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The euro/dollar pair slid to its lowest since July 2020 after US inflation data. The one-year interest rate gap in favour of dollars rose almost 20 basis points to 0.9% in three weeks.
The column argues the dollar's strength reflects rate expectations rather than debasement.
A widening dollar rate advantage supports the dollar index, which tends to pressure dollar-priced grain and meal prices and changes import economics for euro-based buyers.
reuters.comMike DolanNov 12, 2021After 533 past bearish macro events, Euro (USD per EUR) moved a median -0.3% over 5 sessions (33% higher; middle half -1.2% to +0.2%), and -0.5% over 20.
After 2,356 past bullish macro events, US Dollar (Broad) moved a median +0.2% over 5 sessions (60% higher; middle half -0.3% to +0.7%), and +0.4% over 20.
Moves of each commodity's benchmark from the last close before the event. Historical reads pool past events of the same kind; they describe what happened, not what will. Not investment advice.
Describes EUR/USD sliding after US inflation data as the one-year USD-EUR rate gap widened, explaining the rate-differential mechanism.
