The euro is getting hammered. In recent weeks, as investors increasingly expect that the ECB will begin QE, the value they place in the single currency has slid, and the exchange rate shows as much. Within 6 months, the value of euro has been taking a severe beating and there is little sign that the trend is about to reverse significantly any time soon.
Across the eurozone, major economies are in economic stagnation. Deflation, that big sign that all is not well has been popping up more and more in the conversations of economists and the figures of statisticians. The eurozone economy is sick and the ECB has been delaying taking actions to reverse the trend, or at least, it is so far refusing to take the action that it has hinted it would for so long.
The impact on the value of the euro has been extraordinary with its dollar value dropping to $1.1753, the lowest since Dec. 8, 2005, before recovering to trade at $1.1773
Investors have voted with their wallets and this has pushed down the value of the single currency by 16% from its 2014 high of $1.3995 reached on May 8.
Not a football game
The good news of course is that a weaker euro makes goods manufactured within the single currency area far cheaper in the US. German car manufacturers, French cheese and wine producers, Spanish meat producers, Italian fine goods manufacturers and Kerrygold butter. Their goods become cheaper in New York, Boston and right across the 50 US states.
Of course, the news can make imports more expensive, but this is hardly a problem at present in the EU in light of the fact that the euro area is defending itself against deflation, not inflation so the near-term benefits for euro area manufacturers should be positive.
What everybody will be watching is how soon the ECB acts on its long promised QE and whether or not this will see higher levels of cash entering local economies.
Now, where did I put that business expansion plan?