Our currency is less and less strong once morest the dollar. A euro is almost worth a dollar today. Bad news for our economy. What are the consequences for businesses and individuals?
At least we no longer break our heads with conversion calculations. But overall a euro in very small shape is not terrible. We are a long way from his record. Just 14 years ago, with 1 euro you had 1.60 dollars. Today you have $1.02. Exact parity would only be a matter of days.
“A normal exchange rate, that is to say the one that would give me the impression of having the same purchasing power in the euro zone and in the United States, is rather located around 1.25-1, 30. So we see how weak the euro is at the moment”, says Philippe Ledent, economist at ING.
A decline for a year
For a year, the evolution of the euro resembles a tumble. Good news for Americans traveling to Europe. For the same price, they offer 25 to 30% more than a year or two ago. A priori, this is also good news for Belgian companies that export and get paid in dollars except that they, like all of us, are bound by oil.
A very very weak euro is rather bad news
“With a very weak euro, this energy denominated in dollars is very expensive for us, whether it is for you and me, consumers, whether it is for a large number of companies, whether it is including for exporting companies which also consume energy. Finally, a very, very weak euro is rather bad news”, explains the economist.
The future remains unclear. Many factors come into play: interest rates, investor psychology, international trade. In a few days, the European Central Bank should raise interest rates which will strengthen the euro somewhat.
When will the tunnel end?
But when will the tunnel end? “There’s so much bad news to factor into the current course of the euro that it almost can’t get any worse and at some point there’s going to start to be bad news for the dollar as well, which is going to that time strengthen the euro. It is necessarily a question of patience from the moment when this equilibrium exchange rate is at 1.25-1.30, we know that we will go back to it at some point”assures Philippe Ledent.
A matter of patience: economists expect a year or two.
