Euro Could Head Lower As ECB Ponders Delaying Rate Hike
XM Group | Oct 27, 2021 02:42AM ET
Eurozone under pressure
The macroeconomic landscape in the Eurozone has deteriorated significantly in recent months. With the reopening boom from earlier in the year fading and supply chains being an absolute mess, economic growth seems to be slowing down.
Even worse, the power shortage that is ravaging Europe threatens to squeeze consumers, who will be faced with higher energy bills. And on top of everything, China is also battling its own slowdown as the property sector deleverages. With China being the Eurozone’s top trading partner, some collateral damage seems inevitable.
In the big picture, the outlook for the euro still seems gloomy. There are several risks that threaten to kneecap the economic recovery, which is already lagging behind the American one. In contrast, the US economy is shielded from the energy crisis thanks to its energy independence and Congress is working on more spending to power up growth.
The result could be US economic outperformance, which typically translates into Fed/ECB divergence and ultimately, a lower euro/dollar.
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