The Euro is taking notice

The dollar rally has been causing headwinds in emerging markets, with Argentina and Turkey being the noticeable victims at the moment. This rise in the dollar seems to come from two major factors, monetary policy and divergence in growth. We know that the Fed is moving into a tightening phase while many other major central banks are still easing. There is also signs that the global economy did not perform as well in the 1st quarter with the exception of the US, which is still maintaining its rosy outlook. Among advanced economies we see an example of the Euro being singled out as performing poorly.

Over the past month the slowing growth in Germany has caused capital to move out of the bloc. Italian politicians are still trying to form a government from the March elections, and with concerning results as news of the coalitions agenda are being revealed. Germany is resisting Macron's agenda for more economic unity within the region as Angela Merkel tried to keep their coalition happy. This is the issues that has made the Euro fall to the dollar from its really last year, slowing growth in the region and no real unity among the countries to do so. This needs to be watched because the disunity, while not the cause of these issues, could prevent the necessary steps to support growth from being enacted.