EUR Zone M2 / US M2 vs EUR/USDM2 Supply changes from 2008 to current rate conpare, weigh EUR/USD, and reference BTC, crypto/forex spreads spot markets.
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Euro BullHello friends. We are bullish on the Euro. Let's get into why.
The charts shown are the EUR/USD chart (top), and European M2 Money Supply / US M2 Money Supply (bottom).
When the Euro peaked against the dollar at a price of 1 EUR = 1.60 USD, the supply of Euros had been rising dramatically against the supply of dollars, and this supply glut ended up leading to much lower prices for the Euro in the following years.
But now, the supply of the Euro is quite low when compared to the supply of the dollar. In fact, it's at an all time low. There are only 0.69 Euros for every Dollar in the world. If the market were priced purely based off of supply (it isn't, because demand is also a factor), we would see the price of the Euro currently at 1 EUR = 1.45 USD. Instead, the price is at 1 EUR = 1.01 USD, because as we just said demand is a factor. The demand for the dollar has been rising due to fear in the markets, and people have been selling every other currency, including their Euros, in order to get as many dollars as possible.
Our expectation is that the Euro will rise substantially over the next 10 years against the dollar to make up for the supply and demand difference.
Here's another fun observation: The global interest in the search term: "How to buy US dollars" reached it's all time high in May of 2021. Searches for "How to buy Euros" meanwhile are much lower. We think that this illustrates once again that it's not supply but rather demand that is causing these low prices for the Euro. Demand is fickle and can reverse in an instant, and this is what we expect will happen. Supply is more of a constant factor, since it takes many years to truly shift within most of these forex markets.
Supply of the Euro is low, supply of the Dollar is high. Demand for the Euro is low, demand for the Dollar is high. We expect that supply will stay the same, and demand will flip sides. If this is what happens, the Euro will rise VS the dollar.
Thanks for playing.
