Currency and how it can affect you
How quickly can exchange rates move?
The answer is very quickly! On Tuesday USD/EUR moved by nearly 2% in 6 hours.
Buying €250,000 is now $4,600 cheaper.
Exchange rates can move very quickly, which is why they are an important factor when deciding when to buy your Euros.
Why has the US Dollar strengthened against the Euro?
US inflation jumped to 6.3%, higher than anticipated causing the US Dollar to rally. Previously inflation had been dropping since the FED started their interest rate hikes. A hike on 21st September is now more than likely.
What to watch out for going forward?
USD/EUR is now vulnerable to several factors; future strategies to tackle inflation, interest rate hikes, potential currency interventions, recessions and the Ukraine/Russian war.
Ultimately the US dollar is still overvalued and uncompetitive. The FED may have to intervene to help support US exports.
Meanwhile, the ECB will continue to raise interest rates. Christine Lagarde indicated another two interest rate hikes would be needed to push interest rates to neutral, and a 75 bps movement should not be considered the norm. Getting a grip on inflation would be positive for the Euro.
Although the US Dollar is expected to stay strong, as we have seen today exchange rates can move up and down very quickly. While the US Dollar is strong, please contact us if you want to minimise your risk and capitalise on these extremely favourable levels.
Don’t forget you can buy your Euros in advance without the need for a local Euro account. We can hold your Euros on account free of charge.
Article by Spartan FX - Official Currency Partner to KipperTree.
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