The Ever-Ephemeral Euro Exchange Rate – What Does The Future Hold for the Euro?

February 4th, 2013

Since the introduction of the euro as an accounting currency on the first day of 1999, the Euro exchange rate has (as expected with any currency) been in a perennial state of flux.  After a drop in value relative to other major currencies in the first year of the currency’s life, many Euro-skeptics felt that their opinions were vindicated.  However, theirs was a pre-emptive victory, proved to have been declared too soon when the value of the euro increased year upon year, eventually peaking on July 15th, 2008.  On this date, the euro exchange rate peaked against the USD at an impressive $1.5990.  For those that supported the Euro, their victory was to be short-lived as the world would soon see the dawn of the Global Financial Crisis – the most severe since the Great Depression of the 1930’s – which caused significant dips in stock markets all around the world.

As other currencies now slowly begin to recover from the economic slump they previously found themselves in, increasing doubt has been cast over the future of the euro as a currency.  With Greece’s Euro fate still uncertain, and many other problems still plaguing the currency, other currencies are now capable of benefiting from a better euro exchange rate.  Holiday makers from Britain that choose to visit countries in Europe for their holidays will now be able to get increasingly profitable exchange rates.  Approximately 5 per cent of the 36 million holidays that the British population take each year are to Greece and its surrounding islands.  Were Greece to leave the Euro currency, the transition period in which the currency is replaced would see the pound get a better exchange rate against the new currency.  As problems persist with the Euro, it would be safe to assume that the number of people going on holiday to European countries would increase.

It is of course worth considering that when a new currency is created, it is done so with the intention of lasting for centuries, and judging the future of the Euro based upon its very short history would be incredibly difficult to do.

Perhaps the recent decision of the Bulgarian government to suspend their plans to join the euro zone is indicative of further woes that may be awaiting the euro.  Europe’s poorest country deciding to opt out of the currency could certainly signal further troubles ahead for the euro exchange rate.