The impact of the euro rate cut on June 6 on the currency circle and the global economy can be summarized as follows:
Currency wars may intensify: The euro rate cut may intensify a new round of world currency wars. In the first stage, the liquidity released by the euro zone may flow to other currency areas, such as the US dollar zone, resulting in a relative appreciation of the US dollar. This may bring periodic pressure to the capital market.
Increased market liquidity: The interest rate cut means a reduction in the cost of funds in the market, which helps to release part of the market liquidity. This part of the funds may flow into the market and promote economic recovery. For the currency circle, this may increase the activity of the market.
Enhanced corporate vitality: The interest rate cut helps to reduce the borrowing costs of enterprises, thereby stimulating the vitality of enterprises. Enterprises may increase investment and increase the operating rate, which will further promote economic recovery. In this process, the demand for goods and commodities by enterprises and consumers may rise, which may also have a positive impact on certain assets in the currency circle.
Active non-US markets: As market liquidity increases, non-US markets may gradually become active. This includes various financial markets, including the cryptocurrency circle, which may benefit from this trend.
Global economic recovery: From historical experience, the end of the global interest rate hike cycle is often accompanied by a shift in monetary policy and economic recovery. The euro rate cut may be the beginning of this shift, indicating that the global economy may be about to usher in a new growth cycle.
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