On Friday, the official fiat currency of 19 of the 27 member states of the European Union (EU), the euro, plunged to a low of $0.9732 against the US dollar. The drop comes at a time when fiat currencies like the yen, yuan and pound have struggled against the greenback over the past six months. Analysts say the pound and euro are trapped in a ‘catastrophic loop’ and it has also been said that the US dollar is ‘the only possible hedge’ against a failing global economy.
Citigroup analysts say the greenback is the only safe haven in this macro environment
Strange days have found us in the world of finance, fiat currencies, stocks, bonds, and cryptocurrencies. On Friday, September 23, the European Union’s fiat currency, the Euro, struggled against the US Dollar and slipped below parity heading into the weekend. The Euro is currently trading at $0.97 and it dropped to a low of $0.9732 in the morning trading sessions (10 a.m. ET). The euro lost more than 1% against the greenback in 24 hours and it is the lowest for 20 years.
Bloomberg contributors Sofia Horta e Costa and Ruth Carson recently referenced Citigroup Inc. analysts and Canadian Imperial Bank of Commerce views. “The soaring dollar has led many to believe that the only safe-haven asset is the US currency,” the authors explained last week. The duo received a research note from Citi strategists Jamie Fahy and Adam Pickett discussing the phenomena surrounding the US dollar.
“The only place to hide is in US dollars,” say Citi strategists. A “deep recession” will bring inflation down, add the bank’s financial strategists. Win Thin, senior currency strategy analyst at Brown Brothers Harriman in New York, says the macro backdrop appears to favor the dollar. “The Fed’s reassessment of tightening risks is likely to keep the dollar supply across the board in the near term,” Brown Brothers executive Harriman said. Brown Brothers currency strategy analyst Harriman continued:
As we said during this last downward correction in the dollar, nothing has really changed fundamentally and the global backdrop continues to favor the dollar and US assets in general.
TD Securities strategists believe the euro and pound are stuck in a ‘catastrophic loop’
TD Securities strategists believe the euro and pound are stuck in a “catastrophic loop” and analysts at the company believe the situation could worsen in the coming months. TD Securities strategists working alongside James Rossiter detailed Friday that the catastrophic loop is caused by weak economic growth and rising energy costs.
TD Securities analysts believe the pound will fall another 3% from the current ranking. Rossiter and the TD team say there is little the European Central Bank (ECB) and Bank of England (BOE) can do.
“While the ECB and BOE want to slow down and possibly reverse this loop, monetary policy can only limit the slowdown significantly ahead of the coming winter,” monetary strategists noted. “Makers cannot produce the necessary energy supply.”
What do you think of the euro’s fall to $0.9733 against the US dollar and analysts’ predictions for fiat currency? Let us know what you think about this topic in the comments section below.
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