One euro = one dollar. Should we worry or rejoice? – Finance

By dint of talking about it, it had to happen one day: the euro is at par with the dollar. The last time the two currencies were tied was in 2002, in other words, the euro is going back 20 years.

Before seeing who are the winners and losers of this fall of the euro against the dollar, the first question is to know why the European currency lost feathers against the American greenback. Answer: Investors are more worried about Europe than the United States. First, because the war in Ukraine is on our doorstep, but is far, very far from the United States. Then because the rise in oil affects us more, because the barrel is denominated in dollars like so many other raw materials. Then, because the growth potential in Europe is weaker than in America. And then, let’s not forget that interest rates are higher in the United States than in Europe. As a result, investors prefer to sell their euros and buy dollars. It is not only more profitable in terms of return, but also because in times of uncertainty, the dollar remains the queen currency.

Now that we have understood the reason for the dropout of the euro against the greenback, we must know if it is serious? Let’s talk about households first. For our readers, and I obviously include myself in this, this is not necessarily good news. Many non-food items, such as computers, televisions, textiles, toys and furniture are almost all imported and therefore denominated in dollars. My colleagues from BFM TV took the example of a telephone. Before, this phone could be purchased with the equivalent of 420 euros. Today with the fall of the euro, the same phone theoretically costs 500 euros. Clearly, if the manufacturer and the distributor do not make efforts on their margin, we will have a loss of purchasing power of 80 euros for this same smartphone.

When it comes to businesses, the answer is more subtle. It’s a double-edged sword. Exporting companies will of course be advantaged. The former CEO of Airbus explained at the time that each time the euro fell by 10 cents against the dollar, Airbus earned a billion euros in profit. Luxury will also benefit from this fall in the euro. On the other hand, for the other companies – those which buy in dollar or in Chinese currency, it is the horror. Everything that arrives from China and must be sold in Europe will necessarily be more expensive. In addition, it is not good for inflation, because it is already added to the prices of transport which has also already increased.

To sum up this very quick overview, I would say that the fall in the euro is negative for households, but mixed for businesses depending on the sector. For some, it’s the jackpot and for others, it’s grimace soup.

Before seeing who are the winners and losers of this fall of the euro against the dollar, the first question is to know why the European currency lost feathers against the American greenback. Answer: Investors are more worried about Europe than the United States. First, because the war in Ukraine is on our doorstep, but is far, very far from the United States. Then because the rise in oil affects us more, because the barrel is denominated in dollars like so many other raw materials. Then, because the growth potential in Europe is weaker than in America. And then, let’s not forget that interest rates are higher in the United States than in Europe. As a result, investors prefer to sell their euros and buy dollars. It is not only more profitable in terms of yield, but also because in times of uncertainty, the dollar remains the queen currency. Now that we have understood the reason for the euro’s drop against the note green, you have to know if it’s serious? Let’s talk about households first. For our readers, and I obviously include myself in this, this is not necessarily good news. Many non-food items, such as computers, televisions, textiles, toys and furniture are almost all imported and therefore denominated in dollars. My colleagues from BFM TV took the example of a telephone. Before, this phone could be purchased with the equivalent of 420 euros. Today with the fall of the euro, the same phone theoretically costs 500 euros. Clearly, if the manufacturer and the distributor do not make efforts on their margin, we will have a loss of purchasing power of 80 euros for this same smartphone. As far as companies are concerned, the answer is more subtle. It’s a double-edged sword. Exporting companies will of course be advantaged. The former CEO of Airbus explained at the time that each time the euro fell by 10 cents against the dollar, Airbus earned a billion euros in profit. Luxury will also benefit from this fall in the euro. On the other hand, for the other companies – those which buy in dollar or in Chinese currency, it is the horror. Everything that arrives from China and must be sold in Europe will necessarily be more expensive. In addition, it is not good for inflation, because it is already added to transport prices, which have also already increased. To sum up this very quick overview, I will say that the fall in euro is negative for households, but mixed for companies depending on the sector. For some, it’s the jackpot and for others, it’s grimace soup.

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