July 14, 2022 · less than 3 min read
It’s time to book a flight to Europe.
The euro has been a sinking ship this year. Already under pressure from growing inflation, the war in Ukraine has unleashed an energy war on European consumers. Despite these two pressures, the ECB – as ever – seems reluctant to intervene and still has interest rates in the negative, meaning slowly but surely confidence in the euro has been dipping lower and lower.
Now, for the first time in 20 years, the euro and the dollar are at 1:1 parity. And that is pretty good news for us Americans.
In practice, Americans are now getting a 15% discount on anything denominated in euro. If you’d bought a €15 sandwich a year ago, it would have cost you €17.80. Today, it’d be €15.10. Great for consumers, but it could be great for some businesses as well.
If you’re importing from Europe, you’re all set for a great deal. The value of the euro is well down from where it has been in recent years, so this is all really good news for some businesses. The question on everyone’s lips, however, is just how long can it last? The answer isn’t completely clear.
Where next for the euro?
So, is this something that you can profit from? If you’re planning to make a move on the current exchange rate, it’s something you can really use now. It’s very unlikely that the current exchange rate is going to stay where it is over the long term. While there’s no answer on the outcome of the war in Ukraine, and future energy arrangements with Russia over energy will play a big role, ultimately the ECB will (eventually) get a grip on inflation in the Eurozone sooner or later.
The upshot? When it does eventually recover, currencies that have depreciated this year – including the euro – will probably get some hefty tailwinds, slamming this cheap summer window closed. Parity won’t last forever.
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