Today, at 7:06 am EST, the EUR/USD was trading at 1.1094. This reflected a price decrease from the 1.1143 price from yesterday.
My take on the euro is that there appears to be less demand for it, not only based on its price but on a consumer expectations survey from the European Central Bank last week. For example, median consumer expectations for the next twelve months about inflation has declined. At first blush, some would say that an expectation that inflation will decline is a good thing. Most consumers define inflation as an increase in consumer prices. That is not my definition but let us work with the definition that inflation is a reflection of changes in price levels … for now.
My view is that a fall in prices may be telling me that there is a decline in demand for goods and services. Lower prices may be an attempt to get more consumers to make purchases. If consumers expect a fall in inflation, they are saying they expect declining prices but may not be taking into consideration the negative side of a price decline.
On the upside, European consumer expectation of higher incomes increased, according to the survey. But while European consumers, especially lower income consumers, expect growth in income, expectations for spending growth were, according to the survey, relatively unchanged over the past twelve months.
And Europeans are still expecting negative growth combined with an expectation of high unemployment relative to the United States.
My takeaway: The U.S. may be a better investment than Europe right now and as such, the basis for a stronger dollar.
Alton Drew
1 October 2024
Disclaimer: This post should not be treated as trading advice. Please consult a trading advisor before making a trade. This post contains affiliate links, and I may be compensated for your purchase of a proprietary trading challenge.
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