What will happen to the euro in 2018
The dynamics of political and economic factors will determine what will happen to the euro in 2018. The European Union has to define a further format for the functioning of the union, which increases the level of uncertainty. In addition, the position of the euro will depend on the policy of the ECB, which is not interested in excessive strengthening of the European currency.
Political uncertainty and new economic challenges: what will happen to the euro in 2018
In 2018, the European Union will face new challenges that may affect the future format of the existence of the union. After the Brexit shock, United Europe faced the problem of Catalonia. In addition, some regions of Italy announced their intention to expand their autonomies. In such circumstances, the continued existence of the EU remains under threat.
Strengthening the position of euro skeptics indicates a crisis of the main EU institutions. Excessive bureaucracy is increasingly becoming the object of criticism from various EU members. Also, European countries treat the problem of migrants in different ways, which increases the level of tension.
Growing political uncertainty creates pressure on the foreign exchange market, experts say. In addition, the dynamics of the European currency will depend on economic factors and policies of the ECB. The regulator is not interested in a strong euro, for fear of negative consequences for European exporters. The strengthening of the euro will lead to a slowdown in inflation to 1.2% next year, emphasize the ECB. In addition, the growth rate of the European currency will worsen the competitive position of export-oriented companies.
During 2017, the euro continues to regain its position against the dollar. Despite the extension of the policy of quantitative easing, the value of the European currency has reached a local maximum in the last three years. This trend is related to the policies of Donald Trump and the uncertain prospects of the American economy.
In such circumstances, the ECB will not be able to achieve the target level of inflation, which creates threats to sustainable growth of the eurozone economy. As a result, the regulator will be forced to abandon intentions to minimize the policy of QE. At the same time, analysts expect a smooth reduction in the volume of asset repurchases in 2018.
In addition to slowing inflation, a strong euro will lead to a deterioration of exporters. At the same time, imported goods will receive an additional advantage, which will lead to a deterioration in the trade balance.
The ECB is concerned about the significant volatility of the European currency, which negatively affects the pace of economic recovery. Mario Draghi notes the impact of the euro on economic growth and inflation. In 2017, the eurozone economy will grow by 2.2%, predicted by the ECB, which is the highest growth since 2007. The regulator intends to maintain the achieved growth rate in 2018.
In 2018, analysts at DZ Bank forecast the preservation of euro / dollar quotes at $ 1.18 / euro. Despite significant political risks, in 2017, United Europe passed the peak of uncertainty. The results of the elections in Germany and France were favorable signals for Euro-optimists. In addition, the eurozone economy maintains a positive trend.
Representatives of the Rand Merchant Bank are less optimistic about the European currency. Next year, the value of the euro will drop to $ 1.12 per euro, which will be possible due to the rate increase by the Fed.
The dynamics of the euro against the ruble for 2018 will depend on the trends in the oil market and the macroeconomic indicators of the domestic economy.
Prospects for the ruble in 2018
The government admits the weakening of the ruble next year, which will have a positive impact on the performance of the Russian economy. As a result, the value of the European currency will reach the range of 70-72 rubles / euro. At the same time, the government will receive an additional financial resource that will help finance the increase in social spending next year.
The key factor for the foreign exchange market remains the dynamics of oil prices. Price increase in the fourth quarter of 2017 to 57-60 dollars per barrel. allowed to stabilize the position of the domestic currency. At the same time, the Central Bank continues to reduce the discount rate, which leads to a partial outflow of speculative capital.
The basic forecast of analysts suggests a moderate growth of the euro in 2018, which will be possible with the stabilization of oil prices at $ 60 per barrel. The extension of quotas for oil production will be the key to balancing the market next year, analysts say. However, the market for "black gold" will retain significant volatility, which is fraught with new collapses of quotations.
Next year, oil prices may drop to $ 40 per barrel if the demand for “black gold” remains low. Including the dynamics of world oil consumption will depend on the performance of the Chinese economy, which has not yet overcome the effects of shocks in financial markets. In such circumstances, the Russian currency expects a new period of weakening. As a result, the euro may reach a milestone of 80 rubles per euro, analysts predict.
The position of the euro next year will be determined by political and economic factors. In this case, much will depend on the policy of the ECB, which intends to accelerate the economy of the eurozone and go to inflation at the level of 2%. In addition, the regulator is concerned about the excessive strengthening of the European currency, which worsens the position of European exporters. In such conditions, experts admit fluctuations in the euro against the dollar in the range of 1.12-1.18 dollars / euro.
The value of the euro against the ruble will depend on the volatility of the oil market. In the framework of the baseline scenario, the Russian currency expects a slight weakening to 70-72 rubles per euro. In the case of a new collapse in oil prices, the ruble expects a deeper devaluation.As a result, the euro will reach 80 rubles / euro.