As a consumer you will notice this about the cheap dollar

The sharp dollar decline works out quite well for Dutch households. All sorts of articles can become a lot cheaper. Expressed in euros, the price of American articles decreases and Asian export companies know their way to Europe.

The dollar's free fall has been the big story on the currency markets in recent months. Compared to the euro, the US currency has lost more than 10% of its value since early April. Slowly but surely, you'll notice it in your wallet. And if not, it will happen. Just keep an eye on the price of petrol in the coming period. Now that the conflict between Israel and Iran seems to have died down, the price of a barrel of Brent oil has fallen to less than $65. That is admittedly a bit more than early May, but a year ago that same barrel cost $85. Expressed in euros, the difference is much greater: €55 now compared to almost €80 twelve months ago. Yet the price of a litre of Euro95 has only fallen from €2,20 to €2,13 in that period.

Less pain at the pump
Viewed this way, it suddenly becomes a lot easier to understand why so much is earned with oil trading. But there is a good chance that in a few weeks you will pay a little less for a full tank than you do now. The dollar effect can also be felt in your wallet in other ways. Many electronics come from Asian countries and are paid for in dollars. Importers pay more than 10% less for these items than a few months ago. For the time being, this is not noticeable in the shops, because companies pocket the difference or offset it against the costs incurred for covering currency risks. But those who wait too long with price reductions run the risk of pricing themselves out of the market and losing the competitive battle.

More to choose from
The low dollar also affects Dutch shops in other ways. In Asia, cheap toys, seasonal decorations and kitchenware are manufactured in abundance. Some of these usually find their way to the United States. However, the low dollar makes these items somewhat too expensive for American discount shops, so that a growing part of the flow of goods ends up in, for example, Action and Big Bazar. In addition to lower prices, currency effects also provide a wider choice for Dutch shoppers. The big question is of course how long this will last. Part of the answer to that question will probably be available on Thursday.

All eyes on the labor market
On that day, new figures on the American labor market will be released. The growth in the number of new jobs is expected to have slowed to around 130.000, which indicates a weakening of the labor market. In that case, there may be room for the Federal Reserve to lower the policy rate somewhat in July. A lower interest rate is usually unfavorable for a currency. The same applies to financial uncertainty. The budget committee of the American Congress has calculated that the national debt will increase by an additional $3.300 billion in the coming decade due to the Big Beautiful Bill of President Donald Trump. That is $500 billion more than expected. Unless the job creation surprises, the dollar pressure will continue for the time being.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

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