01

The Euro is under significant pressure.

Although the Euro experienced a substantial rebound against the US Dollar in early July, it subsequently began to decline, a trend that has continued to the present.

During that rebound, the exchange rate of the Euro against the US Dollar reached its highest point at 1.1275 since last year's downturn.

However, the exchange rate has now fallen back to 1.07, and it even broke below 1.07 a few days ago. Looking at the weekly chart, this marks an eight-week consecutive decline.

International investment banks are now starting to shift their positions, betting that the Euro will continue to depreciate.

Among them, HSBC's forecast report suggests that due to a noticeable slowdown in Europe's economy, the Euro's exchange rate is expected to drop to 1.03 by March of next year.

Not long ago, HSBC had predicted that the Euro would rise to 1.15.

02

Why is the outlook for Europe so bearish?The familiar scent has reemerged, as a significant bearish news suddenly emerges in Europe's energy supply.

Advertisement

Just before the weekend, it was abruptly announced that the Australian liquefied natural gas (LNG) union declared that negotiations with Chevron had failed, and a comprehensive strike is set to resume immediately.

Affected by the news, the natural gas futures prices in the European market immediately surged by 10%.

Since last year, when Russian gas supplies were interrupted, a significant portion of Europe's natural gas has been sourced from Australia.

Now that there is an issue with Australia's supply, it implies that Europe may have to once again purchase liquefied natural gas from the United States. However, many still remember that during the peak of last year's European energy crisis, the price of U.S. liquefied natural gas once reached ten times that of Europe's.

At present, Australia claims that there are no arrangements for further negotiations. Based on this, some analysts believe that there might be U.S. involvement behind the scenes, as Chevron did not make any concessions in the negotiations over the past week, which seems highly unusual.

Considering the significant increase in natural gas prices and the escalation of the European energy crisis, when determining who will benefit the most, the target clearly points to the United States.

03

Of course, the pressure faced by the Euro is not only due to its own economic reasons but also related to the recent crazy rebound of the U.S. dollar.

Recently, the U.S. Dollar Index has already broken through 105, which is the highest level since March of this year.The euro's decline for eight consecutive weeks corresponds precisely to the US dollar index rebounding from below 100 to the current level of 105. Moreover, the magnitudes are also in one-to-one correspondence, with the US dollar index's increase exceeding 5%, and the euro's depreciation also exceeding 5%.

It is evident that this is a currency war initiated by the US dollar against the euro, striving to devalue the euro exchange rate as much as possible before the Federal Reserve stops raising interest rates and potentially lowers them in the next step.

The decision of the European Central Bank meeting next week is attracting attention; if a counterattack against the US dollar is to be launched, raising interest rates is undoubtedly necessary.

Officials of the European Central Bank's Governing Council have also repeatedly mentioned that the current level of inflation does not allow Europe to stop raising interest rates so quickly.

In addition, several countries have already begun a counterattack against the US dollar. Currently, the central banks of Indonesia and India have intervened in the foreign exchange market in the past few days.

The Philippines and Thailand have also issued warnings that they may intervene in the market.

More significantly, Japan's Deputy Finance Minister's recent remarks are seen as the most intense signal. After the yen broke through 145, the outside world has been closely watching when Japan will intervene.

Under the wave of de-dollarization that has swept the globe in the past year, countries will now launch a direct counterattack against the US dollar in the foreign exchange market.