"Looming Rate Hike: Euro Dives Below 1.0, US Eyes 75-Basis Point Increase"
Starting from today's upcoming annual global central bank meeting, the next month will once again see central banks around the world entering a "battle" of raising interest rates one after another.
Do not naively believe that central banks are raising interest rates to combat inflation; in fact, most of these rate hikes are forced by the Federal Reserve.
Take the euro as an example, especially after June, it has depreciated rapidly and has now broken through its lowest level in 20 years. The interest rate hike of the euro is less about addressing the increasingly high inflation figures and more about dealing with the increasingly low exchange rate of the euro.
If it doesn't raise interest rates and keep up with the United States, Europe will become the target of dollar wealth harvesting.
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Regarding this global central bank annual meeting, people may be more concerned about whether the European Central Bank, after entering the interest rate hike cycle, will adopt a gradual approach or a significant increase each time?
Therefore, the European Central Bank's statements will attract everyone's attention.
In July, as expected by the market, the European Central Bank entered the interest rate hike cycle, but unexpectedly, the first hike in 11 years was 50 basis points, exceeding market expectations.
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However, after the July rate hike, inflation in the eurozone continued to rise further to 8.9%.
As inflation data in the United States began to peak and fall, and global energy and food prices began to decline, Europe's inflation data remained high, so the market tends to believe that in September and October of this year, the European Central Bank will raise interest rates by another 50 basis points each time, totaling 100 basis points.People might think that the European Central Bank's interest rate hike is to cope with such high inflation.
However, it should not be forgotten that the inflation in the Eurozone was already similar to that of the United States at the beginning of the year, and it had already been at a high level for nearly 30 years.
But when the United States started raising interest rates at the beginning of the year, the European Central Bank remained inactive. If it were merely to curb inflation and the need to raise interest rates, the European Central Bank should have raised interest rates long ago.
But why did the European Central Bank have to raise interest rates in July?
It was not because inflation was getting higher and higher, but because the US Dollar Index was getting higher and higher.
With the United States increasing the interest rate hike to 50 basis points in May and further increasing it to 75 basis points in June, from June onwards, the exchange rate of the Euro against the US Dollar experienced a significant decline.
The changes in the Euro exchange rate over these months. After this rapid decline, the current exchange rate has already broken through 1:1, which is also a low level in the past 20 years.
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All along, when the United States encounters economic difficulties, it always shifts contradictions and transfers risks by issuing huge amounts of bonds.But as the United States accumulates more and more debt, it has now even broken through 300 trillion dollars. Under these circumstances, it is already very difficult for the United States to harvest the wealth of some small countries to solve the problem.
A sufficiently large economy must be able to solve the problems of the United States.
From the 1970s to the early 1980s, the United States alleviated its own crisis by harvesting a sufficiently large economy - Japan.

Now, 30 years have passed, and the problems have accumulated more and more seriously. American politicians and financial capitalists naturally turned their attention to another large economy - the Eurozone.
Even by October, the European Central Bank has raised interest rates three times in a row by 50 basis points, totaling only 150 basis points, while the United States has already raised interest rates four times. The cumulative increase has reached 225 basis points, regardless of whether the interest rate increase in September is 50 basis points or 75 basis points, the cumulative increase in interest rates in the United States is far more than that in Europe.
Under the situation where both Europe and the United States raise interest rates at the same time, the interest rate difference further widens, so in the future, the euro will still remain weak, and after breaking through 1:1, it may further depreciate.
On the one hand, the continuous appreciation of the dollar and the continuous depreciation of the euro itself lead many funds to sell euros and buy dollars.
On the other hand, the conflict in Europe has not been relieved for a long time, and funds also need to leave the Eurozone and enter the United States for the need of risk aversion.
In fact, these two aspects, which seem unrelated, are all led by the United States.
The United States has already made a move, and it depends on how Europe responds?