EUR/USD: BEYOND THE SHORT TERM, EXPECT A STRUCTURAL APPRECIATION OF THE DOLLAR AGAINST THE EURO – NATIXIS

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Why is the Euro still weak against the Dollar? Fundamentally, the Dollar/Euro exchange rate is explained by the relative attractiveness of the United States and the Eurozone for capita, economists at Natixis report.

EUR/USD fluctuates in the short term mainly in line with monetary policy expectations

In the short term, the Dollar/Euro exchange rate mainly depends on expected spreads between Dollar and Euro interest rates. 

But in the long term, we should expect a structural appreciation of the Dollar against the Euro because of the greater attractiveness of the US for international capital, due to higher potential growth in the US than in the Eurozone, higher R&D spending and technological investment, and greater amount of funds available for innovation.

 

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