Forecast: euro exchange rate is under strong pressure

Forecast the euro to dollar

In brief: Exchange rate U.S. dollar to the euro continues to trivialize growth, clutching the euro to a minimum. U.S. preparing for new attacks in the middle of the week.

Exchange rate euro can not overcome the psychological factor. The euro is continuing, and the dollar strengthens against the background of European chaos and recession. The once mighty euro has recently reached a four-year low against the dollar may continue to fall regardless of whether it will be successful attempts to European leaders to tame rebellious debt crisis. The currency has fallen almost 4% against the dollar, and analysts predict it inevitable bleak future for the coming months, had stunted the economic problems in the region. If the recession will not be too harsh, it will likely not bring Europe into trouble.

On the contrary, it will lower the cost of German automobiles and Spanish wines abroad, increasing demand. Similarly, the growth of the dollar will reduce the competitiveness of products from the USA. The real problems lie ahead of Europe forward. If the euro will accelerate the fall, investors start to doubt the viability of the currency, which 11 years ago was portrayed as the most audacious foreign exchange experiment. There could be attempts to get rid of some of the 16 EU member states, if they can not get their finances under control, although still not provided a specific mechanism. “Until now, there is no guarantee that the euro will survive this crisis,” – said Jane Foley, head of research Forex in London. “No matter what will happen next, waiting for the euro ahead of the real problems. The euro fell because of the fear that the current troubles of Greece with its growing debt spread to other countries in the region, including Spain and Portugal. To allay these fears and to support the euro, the European Union created a fund of $ 1 trillion. dollars, which should help governments to cope with large budget deficits and avoid default on its obligations to investors. In addition, the European Central Bank agreed to buy debt bonds of the affected States. He said that he had purchased them already 20 billion dollars. At the same time, the rescue plan depends on whether or not Greece and other countries to cut public spending. This allows them to fill holes in the budget, but at same time can slow down economic growth and raise unemployment. Knowing that this year, Europe expects minimal growth, some analysts fear that the new reductions could push the region back into recession, sparking a prolonged fall in the euro. Conversely, if countries do not have difficulties go to the painful cuts, yielding to public pressure and the trade unions, the euro could collapse even further.

If EU countries, including Greece, will be forced to abandon their obligations to investors, they will bring a heavy blow to the weakened banks and pension funds, especially in Germany and France, as they have a large part of their debt. All this may cause another banking crisis, similar to what we observed after the collapse of Lehman Brothers in late 2008 but this time in the heart of Europe. “The euro is between a rock and a hard place, and yet even in the short term is not quite clear how he can choose from a disagreeable situation”, – said Howard Archer, chief European economist at IHS Global Insight in London. Value of the currency reflects the strength and reliability of the country, but in the case of the euro – countries. One of the main problems of the single currency remains a large imbalance within the euro area, where on one side of the scale is an economic giant like Germany, while the other is a dwarf – Greece. Germany’s Chancellor Angela Merkel has admitted that only a trillion fund has enabled the region to gain time to iron out differences, particularly in the amount of public deficits. Germany crushes on neighbors that they have a balanced budget laws, which limit the size of the national deficit. However, to eliminate transnational differences will be extremely difficult, partly because there is no confidence in the ability to comply with the EU fiscal limits. After the executive body of the EU invited Governments to give their national budgets for review and then pass on to their own legislative bodies, several important political figures in France immediately announced that it would contravene the constitution. Politicians of European countries made similar complaints, so that the proposal did not put into motion.

Ukrainian Globalist
2010-05-24 17:27, Currency news.

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