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Europe’s energy crisis: Europe spent 280 billion euros on mitigation in a year – Bruegel

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Europe's energy crisis

Since September 2021, European governments have spent a total of €280 billion on alleviating Europe’s energy crisis, according to estimates by think tank Bruegel.

This amount includes all European governments’ expenditures to cover the burden of the crisis on regional businesses and citizens, including subsidizing small business rates in Greece and direct payments in Belgium. Some of the allocated funds have not yet been realized.

“Prices (for energy – IF) will be high throughout the winter, and European countries must work with a worst-case scenario in which prices remain so even after that,” said Bruegel analyst Giovanni Sgaravatti. – Governments need to focus on ways to reduce demand in sectors where this is possible.

What is causing Europe’s energy crisis?

Energy prices on the continent have jumped more than 10 times their seasonal averages over the past five years as Russian gas supplies declined. This factor is negatively affecting economic growth in the region, putting heavy industry in difficulty. At the same time, ordinary citizens face a sharp rise in the cost of consumer goods and services.

Among European countries, Germany allocated the most funds to support the population in the conditions of the energy crisis – 60.2 billion euros, or 1.7% of the country’s GDP. Italy spent €49.5 billion (2.8% of GDP); France – €44.7 billion (1.8%); Great Britain – €44.3 billion (1.6%) and Spain – €27.3 billion (2.3%).

“European policymakers have responded to the spike in energy costs with wide-ranging price-cutting measures involving subsidies, tax cuts and price controls,” the IMF experts said in their monthly report, adding that such measures have led to a disregard for the need to act on energy savings. “As a result, global energy demand and prices have been higher than they could have been,” the report said.

Earlier we reported that business activity in the euro area fell for the second consecutive month in August.

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Current yuan to dollar exchange rate has fallen to its lowest since 2008

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current yuan to dollar exchange rate

Current yuan to dollar exchange rate dropped to 7.2256 yuan per dollar. This is the lowest level in 14 years, reports RBC. The offshore yuan-dollar exchange rate has fallen to a record low of 7.2577 yuan per dollar since China began trading the currency in 2010.

The People’s Bank of China sets reference exchange rates for the yuan daily. On Tuesday it set the yuan-dollar exchange rate at 7.0722 yuan. This was the lowest since July 2020. The exchange rate of the yuan, which is traded in mainland China, is controlled by the NBK and can deviate from the reference rate by no more than 2 percent in either direction during the day. In Hong Kong and Macau, the CNH offshore exchange rate to foreign currencies may vary without restrictions.

The Chinese yuan to dollar exchange rate today fell to its weakest level since the 2008 global financial crisis amid persistent dollar appreciation against major currencies and fears that China is weakening support for its currency.

The yuan has fallen more than 4 percent against the dollar this month and may post its worst performance in a year since 1994, the publication estimated. China’s currency is under pressure as the country’s monetary policy diverges from U.S. policy, leading to capital outflows.

Earlier we reported on history low for the pound British.

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History low for the pound British

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history low for the pound british

Today we can observe history low for the British pound. The British pound has fallen in the international forex market by almost 5% against the dollar – to a record low of $1.0384. The pound fell 0.85% against the U.S. dollar to $1.0762.

The British currency depreciated after the Ministry of Finance of the country promised to continue cutting taxes, raising fears that the new policy will lead to a sharp rise in inflation and the national debt, Bloomberg wrote. The pound’s collapse was the biggest intraday drop since March 2020, when markets were panicked by the start of the COVID-19 pandemic, the publication estimated.

The sell-off in the currency began on Friday, after the government announced a plan for a massive tax cut in the U.K., which will affect individuals and businesses and increase the budget deficit.

“History low for the British pound shows that markets do not trust the UK,” said Saxo Capital Markets strategist Jessica Amir. – The pound is one step away from parity with the dollar, and things will only get worse from here.”

The British currency has already fallen 20% against the dollar this year. According to Bloomberg, the fall in the British pound sterling in 2022 surpassed the collapse seen after the vote to leave the European Union (Brexit) in 2016. At that time, the U.K. currency depreciated by about 16% in one year.

Earlier we reported that the dollar is getting cheaper against most currencies after rising the day before.

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The dollar is getting cheaper against most currencies after rising the day before. Global money is getting cheaper

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money getting cheaper

The dollar is getting cheaper against the euro, the yen and the pound sterling today after a solid rise in the previous session on the background of the fact that all the world’s money’s getting cheaper. 

The dollar is correcting because investors are trying to fix profits after its significant strengthening, said Trading Economics. Experts believe that the U.S. currency will continue to strengthen on the background of a rapid tightening of monetary policy by the Federal Reserve (FRS). Also, the dollar is supported by reducing the appetite for risk in world markets.

Further growth in volatility in the financial markets will strengthen the dollar because of its status as a “safe haven” currency, said an analyst on the currency market, CBA Carol Kong.

The euro rose 0.53% to $0.9660 against the dollar, up from $0.9609 at the close of the previous session. The day before, European currencies were cheaper against the dollar by 0.8%.

The pound rose by 1.07% to $1.0803 during the trading session, compared to $1.0689 the day before. The exchange rate of the dollar against yen decreased by 0.30% – down to 144.31 yen against 144.75 yen by the end of the previous session. On Monday the American currency grew by 1.5% against the pound and by 1% against the yen.

The index, calculated by ICE, which shows the dollar trend against six currencies (euro, Swiss franc, yen, Canadian dollar, pound sterling and the Swedish krone), was losing 0.5% during trading. The day before, the indicator had updated its 20-year high.

Earlier we reported that the Nasdaq is on the plus side amid signs that growth stocks are recovering.

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