The dollar weakened to spite Europe

02 February 2018, 13:48 | Economy
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The fastest decline in the US currency over the past 30 years will hurt most not the United States, but the economy of Europe. Analysts of investment company PIMCO say that President Donald Trump unleashed a currency war against the European Union and for this purposely brought down the dollar rate. Weak Dollar Favorably Affects US Export. Companies selling goods abroad, bring to the economy additional funds. However, the main reason for the depreciation of the US currency is this, and the desire of the White House to weaken Europe, which for the US is a dangerous competitor in the economic sphere.

Washington is watching with alarm how the EU economy is growing. At the same time, even countries that have slowed down in recent years - France and Italy. In this situation, a weak dollar will spoil Europeans the whole picture: the euro will become too strong with all the ensuing negative consequences for both European companies and the development of the European economy. As a result of imbalance, the profits of European corporations will noticeably decrease, the economy will slow growth, and the European Central Bank will not be able to reduce inflation to the level of 2%, "Expert".

In favor of the fact that the weakening of the dollar is intentional, the strange actions of the American authorities. Trump can say as much as he likes that a strong currency is in line with America's long-term interests, but the Federal Reserve does not do anything to slow the decline. For example, this week the Ministry of Finance did not raise the key rate, which could give the dollar stability. These actions send a veiled but clear message to the markets: the main task of US policy is a weak dollar.

To the currency war is added the trade. The head of the White House threatened with the introduction of protective measures for European goods entering the American market. In late January, he raised duties on the import of washing machines and solar panels in the US. Last year, the US trade deficit increased (the country imported more than it exported), which means that this year Trump can actively apply protectionist measures and continue to weaken the dollar in order to stimulate exports and balance the trade balance.



It is noteworthy that in economic wars against the United States, Europe still has no strong trump cards. Experts do not believe that the European Central Bank will start vigorously responding to Washington's actions by easing monetary policy.

However, in March or April, after the creation of the coalition government of Germany, discussions on the formation of the banking union and on the need to strengthen the financial integration of EU members. Steps in this direction will make the EU less vulnerable to US intrigues.




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