The euro fell during today’s trading at $1.083, a level that could come under further pressure if these policies are implemented. As for the dollar index, which measures the greenback’s performance against six major currencies, it reached 103.93 in early trading today, after hitting its highest level since the beginning of August at 104.02 points on Monday. The index appears set for gains of more than 3% this month, boosting the dollar’s strength against other currencies, including the euro.
Goldman Sachs predicted that the euro could fall as much as 10 percent if U.S. President Donald Trump imposes extensive tariffs and cuts in domestic taxes if he wins the next U.S. presidential election. This scenario is a strong catalyst for the rise of the US dollar, which in turn could lead to a significant decline in the value of the euro. Michael Cahill, an analyst at Goldman Sachs, suggests that a 10% tariff globally and a 20% tax on Chinese imports, combined with the stimulus of domestic tax cuts, could push the dollar higher, while leading to a drop in the euro by 8-10%.%.
These forecasts reflect uncertainty in global markets related to potential U.S. economic policies, particularly with regard to international trade and taxation. These policy changes could reshape the global economic landscape, with direct effects on major currencies such as the euro and the dollar. In this scenario, investors remain on the lookout for developments in the political and economic situation in the United States and their potential impact on global markets. Here’s a revision of your sentence to eliminate passive voice:
“These changes are expected to shape the global financial market because the dollar reacts strongly to shifts in trade and tax policies.”
Impact of euro’s decline on European economy
The fall of the euro significantly affects the European economy in many ways. For starters, the depreciation of the euro represents an opportunity to boost European exports, as European producers become more competitive in global markets. The depreciation of the currency means that European goods will be less expensive for foreign buyers, enabling European companies to increase the volume of their exports and thus boost economic growth. However, the European economy also faces some challenges due to the decline in the euro. One of the most prominent of these challenges is the high cost of imports. When the euro falls, imported goods and services become more expensive, leading to an increase in the prices of products, especially those that rely on imported raw materials.
The impact of the euro’s decline also extends to financial markets. When the euro weakens, it can increase market volatility, as investors adjust their portfolios in response to exchange rate changes. A weaker euro could also cause increased uncertainty among investors, negatively affecting foreign direct investment in European countries. Also, the tourism sector is affected by the decline in the euro, as travel to European countries becomes more attractive to foreign tourists, increasing tourism revenues. However, this may affect European tourists who want to travel outside the Eurozone, as their travel costs will increase.
In addition, a weaker euro could lead to divergence in the ECB’s monetary policies. The central bank may turn to stimulus measures to support the economy, such as lowering interest rates or expanding asset purchase programs, in an effort to achieve economic stability and growth.
Factors leading to the decline in price of euro
There are many factors that lead to the euro’s decline, and they play a decisive role in determining the value of a currency. One of the most prominent of these factors is the monetary policies of the European Central Bank. When the central bank cuts interest rates or implements stimulus programs, it reduces the attractiveness of the euro compared to other currencies, prompting investors to look for better returns in other currencies. Economic factors also contribute to the euro’s decline. Weak economic data, such as lower economic growth or high unemployment, point to a weaker European economy, negatively impacting confidence in the euro. For example, any reports of a recession or slowdown in growth can lead to currency depreciation.
Political transitions also play a big role. In situations of political instability, such as controversial elections or political crises, investors tend to hedge risk by converting their investments into more stable currencies, sending the euro weaker. Issues such as the secession of countries or financial crises within the Eurozone can significantly affect the price of a currency. International trade relations are also a factor.
Also, global geopolitical events, such as crises or conflicts, can lead to the euro’s decline. When crises intensify, investors tend to flee to safe havens such as the US dollar, causing the euro to depreciate. In general, the decline of the euro occurs as a result of a complex interaction between monetary policies, economic conditions, political developments, and global factors, requires investors and observers to carefully monitor these factors to understand the potential trends of the currency.
