The European Union is running a regionwide 15% off sale – The Average Joe

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    The European Union is running a regionwide 15% off sale

    victorlei

    July 12, 2022

    The EUR/USD hit parity for the first time since 2002, which means you can convert U.S. dollars to Euros at a near 1-1 rate.

    What’s the big deal? The Euro was trading around $1.15 back in February and has plummeted since the Russian invasion.

    Reasons why the EUR/USD is falling:

    • The U.S. is raising interest rates while the E.U. hasn’t. Higher interest rates tend to attract more global investors, which increases the demand for country raising rates.
    • The U.S. dollar is seen as a safe-haven currency. Investors sold off the Euro as the Russian invasion progressed — moving towards safer assets like the U.S dollar.

    A country with a stronger currency is generally seen as a stronger economy. The U.S. grew faster in the first quarter of 2022, and inflation was slightly lower than the E.U. in May.

    The European Union is in a tough position with the Russia/Ukraine war impacting the region — which is at risk of escalating.

    Russia is threatening to reduce gas flows to Germany and other regions — making their gas shortage even worse.

    How this impacts you: A strong U.S. dollar relative to the Euro makes U.S. goods more expensive — but it also makes European goods cheaper…

    • Your purchases: By reaching parity, goods from the European Union are ~15% cheaper than at the start of the year.
    • Your stocks: U.S. companies that rely on global exports could see a slight decline in sales as U.S. goods become less competitive.

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