Ben Emons, Columnist

What a Strong Euro Means for the U.S. Debt Ceiling Debate

There's a risk the greenback will "overshoot" on the downside, creating a crisis of confidence.

August 31, 2017 at 9:00 AM UTC

Ben Emons is the founder of FedWatch Advisors, a firm specialized in analysis and investing around the Fed. Previously he was associated with NewEdge Wealth as head of fixed income and Medley Global Advisors as Managing Director of Global Macro Strategy. The opinions expressed are his own.

The dollar's weakness bears watching.
Photographer: Justin Sullivan

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The euro's surge above $1.20 for the first time since the start of 2015 has captivated the foreign-exchange market. The rally has been seen as further confirmation of Europe's economic recovery after years of debt crises and political instability. The question now is whether the euro is becoming too strong and at risk of "overshooting" its long-term fair value.

The debate has become more intense since European Central Bank President Mario Draghi failed to address the euro's appreciation in his Aug. 25 speech at the Federal Reserve's Jackson Hole retreat. That led many traders to speculate the ECB is relatively comfortable with the euro's appreciation. If that's the case, then the euro may gain all the way to $1.25, which is where it was trading when the ECB started its quantitative easing measures in 2015.