Will the fate of the euro and the dollar change? Is the US economy heading for big trouble?

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The problem of inflation continues in global economies. While the Fed has made moves to fight inflation, which has peaked in 40 years, there are no positive signs in the short term. The US Federal Reserve, the Fed, raised interest rates by 75 basis points, the biggest interest rate increase in 28 years, and raised the interest rate to 1.75%. While US inflation was 8.6%, real interest rates remained quite low.

The Fed began the process of shrinking its balance sheet and while it continues to struggle with movements such as the decrease in the supply of dollars in the market, the return of investments to deposits, the decrease in inflation due to a partial slowdown in the economy, the high prices of oil, commodities and foods that occur globally are starting to block the measures taken.

THE RUSSIA-UKRAINE WAR RAISED THE BALANCE

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Russia’s attacks on Ukraine last March raised prices across the world in a short time. The two countries, rich in minerals and gases used in the production of oil, natural gas, food and chips, are going through difficult times because of the war. While goods and the supply chain were disrupted due to economic sanctions against Russia, production was halted in Ukraine due to the strong effects of the war. The disruption of goods and the supply chain caused global problems. Due to the sanctions imposed on Russia, natural gas and oil prices rose sharply, and food prices rose accordingly.

STRENGTHENED RUBLE AGAINST SANCTIONS

While economic sanctions imposed on Russia by countries such as the EU, US and UK caused concern in the short term, this situation began to reverse later on. In times of war, 154 Russian rubles were bought for 1 dollar, today only 55 Russian rubles are bought for 1 dollar. When we look at the pre-war charts, the ruble was in the 60-70 range for a long time. In other words, 60-70 rubles can be bought for 1 dollar. Russia, one of the main actors in the war in an ongoing war, has increased the value of its currency despite all the sanctions and backlash. The ruble is trading at its strongest level since June 2015 against the US dollar.

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Russia’s high income from commodity exports, declining imports due to sanctions and the fact that capital controls are in place are among the factors that helped the ruble to gain traction.

EURO/DOLLAR PARITY CAN BE BELOW 1

Danish Danske Bank did an impressive analysis for the euro/dollar parity. The bank said the euro could lose strength against the dollar due to weak growth and high inflation. It was noted that the weakening of the euro against the dollar could continue in the 0.80-1 range due to fears of entering a period of stagflation.

Danske Bank analyst Lykke Merklin said: “We may continue to see a downward graph in the euro/dollar parity over the next 2-5 years and declines in the 0.80-1.00 range.”

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The euro/dollar parity is currently 1.0564.

Will the fate of the euro and the dollar change? Is the US economy heading for big trouble?

Stagflation: The coexistence of stagnation and inflation in the economy is called stagflation.

IS THE US ECONOMY GOING INTO RECESSION?

The giant American bank Goldman Sachs prepared a report on the American economy. Goldman Sachs reported that the likelihood of the US economy entering a recession next year is increasing.

While GDP projections for the US economy have been revised downwards, the probability of entering a recession has increased from 15% to 30%.

THE SECOND QUARTER GROWTH DATA WILL DETERMINE

The second-quarter growth figures, which will be announced, will determine whether the US economy enters a recession or not. While the US economy grew in the second quarter and avoided a recession, economists noted that it is difficult to avoid a recession next year. Recession probability for 2023 has increased to 25%.

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RATE IS INCREASING CUMULATIVELY

The economists also claimed that when they calculated cumulatively, the probability of the US economy going into recession increased from 35% to 48% in the next 2 years.

INCREASE IN ENERGY PRICES ATTRACTS ATTENTION

Goldman Sachs economist Jan Hatzius said rising energy prices and the Fed’s measures against inflation could change the outlook for a recession. “We anticipate anticipating the risk of recession,” Hatzius said. This is due to the fact that the growth trajectory is currently lower and the Fed will not be able to respond strongly to high inflation if energy prices rise rapidly,” he said.

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Recession: Recession is the phase of moderate contraction in the level of real economic activity, which culminates in a stable negative conjunctural wave, with a fall in real gross domestic product due to the fall in economic activities of a country for at least six months, stagnation in activities economic.

US ECONOMY DOWN

US citizen savings rates have fallen to a 14-year low. The saving habits of the American people have thus changed. In April, Americans managed to save just 4.4% of their disposable income. In the same period of the previous year, this rate was 12.6%.

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