Appreciation of euro to continue

Original drawings by Albert Rocarols on the theme of the euro. (EC Audiovisual Services)

Original drawings by Albert Rocarols on the theme of the euro. (EC Audiovisual Services)

This January’s upwards trend of the euro parity with the other major currencies, the dollar and the yen, led today at a quote very close to the upper benchmark of 1.35, triggering worries about Eurozone’s exports. During this first month of the year the single European currency has appreciated at least 15% with the dollar and 25% with the yen, making the life of exporters more difficult.

The problem is however that the rally of the common currency creates a lot more problems for the countries already in trouble. It is well established that German exports are not so much price sensitive as the products sold abroad by countries like Spain, Italy, Greece, Ireland and Portugal. In this last category one could also place France, being already in dire straits with its international competitiveness and trade account deficits. Let’s follow the facts.

Upward tendency

On 11 July 2008, on the apogee of the American credit crunch the euro/dollar parity reached its apex, with an unbelievable quote of 1.594. Two years later on 6 June 2010 at the heart of the Greek tragedy, the exchange rate of the two monies came to its low at 119.3 American cents. This downward tendency didn’t last long. Ten months later the euro appreciated again with the dollar at 1.482 on 30 April 2011.

This development materialised despite the still raging crisis over a possible Greek exit from Eurozone.  After that the euro parity followed a mild downward path until July 2012. However since the major Eurozone countries left to be understood during the summer of 2012, that they will not to let Greece rot alone, the euro commenced its current upward path. The tendency culminated this January, after the Japanese plan for a much cheaper yen became apparent.

In short the euro exchange rates in money markets are behaving as if investors are constantly on the look for reasons to massively choose euro denominated placements. This is a strong indication that the single European money is following the old paths of the Deutsche Mark, which was constantly on the rise with the dollar.

At this point it must be noted that the current appreciation path of the euro is not based on a growth prospect. On the contrary Eurozone was in recession during the last quarter of 2012, without any tangible possibilities for a new growth period this year. What if Eurozone returns to even a fragile resumption of economic activities? In this case what will be ceiling of the euro/dollar and the euro/yen parities?

There is no doubt then that the present conjuncture in money markets is not so much supported by presumably good prospects for the European economy, but rather it can be explained by the rather negative prospects of the American and the Japanese economies.

In the US, the Obama administration is constantly asking the Congress for new higher government borrowing ceilings. However the ever-increasing US sovereign debt, with which Washington finances its extra spending, do poses mounting problems menacing the creditworthiness of the US. At the same time though this extra government spending doesn’t seem enough to bring the economy in a virtuous cycle of self-sustainable growth path.

As for Japan its long time stagnation record can logically be reversed to a mild growth, only at the expenses of its trading partners. The yen devaluation spearheads this policy option.

Summing up this little theory, the natural conclusion is that the external value of the euro will very likely continue to appreciate. Past records are a good guide for prospects.









the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

How do we build a #sustainableworld?

UN says ‘many humanitarian achievements’, one year after ouster of ISIL from Mosul

Memoirs from a unique trip to China: “my new old dragon” (Part I)

This is why AI has a gender problem

What happens when the Eurogroup decides to help Greece

Digital business is Europe’s best hope to get back to growth

Silicon Valley can do more to achieve the #GlobalGoals

Combatting terrorism: EP special committee calls for closer EU cooperation

Coronavirus: EU Civil Protection Mechanism activated for the repatriation of EU citizens

China in my eyes

Central America: drought, resulting crop losses threaten food security of two million people, UN warns

Commission threatens Chinese firms with trade penalties

The West and Russia impose a new order on the world

This is where obesity places the biggest burden on healthcare

Countries must invest at least 1% more of GDP on primary healthcare to eliminate glaring coverage gaps

Hot air behind your cold fridge? Why the future of cooling must be sustainable

Abu Dhabi is investing $250 million in tech start-ups

“As German Chancellor I want to be able to cope with the merger of the real and digital economy”, Angela Merkel from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

Statistics show the ugly face of youth training schemes

Here’s how data can shine a light on financial crime

Refugee resettlement: ‘Tremendous gap’ persists between needs, and spaces on offer

10 start-ups that are helping to change the Arab world

UN chief commends African Union on adoption of institutional reforms

I accidentally went viral on TikTok. I learned we failed our youngest generation.

On our way to China

COP25 climate talks: What just happened, and what lies ahead?

Migration and rule of law on next ACP-EU Parliamentary Assembly agenda

Commission caps charges on card and Internet payments and enforces competition

Eurozone bank rescues ‘a la carte’ until 2015 then only bail-ins

Here are six bold ideas to accelerate sustainable energy innovation

ISIL’s ‘legacy of terror’ in Iraq: UN verifies over 200 mass graves

Better training ‘a necessary and strategic investment’ in peacekeeping that saves lives: Guterres

UN police officer recognized for protecting vulnerable Somali women from abuse

Time to be welcome: Youth work and integration of young refugees

New Report Offers Global Outlook on Efforts to Beat Plastic Pollution

How climate change exacerbates the refugee crisis – and what can be done about it

Cultural tolerance is a must: “No sir, I’m not inferior!”

What next for Europe? Three (completely) different Davos views

Can collective action cure what’s ailing our food systems?

ITU Telecom World 2018 takes place in Durban, South Africa

Yemen conflict: ‘Fragile’ hopes rise, as violence decreases and life-saving humanitarian funding surges

Tomorrow’s UK general election: Will Tories win majority to shoot an abrupt Brexit or a hung parliament will prolong January’s exit to 2050?

New York City has a plan to fight fast fashion waste. Here’s how it works

Global climate change: consequences for human health in Brazilian cities

Legal Manager – 2050

Why the ECB had to clarify it caters for the entire Eurozone not just Germany?

These countries spend the most on education

There isn’t a single country on track to make the UN’s targets for gender equality

Why sustainable products are a win-win for all of us

Can the banking union help Eurozone counter its imminent threats?

China Unlimited Special Report: The trip to China

2019: A deadly year for migrants crossing the Americas

Everything you need to know about water

Visiting North Korea, UN relief chief spotlights funding shortfall to meet humanitarian needs

‘Mosques should be safe havens, not sites of terror’, says Guterres announcing UN plan to help safeguard religious sites

Will 2020 be the year blockchain overcomes its hype?

Why is Grexit again in the news? Who is to pay for Eurozone’s banking problems?

It’s people, not technology, that will decide the future of work

Our tourism system is broken – time to customize

EU leaders slammed on anti-tax evasion inaction and expensive energy

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s