European Markets

I've been looking into European equities for some time and getting a better feel of the economy over on the other side of the pond. The European Central Bank is fearful of high inflation rates. Eurozone inflation is at 16 year highs at 3.7% as of May and was 3.3% in April. The ECB's target rate is the same as the USA at 2%.

Right now futures are priced in to represent a very high chance of the ECB raising interest rates by 25 basis points or a quarter of a percentage point to 4.25% in July. What this entails is an appreciation of the Euro against other currencies; mainly the US dollar. This spells trouble for companies in the Eurozone, because their exports to the US will shrink. That is because of purchasing power of US citizens decreasing towards European goods, since it will cost more US dollars to buy Euros.

The UK is facing a similar issue with rampant inflation...