Both central banks - ECB and Fed continue their policy of rapid balance sheet expansion. The Fed's assets' value grew by exactly 5% since July 1, 2021. The ECB prints even faster - the 5.5% growth at the same time.
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| Fed / ECB Balance Sheet Expansion, 2021/07/01 = 100 |
After the beginning of the analyzed period, the Fed balance sheet expansion (orange line) was visibly more dynamic. The situation has changed in mid-September when the total value of ECB assets (blue line) kept its growth pace while the Fed's assets' value fell.
Historical data show, that when both central banks print their currencies at the same pace, the demand side of the market begins to shape the exchange rate values. According to Gresham's law, bad money drives out good money. Probably the USDs are being kept by investors more willingly. The EUR/USD usually falls as a result.
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Data Credits:
European Central Bank, Central Bank Assets for Euro Area (11-19 Countries) [ECBASSETSW], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ECBASSETSW, October 15, 2021. Board of Governors of the Federal Reserve System (US), Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level [WALCL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WALCL, October 15, 2021.
European Central Bank, Central Bank Assets for Euro Area (11-19 Countries) [ECBASSETSW], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/ECBASSETSW, October 15, 2021. Board of Governors of the Federal Reserve System (US), Assets: Total Assets: Total Assets (Less Eliminations from Consolidation): Wednesday Level [WALCL], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/WALCL, October 15, 2021.