Euro in relation to FX

barrooo

http://www.babypips.com/blogs/currency_currents/looms_and_erm_risks_rise.html


Interesting bit of reading about the possible effects of the credit crunch on the euro.

For my own two pence, I think the Euro will either come out of this as a stronger currency and we'll end up joining, or it'll collapse completely. I can't really see any middle ground

gozomark

I go for the middle ground - it will undergo massive stress, won't fail, but will be weakened

purch

I'm with you on that. (not you....him)

It's make or break time approaching for the EUR very quickly, too quickly for the ECB which is still struggling to come up with a sensible plan.

The EUR could easily come out of this current recession as the strongest currency out there, and the new reserve currency for the World and the U.K. will be begging rather than forced to join.

Or it could implode under the weight of it's own problems.

Whatever happens it will be in a different place in 18-24 months.

tradetime

Agreed, I think this is the acid test for the Euro, this is the currency equivalent of the heavyweight championship of the world, the biggest risk to the Euro, is the one that has always existed since its inception, it's a collection of peoples who don't really like each other and that will show through more and more as the pressure cranks up.

gozomark

the Euro will stay together for political reasons - if it was only based on economic rationale then it would be different.

Eurozone hasn't converged, and convergence isn't all good news anyway -surely its better to have the major European economies running to different business cycles rather than all moving up and down at the same time

tradetime

gozomark wrote: »

the Euro will stay together for political reasons - if it was only based on economic rationale then it would be different.

Eurozone hasn't converged, and convergence isn't all good news anyway -surely its better to have the major European economies running to different business cycles rather than all moving up and down at the same time

That's all very well if your economy is performing to the beat of the ECB, but do you think that Ireland, Spain, Greece, and Italy if they had interest rate control would not be cutting like the rest of the free nations. A lot depends on policy going forwards, but there is a strong possibility the ECB will only cut by .25% today, that will likely further turn the screws on struggling nations, as this crisis drags on this collection of economies are going to get further and further out of whack.

purch

the Euro will stay together for political reasons - if it was only based on economic rationale then it would be different.

I agree that neither Germany nor France (and you could include their mates in close proximity) will allow the break up of the EUR, without a fight. But there are less committed members who might weigh up their situations and decide they will be in a better place outside the single currency.

If the EUR continued with only those northern European nations that have reasonably converged economy's, then it will emerge a stronger currency.

I think if they do nothing, and allow economic forces and the market to control the destiny then it could all end in tears !!!!

barrooo

the Euro will stay together for political reasons - if it was only based on economic rationale then it would be different.

Good point, however, as the strain on member state economies begins to grow, the economic and political situations are becoming more divergent.

I remember even last year as economic figures coming from France began to get worse, someone from their finance ministry was arguing that Trichet and the ECB should be cutting rates quicker.

Having the poitical will to remain in a single currency is easy while times are good but may prove to be untenable as the situation worsens