Fall of the euro against the dollar: these prices likely to rise

After dropping below parity with the dollar several times this summer, the euro hit a new all-time low on Monday 5 September. European currency dipped below the $0.99 threshold, for the first time in 20 years, due to fears about the continent’s economy caused by the announcement on Friday of the complete shutdown of the Nord Stream 1 gas pipeline by Gazprom. Since the start of the year, the euro has thus lost 13% against the dollar.

This weakening of the euro is not without consequences for consumers and businesses. Certain products should thus see their prices increase on the Old Continent. Indeed, this development will drive up the cost of imports.

The main hydrocarbons concerned

“The main impact will be on oil, denominated in dollars“says Sylvain Bersinger, consultant economist at the firm Asterès, which explains in particular that prices at the pump remain at a high level in France.

Read alsoFuel prices: sharp rise in diesel, gasoline stabilizes over a week

The same tension weighs on gas, for which the euro zone is also highly dependent on the outside, and a large part of whose imports are invoiced in American currency. Its prices rose again on Monday, after the announcement on Friday of the complete shutdown of the Nord Stream 1 gas pipeline by Gazprom, while it supplies most of Russian gas to Europe.

This risks driving up the production costs of European companies, aggravating the rise in prices and thus weighing on the purchasing power of households. “High gasoline prices that could cause a trickle-down effect in other parts of the economy, through companies that need the services of transporters in particular and who would choose to increase the selling price of their products», explains Sylvain Bersinger. And this, while inflation is already putting the finances of the French to the test, having reached 5.8% year on year in August, after 6.1% in July. A level that was record since the beginning of this statistical series, in 1991.

Imported products also affected

More directly, the prices of products directly imported by France from the United States could increase, under the effect of the plunge in the euro against the dollar. Because then more euros are needed to buy imported products in dollars.

Among the American products most imported by France in 2020, according to French Customs, were mechanical equipment and electrical, electronic and computer equipment (22% of imports), transport equipment (22%), pharmaceutical products (14%) and chemicals, perfumes and cosmetics (10%). In 2020, France imported a total of 30.1 billion euros worth of goods from the United States, or around 6.2% of its total imports. The United States was thus France’s sixth-largest supplier that year.

Advantage for exporting companies… and American tourists

This configuration is, however, advantageous for French companies that export outside the euro zone, whose competitiveness increases in the event of a weak euro. Indeed, with the depreciation of the euro, their prices become more competitive once converted into dollars.

Read alsoShould we fear a collapse of the euro to its historic low of 0.83 dollars in October 2000?

The companies most likely to benefit from this situation are therefore those whose activity is resolutely export-oriented, such as aeronautical groups, those specializing in luxury or the automobile industry. However, trade between European countries is not affected.

Other winners of this weakening of the euro: American tourists in Europe, who are already seeing their purchasing power increase during their holidays on the Old Continent. Conversely, for French tourists, this is not really the time to organize a “road tripacross the Atlantic…