What does the recent fluctuation in the exchange rate euro mean for your business?

March 5th, 2013

Believe it or not, the exchange rate euro is destined for an even more turbulent few weeks ahead of a huge EU summit that will take place between the 18th and the 19th of October, where the fate of Greece will be decided.

French president, Francois Hollande, believes that as well as finding a solution to the on-going Greek debt problem (which will undoubtedly be the main focus of the summit) some progress can also be made with regards to the Spanish economy.  Spain has thus far resisted pursuing a bailout from the European Union, despite their deep and enduring economic woes.  It is likely that traders will pre-emptively avoid trading in the Euro for fear that the decisions that unfold at the summit will have profound malign effects on the value of the currency.  Consequentially the exchange rate euro will improve for those trading in other currencies.

With a definite timescale now in place for developments with regards to the Eurozone crisis, it is appearing more and more likely that Greece will eventually be forced to leave the Eurozone.  Greek Prime Minister Antonis Samaras is under unbelievable pressure to put together a solid austerity package for the country which will be worth €14 billion for the next two years.  With the other members of the European Union growing restless there have been questions raised as to whether the steps that Samaras has proposed that Greece take will have any real efficacy in the short-term, which is where progress is most desperately required.

Samaras has proposed steps such as; the privatisation of state-owned business, a cut in government jobs and an improvement in the methods by which taxes are collected in the country.  Critics fear that the effects of these steps will not be felt soon enough.  Throughout September Greek financial records are to be audited by the European Commission, the European Central Bank and the International Monetary Fund.  The added pressures are presumably unwelcome by a struggling Greek government.  The exchange rate euro will undoubtedly be affected by such measures being carried out by the troika, as the prospects for Greece continue to look increasingly poor.

Good news could come from the summit though with regards to the fate of the Spanish economy.  If Hollande is correct about the summit addressing the Spanish recession, then definite tangible effects will be felt as a consequence of the summit.  Keeping up-to-date and having a close eye on the news over the coming weeks will be essential for those with vested interests in the exchange rate euro.