternatives to U.S. assets and to lower their dollar exposure in the wake of U.S. President Donald Trump's erratic trade policies. SAP had predicted back in April that for every 1 cent rise in the euro, its annual revenue could decline by around 30 million euros. The euro was last at $1.1688 compared to $1.1329 at the end of April. Earnings from luxury behemoth LVMH and drugmaker Roche this week will also be of interest. Tariffs and where they are headed remain on the agenda after diplomats said the EU is exploring wide-ranging "anti-coercion" measures which would let the bloc target U.S. services or curb access to public tenders in the absence of a deal. Trump has threatened 30% duties on imports from Europe if no agreement is signed before the August 1 deadline. Meanwhile, the 'will-he-won't-he' saga over Trump possibly firing Federal Reserve Chair Jerome Powell rumbles on. U.S. Treasury Secretary Scott Bessent said on Monday the entire Federal Reserve needed to be examined as an institution and whether it had been successful, further exacerbating worries about the independence of the U.S. central bank. Key developments that could influence markets on Tuesday: Earnings: SAP, UniCredit, Julius Baer Trying to keep up with the latest tariff news? Our new daily news digest offers a rundown of the top market-moving headlines impacting global trade. Sign up for Tariff Watch here. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Reuters
4 days ago
- Business
- Reuters
Dollar slips against euro but maintains weekly gains
NEW YORK, July 18 (Reuters) - The U.S. dollar slipped against the euro on Friday but held on to weekly gains, as investors weighed expected Federal Reserve policy amid signs that tariffs may be starting to increase some inflation pressures and as U.S. President Donald Trumpcontinued to criticise Chair Jerome Powell. Data on Tuesday showed that consumer prices rose in June, though the increase was seen as moderate. Wednesday's producer price inflation report showed that prices were steady last month. Powell has said he expects inflation to rise this summer as a result of Trump's tariff policies. His comments have pushed out expectations of when the U.S. central bank is likely to cut interest rates. But the labor market is showing signs of weakness even as headline job gains and the unemployment rate remain relatively solid. 'We're waiting on the tariffs to become real and not just a negotiating ploy and waiting on the labor market to reveal itself,' said Lou Brien, strategist at DRW Trading in Chicago. 'Layoffs are at a lower level than they were pre-pandemic, but the hiring is terrible. And if, all of a sudden, the layoffs come up, we're going to get a significant increase in the unemployment rate very quickly,' Brien said. Fed governor Chris Waller said on Friday that he favors a rate cut at the July meeting because he feels tariffs are likely to have a limited impact on inflation. Waller added that underlying data "are not indicating a super healthy private sector labor market," and the Fed should "get ahead" of a possible hiring slowdown. Powell is facing almost daily criticism from Trump over the Fed's reluctance to cut rates. The dollar tumbled on Wednesday on reports that Trump was planning to fire the Fed Chair, but rebounded after Trump denied the reports. Powell's term will end in May. Chicago Fed President Austan Goolsbee said he is a "little wary" about signs in the June consumer price index that tariffs are pushing up goods inflation, but still believes the U.S. economy is in a good place and the Fed's policy rate can come down a "fair bit" over the next 12 months. Fed funds futures traders are pricing in 46 basis points of cuts by year-end, implying that two 25 basis point cuts are seen as most likely, with the first coming in September. The dollar index was roughly flat on the day at 98.49, and is on track for a 0.65% weekly gain. The euro was last up 0.22% at $1.1621 but is headed for a weekly drop of 0.59%. The euro pared gains after the Financial Times reported that Trump is pushing for a minimum tariff of 15% to 20% in any deal with the European Union. Sterling was flat at $1.3411 and is heading for a weekly decline of 0.64%. The Japanese yen was slightly lower against the greenback heading into Sunday's upper house election, in which Japan's ruling party looks vulnerable. The dollar gained 0.1% to 148.75 yen and is on track for a weekly gain of 0.93%. Polls suggest Japan's ruling coalition is at risk of losing its majority, which would stir policy uncertainty at home and complicate tariff negotiations with the United States. U.S. Treasury Secretary Scott Bessent told Japanese Prime Minister Shigeru Ishiba that their countries can reach a "good agreement" on tariffs, Ishiba said on Friday after meeting Bessent in Tokyo. In cryptocurrencies, bitcoin fell 1.51% to $117,680, holding below a record $123,153 reached on Monday. The U.S. House of Representatives on Thursday passed a bill to create a regulatory framework for U.S.-dollar-pegged cryptocurrency tokens known as stablecoins, sending the bill to Trump, who is expected to sign it into law.
