With the currency crisis in Europe, it comes as no surprise that the Euro has fallen in value and has now reached the lowest point since July 2010, at $1.2857.
The European crisis has seen country after country endure punishing liquidity and debt crises, starting with Ireland, then Greece and Spain, and finally Italy.
Despite many summits and meetings to solve the crises, Eurozone leaders have not responded as vigorously as markets would have liked.
Resisting a TARP-style approach to the mounting problems has created a lingering sense that the Euro will continue to weaken, especially as Europe is widely expected to slip into recession in 2012, if it is not in one yet.
Will Europe bounce back? My bet is that it will. After the austerity programs, European Central Bank support and IMF support, Europe wil be back, but it will certainly take time. And we are not out of the woods yet.
Sebastien Galy, senior currency analyst at Societe Generale added that “Investors seem increasingly convinced that the European situation will be stabilized.”
The boost to the U.S. dollar is bad news for exporters, who will face price pressures for their goods overseas. However, it will be better news for U.S. tourists.
For the forex trader, is this a good time to bulk up on Euros? Some economists who believe Europe and the Euro will be back answer yes.
Besides, they say, the U.S. has its own massive deficit and debt problems that may be exacerbated by the continuing cage match between President Obama and congressional Republicans.
However, these are historic lows for the Euro, so it may be a good option for now. Talk with your financial adviser about this option.