Will the euro’s exchange rate collapse?

The COVID crisis already led to a marked behavioural asymmetry between the Federal Reserve and the ECB: labour supply declined in the United States but not in the euro zone, leading to significantly higher wage increases and core inflation in the United States, hence the prospect of a more restrictive monetary policy in the United States than in the euro zone. The war in Ukraine reinforces this asymmetry between the Federal Reserve and the ECB, since the euro zone is much more dependent on Russia for its supplies (energy, metals, agricultural products) than the United States, and the loss of growth will be much greater in the euro zone. We should therefore expect a marked monetary policy divergence between the United States (interest rate hikes, shift to a policy of reducing the central bank's balance sheet) and the euro zone (whatever the ECB may still say, no marked monetary policy tightening). The financial markets do not yet fully expect this divergence, so the euro will depreciate further against the dollar. If the conflict does not spread to Europe, however, we should not expect the euro to collapse, due to the excess savings of the euro zone and the solid international demand for euro-denominated assets (except very temporarily at the outbreak of the war in Ukraine), due to the structural strengthening of Europe.