The single currency is being accused of having a destructive impact. Some experts fear that it could not only overtake the US dollar but also harm Europe’s economy. Nevertheless, there is little cause for alarm. The euro does not have enough power to crush everything in its path.
According to Germany's Handelsblatt, excessive euro strength could pose a problem for the European Union’s economy. US President Donald Trump's unpredictable trade policies are currently heavily influencing the currency market. Many analysts are wary of potential imbalances, particularly in the EUR/USD exchange rate. The euro is rising and edging closer to the $1.2000 mark, unsettling some investors.
Economists and central bankers are split on the implications. Some foresee negative consequences, such as higher prices. Others believe that such trends are not dangerous. Still, the majority expect the European currency to keep gaining ground.
Analysts note that the euro's current performance is shaping the European Central Bank's monetary policy. A stronger single currency could dampen inflation in the eurozone, potentially pushing it below the regulator's 2% target this autumn. In response, the regulator might cut interest rates.
This has also fueled forecasts of an unprecedented global currency crisis driven by developed nations' massive sovereign debt burdens. Debt levels among G7 members already exceed 100% of GDP. Countries with the most pressing debt issues include Canada, France, Italy, Japan, Spain, the UK, and the US.
