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The dollar is strengthening, you can look at the dollar index [1] which compares the dollar to a basket of developed market currencies [2] [1]https://en.m.wiki

The dollar is strengthening, you can look at the dollar index [1] which compares the dollar to a basket of developed market currencies [2] [1]https://en.m.wikipedia.org/wiki/U.S._Dollar_Index https://en.m.wikipedia.org/wiki/U.S._Dollar_Index [2] https://www.wsj.com/market-data/quotes/index/DXY/ https://www.wsj.com/market-data/quotes/index/DXY/

npongratz 4y ago
But that basket of currencies is composed of 57.6% EUR. I'm barely an amateur observer of these markets, but it seems to answer the question "dollar sinking or euro strengthening?", it'd be better to look at a basket of currencies that excludes the euro in order to tease out the principal components of the move. And really, should probably also go the other way that looks at a basket of EUR/XYZ currencies and exclude EUR/USD. But again, this is not at all my area of expertise; I'm a rank amateur with barely any skin in the game. I'm very happy to learn other opinions and ways these things are determined.
- game-of-throws 4y ago
  There's also the Euro Index (EXY) which is hitting all-time lows (at least as far as this chart goes back). Of course EXY includes the EUR:USD pair so it's kind of the reverse problem. https://www.tradingview.com/symbols/TVC-EXY/ https://www.tradingview.com/symbols/TVC-EXY/
- bartvk 4y ago
  You can also value both currencies in gold, which offers another perspective.
- balderdash 4y ago
  It’s a fair point. In the last year USD.EUR is up ~20%, dollar index is up ~20%, so to your point the other half the index is has also weakened against the dollar. WSJ Dollar index which is even broader is also up.
davrosthedalek 4y ago
Can someone ELI5 how the USD can go up vs EUR if US has higher inflation (about 1% or so) than the eurozone (or at least Germany). Wouldn't that mean that stuff gets cheaper in EU compared to US? Shouldn't there be arbitrage at some point?
- drexlspivey 4y ago
  There is no arbitrage because the USD is expected to weaken against the euro due to higher interest rates. The December 2022 EUR/USD futures are trading at 1.016
- balderdash 4y ago
  Eurozone is running at equivalent inflation numbers [1] + interest rates are higher in the US [1] https://www.euronews.com/my-europe/2022/07/01/inflation-in-the-eurozone-reaches-new-record-high-of-86 https://www.euronews.com/my-europe/2022/07/01/inflation-in-t...
  - davrosthedalek 4y ago
    Seems to be a new thing, see [1]. Would you expect the USD to devalue against the EURO in that decade? I don't think we see that. [1] https://www.bloomberg.com/news/articles/2022-05-03/europe-inflation-seen-surpassing-u-s-for-first-time-in-a-decade https://www.bloomberg.com/news/articles/2022-05-03/europe-in...

npongratz 4y ago

But that basket of currencies is composed of 57.6% EUR. I'm barely an amateur observer of these markets, but it seems to answer the question "dollar sinking or euro strengthening?", it'd be better to look at a basket of currencies that excludes the euro in order to tease out the principal components of the move. And really, should probably also go the other way that looks at a basket of EUR/XYZ currencies and exclude EUR/USD. But again, this is not at all my area of expertise; I'm a rank amateur with barely any skin in the game. I'm very happy to learn other opinions and ways these things are determined.

game-of-throws 4y ago
There's also the Euro Index (EXY) which is hitting all-time lows (at least as far as this chart goes back). Of course EXY includes the EUR:USD pair so it's kind of the reverse problem. https://www.tradingview.com/symbols/TVC-EXY/ https://www.tradingview.com/symbols/TVC-EXY/
bartvk 4y ago
You can also value both currencies in gold, which offers another perspective.
balderdash 4y ago
It’s a fair point. In the last year USD.EUR is up ~20%, dollar index is up ~20%, so to your point the other half the index is has also weakened against the dollar. WSJ Dollar index which is even broader is also up.

davrosthedalek 4y ago

Can someone ELI5 how the USD can go up vs EUR if US has higher inflation (about 1% or so) than the eurozone (or at least Germany). Wouldn't that mean that stuff gets cheaper in EU compared to US? Shouldn't there be arbitrage at some point?

drexlspivey 4y ago
There is no arbitrage because the USD is expected to weaken against the euro due to higher interest rates. The December 2022 EUR/USD futures are trading at 1.016
balderdash 4y ago
Eurozone is running at equivalent inflation numbers [1] + interest rates are higher in the US [1] https://www.euronews.com/my-europe/2022/07/01/inflation-in-the-eurozone-reaches-new-record-high-of-86 https://www.euronews.com/my-europe/2022/07/01/inflation-in-t...
- davrosthedalek 4y ago
  Seems to be a new thing, see [1]. Would you expect the USD to devalue against the EURO in that decade? I don't think we see that. [1] https://www.bloomberg.com/news/articles/2022-05-03/europe-inflation-seen-surpassing-u-s-for-first-time-in-a-decade https://www.bloomberg.com/news/articles/2022-05-03/europe-in...