US Dollar May Fall if Consumer Data Fuels Fed Easing Bets

Some feel that the US Dollar may fall against the Euro and the Yen due to news events, such as Greece, or a sovereign debt crisis. Others believe that the Euro and the Yen will fall because of current news events in China. The truth is a combination of both.

I believe the Euro will fall because of the escalating tensions between Russia and Ukraine. Russia is one of the primary buyers of natural gas from Ukraine. If there is a conflict between Russia and Ukraine the value of Russian gas will rise. Moreover, Russia is one of the primary importers of Greek debt, another major European nation, which has been reined in by the Euro zone (in particular, Spain).

Perhaps the Euro will fall because of the recent Spanish election. The Euro is in a deep slump and the only reason it’s holding up is because there is a bit of an economic recovery. But when the United States President, whom the party supporting, is not re-elected, the Euro does not have a strong hold on the value of the currency. We have seen this dynamic play out before.

The US Dollar may fall due to news events in China. China is a major player in the world economy and it is in danger of slowing down. It’s bad enough that there is financial turmoil in the world today. As economies are slowing they’re producing less demand for the currencies of other nations. They are declining in value as they become less valuable.

Another reason the Euro may fall is because of the current Euro crisis in Spain. This is probably the greatest economic threat that Europe has faced in the last decade. It could escalate into a crisis that affects other European nations, the Eurozone and the world’s economy.

The US Dollar may fall against the Euro due to the speculative devaluation of the Euro. Look at a chart of the Euro (from December, 2020). You can see that the Euro has been increasing in value since December of 2020. Although the Euro started out somewhat lower than the Dollar it has slowly increased over the past six months.

One other reason why the Euro may fall is because of news events in Greece. Of course the Euro is also being affected by the Eurozone as well. Greece is experiencing its own economic crisis and just like the US Dollar may fall because of the future of Greece.

All of these things are likely to cause the Euro to drop. However, don’t expect the US Dollar to drop immediately. There are two reasons why the Euro will rise next week.

First, it is certain that the Greek government will meet the requirements to exit the Euro. If Greece will meet its fiscal targets, the Euro will increase in value. Therefore, the US Dollar will rise in value.

Second, Greece may collapse and leave the Euro. If Greece becomes an escape route for people leaving the Eurozone (particularly countries that cannot pay their bills), then the Euro will fall in value.

So, if you own the Euro, you will benefit from a further increase in the Euro. If you own the Dollar, you will gain from a more stable global economy.