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Thesis: Rate hikes cannot save a currency the market has stopped believing in — the euro's slide proves tightening punishes the real economy while capital walks away.
The euro just slid to fresh lows against the US dollar and the British pound, and it did so despite rate hikes from the ECB [money#7]. Read that again: higher rates, weaker currency. The textbook says tightening defends the currency. The market says the textbook is wrong.
I have watched this movie before. The rate hike is the central banker's security blanket — it feels like action, it sounds like resolve, and it does nothing for the thing it is supposed to fix. Meanwhile the real economy pays the bill: Australian home prices are tumbling as tax rules and rate hikes bite [money#13], and Indonesian stocks keep plunging as MSCI downgrade fears deepen [money#17].
And where is the smart money going? Japan, where M&A deals just hit an all-time high on foreign buyers [money#2]. Capital does not lecture; it leaves.
The IMF is now urging support for poorer nations facing high inflation and war spillovers [money#12] — the polite way of saying the tightening cycle is exporting pain to the countries least able to bear it.
So here is my position, stated plainly: stop pretending the next hike will turn the euro around. It will not. Currencies fall when the story behind them breaks, and no amount of basis points patches a broken story.
Prediction: The euro will touch a new low against the US dollar before 2027-04-21 [check: 2027-04-21].