The Euro has been around for only over a decade now and there are already questions as to whether the currency is going to survive or not. The Euro reached a double peak around April – July 2008 and has been on a downward trajectory after that. It is currently trading at around 1.34 to the US Dollar and has a strong support at around 1.30. If it goes below 1.30, then it can go all the way down to 1.20.
We are still not making long term forecasts for the Euro yet. Although the challenges faced by the Euro are quite huge with the biggest problem being the economies of the so called second-tier Euro nations. Germany is undoubtedly the “first among equals” and there is every indication that the Germans will tolerate lesser equals only for so long. On hindsight. the Europeans (especially Germany and France) are realizing that the theory of a single currency is much better than the actual practicality of it.
But the US situation is also not strong. And one has to always remember that the strength of a currency is never measured as a standalone item. It is always measured against another currency. Thus, it will turn out to be a case of who can handle the situation better – the US or the entire Euro zone. In the near term we are banking on the Euro falling further at least below the 1.30 mark. Beyond that, we will have to wait and see how things shape up.
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