The euro has appreciated significantly in recent weeks. Expressed in US dollars, our currency rose from €1,12 to €1,18 in July, its highest level in 2 years. This is not a favorable development for European (agricultural) exports.
For a long time there was a stable picture, but in recent weeks the euro-dollar exchange rate has clearly started to rise. A further increase is also in prospect, the ING bank predicts a rate of €1,20 by the end of this year.
Cocktail of factors
There are several reasons for the increase. For example, America has been in a diplomatic clinch with China for a long time, which flared up again last week. An American consulate has been closed in the Chinese city of Chengdu in revenge after the opposite occurred in the American city of Houston (Texas). Europe is further along with the support package to combat the corona crisis than the US, at least that is the interpretation of the market. This also puts pressure on the American currency.
The American investment bank Goldman Sachs announced this week that the position of the dollar as a world currency is under pressure. This can be deduced from the gold price, which has risen to a record high and is likely to rise further. The value of the dollar is consciously depressed by the stimulus policy of the FED, the central bank of America. According to the bank, a weak dollar will benefit the national debt, which is further accumulating due to the corona crisis.
Brazilian real
The stronger euro poses an additional challenge for European exporters on the global market, on top of the drop in demand (for many products) as a result of the worsening corona pandemic. Not only the dollar, but also the real value of agricultural superpower Brazil has fallen sharply. Something that European exporters of meat, grains and sugar will undoubtedly notice as they encounter Brazilian exporters on the same sales markets. This also applies to US traders.