The Dollar Vs. Euro May Become a More Interesting Story:
The dollar versus the euro should be a much more interesting story than it has been for the last few weeks. Both the U.S. and the 17 nations that share the common currency -the euro, are facing some severe economic struggles. The U.S. is suffering from high levels of unemployment, an imploding housing market, low income growth and a banking sector that is still recovering. The euro zone has low growth dragging the region down from Ireland, Portugal, Greece, Italy and Spain compared to Germany and France which are faring much better.
The Euro Might Not Be That Valuable?
Was the euro overvalued from the jump? Several economists argue that the euro is a bad idea and may not last. Nations with different spending habits and political economies can implement policies with unusual outcomes based on the reliance of a common overriding, unifying goal. The euro-moral hazard may be the cause of the breakup of the euro as a common currency and the creation of a eurobond may not float well globally.
Checking the rate of change for the euro vs. the dollar will be a useful metric in analyzing how traders are placing their bets. The dollar has been rising against the euro for the past few weeks and analyzing the change of sentiment is helpful in assessing the global outlook of the two major economic zones.
If the dollar continues to rise, those favoring a strong dollar policy will be happy although the price of goods measured in dollars may rise, but then some ‘necessary inflation’ might help U.S. growth. The dollar may have formed a bottom against the euro if current technical analysis trends hold for the last few years which could make the relative cost of euro economic bailouts -more expensive if they ever occur.