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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
by 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 agoThere 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 agoEurozone 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 agoSeems 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...