EUR/USD spot on a bad trend … to be continued

Back to my website, a new finance publication.

As you already noticed given the importance of the change, the EUR value compared to USD and the pounds, and even CHF or the Moldovan leu (!) decreased a lot.

The trend is likely to continue given what the FT is explaining to us in a recent issue. They told us that EUR denominated foreign debt issuance has been increasing compared to USD foreign debt issuance. The difference between the monetary Policy of the FED and the monetary Policy of the ECB is explaining such a trend (and the EU QE is likely to continue at least a few years since the inflation target of 2% is not reached within the eurozone).

The main aim of borrowing in EUR instead of USD is that it is always better to borrow in a currency which value is decreasing because your debt is compensated by inflation and thus cheaper and cheaper to pay back. Markets are not stupid, they don’t especially like to borrow in EUR because they like the currency, they borrow in EUR because they bet on a consistent and quite durable decrease of its value against other currencies.

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