I am sure this is a question that haunts most of the today’s traders. And of course if you would know the answer, we would not know on which island you would live :).
A simple graph (at the beginning of this blog) is showing that the EUR/USD pair has ramped up from 1.3552 to 1.4825 (as of today May 4). This is a historically large level, as the EUR/USD has rarely jumped above 1.5 (and this only in the great crisis). So why is the dollar so weak nowadays versus the Euro?
There are several reasons for that I guess:
1. Large USD deficit
I was recently reading an article in The Economist showing that by the same method of calculation, the US budget deficit is larger (as a % of GDP and at 11% or so) tha the one of Portugal. A large deficit also means problems for the dollar, since the US government has to finance this somehow and devalue the currency. Thus the consequence. Read more