The British pound is no longer stable! The European economy is in recession, and cross-border sellers are clearing out their inventory and "running away"...

It is learned that according to foreign media reports, on September 23, the British government announced the largest tax cut plan since 1972. Its measures involve personal income tax, property tax, overseas tourists' shopping consumption tax and corporate tax. It is estimated that by 2026-2027, the total tax cut will reach 45 billion pounds .

The introduction of the tax cut budget led international investors to sell off the pound in large quantities, and its exchange rate also fell all the way. On September 26, the pound-to-dollar exchange rate fell to 1.0349 at one point , with the maximum intraday decline exceeding 5.71%, setting the lowest level since the British currency adopted the decimal system in 1971, and was only a millimeter away from falling below the 1:1 parity .

In the past, because the British government was unwilling to lose its monetary policy autonomy and refused to join the eurozone, the pound was considered more stable than the euro. Until mid-2021, the pound-dollar exchange rate remained around 1.35-1.4. But since the beginning of this year, the pound-dollar exchange rate has fallen by more than 20% . The euro on the other side of the channel has already fallen below the dollar parity, and the economy of the whole Europe is not optimistic.

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The economic downturn has reduced the spending power of European people

On July 15 this year , the euro-dollar exchange rate fell below parity for the first time in 20 years , when the euro-dollar exchange rate hit a historical low of 0.9952. By August 23, this value was "refreshed" again, with the euro-dollar spot exchange rate hitting a low of 0.9899 on that day . As of today, the euro-dollar exchange rate has fallen to a low of 0.9541 .

▲ The picture comes from Sina Finance

According to industry insiders, there are two main reasons for the sharp depreciation of European currencies:

1. The Russian-Ukrainian war continues to bleed Europe

The energy crisis is the most serious problem facing Europe. Seven months have passed since the outbreak of the Russia-Ukraine conflict, and there is still no sign of easing. Russia is Europe's largest energy importer, and Europe's support and assistance to Ukraine has led to diplomatic tensions between the two sides, and energy transactions have also decreased or even stagnated.

However, the stagnant energy imports have not been replenished, especially for countries such as Germany, the Netherlands, and the Czech Republic, which rely on Russian natural gas for more than 40% . After losing their main natural gas supply, European natural gas prices began to soar. According to data from the European Statistical Office, as of July 2022, the annual growth rate of energy price inflation in the EU reached 38.3% , of which the annual growth rate of natural gas inflation reached 52.2% .

2. The Federal Reserve continues to raise interest rates

On September 21, local time, the U.S. Federal Reserve announced a 75 basis point interest rate hike, raising the target range of the federal funds rate to between 3.00% and 3.25% . This is the fifth interest rate hike this year .

The Fed's continuous and substantial interest rate hikes have pushed up the US dollar index, causing non-US currencies to depreciate beyond fundamentals. Not only Europe, but also the RMB and Japanese yen in Asia are affected. Today, the RMB/USD spot exchange rate opened at 7.1800 and then fell below the 7.20 mark , the first time since the 2008 financial crisis .

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The outlook is worrying, and a large number of sellers are fleeing the European site

Although economic ups and downs are a cycle, there were optimistic people who believed that the European economy would rebound in the first half of 2023. However, the recent announcement of partial mobilization by the Russian government and the referendum of four places including Donetsk to join Russia seem to indicate that the scale of the Russian-Ukrainian conflict is about to expand, and the European economy may be hit again.

It has been observed that many sellers have discussed this online recently due to concerns about the European economic situation. Most cross-border sellers said: This year's European site is too difficult!

One seller said: "The relevant certification costs of the European site are already high, and with the currency depreciation, everything I do this year will be a loss! I am considering whether I should withdraw ."

There was also a European seller who had just been laid off . One month after joining the company, he heard the news that the company had decided to lay off the European site...

However, there are still many business opportunities in the downward environment. A previous article mentioned that as winter approaches, the demand for heating products in European countries with insufficient natural gas supply has increased greatly, and Chinese electric blankets have become popular in the European market . And important festivals such as Halloween and Christmas are coming soon. If you can accurately understand the market motivation, it is not impossible to have a big order!