EUR Yields Its Place to USD

• 04.14.2015, 22:46
•  Europe,  America,  World

The Euro fell against dollar to 1.0520 on Monday; the exchange rate is in its lowest point since 16 March, before it was to 1.0567. The data shows that the drop of euro is going very fast. A month ago euro were trading as mush as $1.0462. In overall estimation the drop of euro over the last week is about 3.4%, Ibtimes reports.

The EUR/USD relationship develops the way predicted by European Central Bank. Quantitative easing program was aimed at decreasing the value of euro against other currencies in order to boost exports and to bring inflation to EU ceiling 2% in Eurozone. According to ECB data the April 2015 bank lending survey (BLS), published today, showed that euro area banks reported a further net easing of credit standards on loans to enterprises in the first quarter of 2015 (a net percentage of -9%, after -5% in the previous quarter), which was higher than banks’ expectations in the previous survey round. Banks’ cost of funds and balance sheet constraints as well as competition were driving banks’ further net easing of credit standards for loans to enterprises. In contrast with the development for enterprises, there was a slight net tightening of credit standards on loans to households for house purchase (2%, from -4% in the previous quarter). According to the recent data, there have been substantial improvements in the level of credit standards compared with banks’ indications one year ago. This means that QE has reached its purpose.

Before the program has started the US and the UK were very skeptic about ECB new policy if it will work out, but the difference between these countries and Eurozone is the negative interest rates and negative bond yields across the Euro area, which were not the same for the US and UK while they had applied the program. The negative arrows above mentioned vectors encourage every investor to borrow from the banks and not to keep money as deposits or buying bonds. So, the money is in the circulation rather than in reserves funds, which will help to boost the level of output.