Moving towards a Cheaper Euro

If you’re planning a trip to Paris, there are 3 things that could soon make the Euro cheaper – It’s common sense that you want the highest euro total possible. After all, the more euros you have in your pocket, the more sites you can see, the more macarons you can eat, & the fuller your Paris experience (& stomach) will be.

Given that, what’s going to make the euro sink on the foreign exchange market? Of course, while I don’t have a crystal ball, I can look at what’s happening in Europe, & use this to look at what needs to happen for the euro to get cheaper. Here’s hoping!

Credit: DPA, Germany’s News in English

1. The European Central Bank rescue plan proves a dead duck.

Last week, the European Central Bank launched a bold plan to draw a line under the debt crisis. It involves buying Spanish & Italian government bonds, hence reducing the financial pressures on these countries while they reform their economies. But will the plan take off?

According to the Bundesbank, the plan is illegal, in that it constitutes central bank funding of member governments. If that opinion gains sway, the ECB might not have the chance to use its scheme.

Second, the scheme is dependent on Spain & Italy first accepting bailouts. As with Greece, that would mean more cuts, more powers being devolved to Brussels, & national humiliation. If you were Spain, would you take this deal?

Hence, lots of potential for the euro to fall here.

2. The Eurozone falls into recession.

This has been on the cards for some time. However, until now, the continent has avoided the ignominy. For instance, France has had 0.0% growth for nine months on the trot now, meaning it’s stood on the line between recession & growth for almost a whole year.

Elsewhere, Mediterranean countries like Spain & Italy have already begun contracting, but that’s been balanced out by the continued (& almost miraculous) growth of Germany. How long can this last? How long can one country, however powerful, compensate for the shortfall of sixteen others?

The euro should then fall as Europe enters an official recession.

3. The Netherlands takes a more anti-euro stance.

The Netherlands is holding its general election this week &, while we’re unlikely to see the swing to the extreme left & right that characterised Greece’s election not long ago, anti-euro feeling is nonetheless strong in Holland.

For instance, anger about the total funds being siphoned to Spain & co. have forced current premier Mark Rutte to the right, meaning he’s adopted, if not an anti-euro platform, then one that involves taking a much tougher line with fellow Eurozone members. That could see the euro weaken further down the line, as whatever Dutch government emerges becomes even more begrudging about forking over taxpayer cash to Brussels.

As a result, there is a large chance the euro could weaken in the coming month.

Post by contributor Peter Lavelle, Pure FX –                                                              

Get in touch: To get an exchange rate guaranteed to beat your bank when you buy euros, contact us at foreign exchange specialist Pure FX. We’d be delighted to help you maximise your euro total. 


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