Why did the euro outperform the dollar in the first three months of the year?

Why did the euro outperform the dollar in the first three months of the year?



02/09/2017



The European currency has managed to outperform the US dollar and this year has risen to 15% since 2015, raising questions about the factors behind it. Has the ECB's policy and plan succeeded in reviving the Eurozone economy as planned? Has the Fed raised interest rates?

European Central Bank


The European Central Bank's plan since the beginning of the year has continued to cut interest rates as a way to eliminate inflation, raise growth rates and reduce unemployment. At the beginning of the year, the European Union decided to cut interest rates to nearly zero percent.
The ECB's plan included quantitative easing, a plan put in place by central banks by flooding the markets with money and increasing liquidity, which was done by the European Union. The bond purchase price reached 80 billion euros from 60 billion euros a month.
Cut interest rates, cut the benchmark refinancing rate from 0.05% to zero and reduce the deposit rate from -0.3% to -0.4% to charge more banks for depositing funds.
And cut the basic interest rate by 5 basis points to 0%, and reduced the deposit rate by 10 basis points to 0.40%
The bank kept this plan and continued to cut interest rates until mid-year, and succeeded in raising the price of the euro and surpassing the dollar, which helped to achieve economic growth and the euro countries exceeded the economic crisis that began successfully since 2008, 6 percent in the second quarter of this year compared to 0.5 percent for the first quarter of 2017.
The euro area has begun to recover economically and the European process has succeeded in stabilizing and growing by beating the US dollar, but at the same time the inflation rate remains below the level set by the European Central Bank.

The tension in America is reflected on the euro


The previous European plan was met by a presidential election in the United States and the rise of Donald Trump to power. Although the dollar rose as soon as Trump succeeded in the presidential election, it soon changed as Trump's tax cuts began.
And the conflict in the statements between him and the North Korean president news of instability in the political situation and thus economic, and raised this concern of some investors, which in turn affected the US currency, "the dollar."
And the failure to implement the tax reform plan so far and the year to the end has contributed to increasing investor concern and reduce the price of the dollar, and fell below the required level despite the high level of growth and move the level of unemployment.
The Federal Reserve's policy was clear - raising the interest rate, but in this way it is difficult for the Fed to resort to a higher interest rate hike or lower it with the dollar falling.
Unexpectedly, the Japanese yen gained more strength, rising 5% against the dollar, despite recent political tensions and the possibility of Japan's involvement in a war with North Korea, but it succeeded in stabilizing and rising against the US currency.

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