{"id":34696,"date":"2023-03-18T21:00:00","date_gmt":"2023-03-18T20:00:00","guid":{"rendered":"https:\/\/www.11onze.cat\/?p=34696"},"modified":"2023-03-14T10:51:46","modified_gmt":"2023-03-14T09:51:46","slug":"euro-devaluation-increase-inflation","status":"publish","type":"post","link":"https:\/\/www.11onze.cat\/en\/magazine\/euro-devaluation-increase-inflation\/","title":{"rendered":"Euro&#8217;s devaluation will increase inflation"},"content":{"rendered":"<div class=\"component text\">\n  <div class=\"container\">\n\n\n    <div class=\"row\">\n      <div class=\"col  col-lg-8  offset-lg-2\">\n        <h3><b>What will be the consequences of the devaluation of the euro against the dollar, and how will it affect our pockets? The virtual parity between the two currencies will aggravate inflation, and the theoretical improvement in the competitiveness of European industry may be greatly diminished by the increase in energy costs.<\/b><\/h3>\n<p>&nbsp;<\/p>\n<p><b>One dollar is already worth almost one euro. <\/b><span style=\"font-weight: 400;\">Parity between the two currencies is almost a reality. The 1.6 dollars that could be obtained for each euro in July 2008 is a long way off. In fact, the dollar&#8217;s exchange rate these days is the highest against the euro since the end of 2002, the year in which the European currency came into circulation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Since the beginning of February, before the Russian invasion of Ukraine, the euro has depreciated by nearly 13% against the dollar. And if we take the beginning of 2021 as a reference, the depreciation has been almost 18%, so <\/span><b>the European currency has lost almost a fifth of its value against the American currency in little more than a year and a half<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>More fuel for inflation<\/b><\/h3>\n<p><b>The rising dollar is very bad news for inflation<\/b><span style=\"font-weight: 400;\">, since oil and many commodities are paid for in the US currency, so the dollar&#8217;s appreciation is equivalent to its rise. The current price we pay for a barrel of Brent Crude is around 105 dollars. At the current exchange rate, it costs us almost the same amount of euros, while at the exchange rate of a few months ago it would cost just over 90 euros.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Indirectly, <\/span><b>the rise in oil prices will have an impact on the price of most products due to the increase in transport costs<\/b><span style=\"font-weight: 400;\">. The increase in the price of liquefied gas imported from the United States for European industry, which was already much more expensive than Russian gas, will also play an important role.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In this respect, the President of the European Commission, Ursula von der Leyen, <\/span><a href=\"https:\/\/apnews.com\/article\/russia-ukraine-france-ursula-von-der-leyen-df521629d80ed3ba4ff97439b3a44c02\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">called<\/span><\/a><span style=\"font-weight: 400;\"> on European countries to unite in the face of a possible cut in Russian gas supplies, which is vital for the competitiveness of many European factories. All the signs are that we will have to dig deeper into our pockets.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Fears of recession<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">Developments in the euro\/dollar exchange rate reflect the shift in US monetary policy, as the Fed <\/span><a href=\"https:\/\/www.federalreserve.gov\/newsevents\/pressreleases\/monetary20220615a1.htm#:~:text=The%20Board%20of%20Governors%20of,%2C%20effective%20June%2016%2C%202022.\" target=\"_blank\" rel=\"noopener\"><span style=\"font-weight: 400;\">raised<\/span><\/a><span style=\"font-weight: 400;\"> interest rates in March and June to between 1.5% and 1.75%. This makes it <\/span><b>more attractive for investors to buy US debt<\/b><span style=\"font-weight: 400;\">, which is obviously in US dollars. And this interest rate is expected to rise again later this month.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In contrast,<\/span><b> the European Central Bank (ECB) has not yet dared to change the 0% interest rate because of the fragile economy<\/b><span style=\"font-weight: 400;\">. And experts predict that the ECB will only raise it by a quarter point at its July meeting. The fact that the US Federal Reserve has already raised interest rates six to seven times more this year than the ECB is expected to do makes a big difference.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, <\/span><b>many analysts interpret the weakening of the euro as a sign of the market\u2019s fear of recession in Europe<\/b><span style=\"font-weight: 400;\">, which could hit many countries between the end of this year and next year.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h3><b>Benefits for European industry?<\/b><\/h3>\n<p><span style=\"font-weight: 400;\">In theory,<\/span><b> the devaluation of the euro is an advantage for European exports<\/b><span style=\"font-weight: 400;\">, as products become more competitive. A weak euro against the dollar makes a product produced in the euro area cheaper for Americans, while a product made in the US becomes more expensive for Europeans.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the medium term, this could particularly benefit economies such as Germany and France, which are clear exporters. And, in principle, it should lead to a revival of industry and trade. But <\/span><b>the rising cost of energy may limit, to a large extent, this theoretical improvement in competitiveness<\/b><span style=\"font-weight: 400;\">. Moreover, runaway inflation would not help in gaining market share either.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><b>If you want to discover the best option to protect your savings, enter <\/b><a href=\"https:\/\/serveis.11onze.cat\/en\/preciosos-11onze\" target=\"_blank\" rel=\"noopener\"><b>Preciosos 11Onze<\/b><\/a><b>. 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