If the ECB cuts its key rate while the Federal Reserve holds interest rates steady in June due to persistent inflation, the US interest rate will look even more attractive to investors. This will tempt some investors to shift their wealth from the euro to the dollar. And obviously, more demand for the dollar will increase the value of the dollar relative to other currencies. This perspective is strengthened by the fact that the head of the European Central Bank, Christine Lagarde, has already formulated the intention to proceed with a first reduction of the euro benchmark in June.
Meanwhile the US dollar has been rising since late December. And in the last few days, this rise has turned into a vertical explosion with a trend that can reach the absolute parity of the two currencies ie 1/1.
Analysts have been looking at the US Dollar Index since late December. This index is a measure of the value of the US dollar against a basket of six major world currencies – the euro, the Swiss franc, the Japanese yen, the Canadian dollar, the British pound and the Swedish krona.
A stronger US dollar helps profits at multinational companies and boosts commodity prices, such as oil and gas, for almost everyone else in the world.
In essence, we are talking about a new revival of inflation in countries with high imports in dollar terms, but also a significant improvement in the competitiveness of tourism.
As we all understand, we are already talking about Greece…
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