The return to normal confidence in euro-zone equities will drive up the euro's exchange rate

The US external deficit will increase sharply due to the highly expansionary fiscal and monetary policies conducted at full employment. As in the past, this is likely to lead to a depreciation of the dollar against the euro. But non-residents have also sold massive amounts of euro-zone equities in the recent period, which show s investor wariness towards euro-zone equities (concern about growth, Brexit and political tensions in the euro zone). Confidence in euro-zone equities will probably return (growth will not be bad and corporate profitability is strong in the euro zone, euro interest rates will remain very low), and this return of confidence, which will bring capital back to the euro zone, should give rise to the expected situation of a weak dollar against the euro.