Many do not stop wondering what will happen to the euro in the near future. The unstable economic situation in the world makes people look for ways to preserve their savings, and conversion into foreign currency is considered as one of the possible directions. We focus on the fact that today experts are in no hurry to give forecasts, since most of them have turned out to be erroneous in the last six months.
The strengthening dollar against the euro
In March 2015, most analysts spoke of a stronger dollar against the euro. There were predictions that by 2017 the American currency will be fully equal to the European one. Despite the rollback that could be observed throughout April, the situation has not yet stabilized. It’s too early to say that the negative dynamics of the euro has finally changed.
The beginning of May was marked for the European currency by trading at 1.1. Global agencies such as Goldman Sachs, Barclays and BNP Paribas, announced that the "European" will reach this price tag only by the end of 2015. A more optimistic forecast was given by Wells Fargo representatives, focusing on the level of 1.22. We can talk about a dual scenario. Two directions are being considered: a fall to the level of a 2-year low and an increase to 1.22.
European economy
In the first half of 2015, experts expect a GDP growth of 1-2%. For Europe, this figure can be considered more than positive. Expected macroeconomic indicators are adjusting to a positive euro outlook. This is the unemployment rate in the range of 9.5%, which was relatively recently estimated only in double digits, as well as inflation at the level of 1%.
Experts attribute the fall of the European currency against the dollar with a more active development of the American economy over the past two years. Despite the expected growth of the euro in the next couple of years, today the course is constrained by many factors. We can say about the reduction in industrial production in Germany and in many other large countries. The problem is hidden in the uneven development of EU states. The northern regions today are only recovering after prolonged stagnation.
The fall of the euro as a result of the speech of Mario Draghi
Mario Draghi in his recent spring speeches has repeatedly said that he intends to take all measures to reduce public debt. This cannot but affect the euro exchange rate. Representatives of Morgan Stanley agency say that the negative trend will be supported by the relative openness of the European trading zone, as well as the presence of deflationary pressure. There has been an outflow of portfolio type investments, where exactly the euro plays the role of a financing currency.
EU connection with Russia
It is worth noting the fact that the EU has a certain dependence on gas that is imported from Russia, as well as on the import of its goods into the Russian Federation. Both gas and import volumes are declining today due to sanctions that have a negative impact on EU states. Despite the current trend, the euro, according to the forecasts of world analysts, will not grow for a long time. Investors no longer hope to strengthen the European currency. As the experts say: "the era of the dollar is in full swing." The only thing that can be hoped for is the restrictive actions on the part of the American government that will keep the national currency at a certain level.
Considering the question of what will happen to the euro in the near future, many experts are trying to impose the situation with Greece on the formation of the course. Analysts at the global agency Stratfor are considering only two options for further developments:
- Greece may leave the euro zone, and Germany will introduce the German mark. This is one of the most negative forecasts for the EU, which will send a pair of "euro / dollar" on a long southern voyage. There is a risk of a complete collapse of the European currency.
- The second option is a continuation of the partnership with both Greece and Germany. The financial support that will be provided to states does not destabilize the global economy of the EU, but only slows down its rapid growth, which will not be a catastrophic phenomenon.
“One dollar - one euro” as one of the alternative scenarios
Considering what will happen to the euro in the next few years, Goldman analysts are voicing the exchange rate of 0.9 dollars = 1 euro by 2017. Specialists do not stop talking about the threat of deflation and the almost zero, and in some places negative growth of the economy. Since the beginning of 2015, the European national currency fell by 2.6% against the currencies of 9 countries. Prior to parity with the dollar, it remains relatively short, only about 15%.
It is worth recalling that the euro has already fallen to the same level with the US currency in 2012. At the end of 2014, the euro lost almost 12% of its value. According to Chris Iggo, head of the fixed income department of AXA Investment Management, parity will be achieved if the monetary policies of the ECB and the Fed remain the same. We recall that in the fall of 2014, the ECB lowered the deposit rate by 0.2%. Echoes of Draghi's message about the purchase of sovereign bonds of European countries and about the next stage of the policy of quantitative easing are noticeable today in the format of the fall of the euro / dollar pair.
Temporary recovery
Today's rollback of the euro to the north is a direct consequence of the actions taken by the ECB at the end of 2014. We are talking about reducing the interest rate from 0.15% to 0.05% and reducing the deposit rate, which was mentioned earlier. These record low rates for the European zone stimulated active lending by banks to the real, rather than financial, sector of the economy. Only six months later, after the adoption of drastic measures by the ECB, did the European economy gradually recover. Recall that no one knew about the rate cut. A similar scenario seemed possible only to six economists of the fifty-seven interviewed.
Euro and Russian national currency
Although the euro outlook remains negative for the dollar, the ruble / euro ratio will be exactly the opposite. The European currency will continue to grow in relation to the ruble in the near future. The weakening economy of Europe against the background of Russia is in a very favorable position. The situation is due to events taking place in the global oil market. In parallel with the fall in oil prices, the euro will also rise. Despite today's rise in oil prices, experts are still waiting for the price of black gold to drop to the January low, so we can count on the second jump in euro growth in Russia. Do not forget that the forecast remains a forecast, and it is highly likely that the ruble will begin to strengthen its position.
What will be the price of the euro, according to the best world analysts?
The opinions of experts regarding the euro differ and are characterized by their optimism. Deutsche Bank believes in a fall below parity and stops at a rate of $ 0.95 per euro by the end of 2017. The author of the forecast, George Saravelos, builds on the fact that in 2000 the euro / dollar was trading at 0.8300. Due to the wave structure of exchange rate fluctuations at intervals of seven to nine years, Deutsche Bank experts do not see anything catastrophic in the situation.
The British bank HSBC gives a slightly different forecast for the euro. Experts of the financial institution are confident that by the end of 2015, the euro and the dollar will be trading at 1.19. Representatives of Barclays prefer the level of 1.1, which can be seen today, but Morgan Stanley experts are inclined to the indicator of 1.14.
At the moment, it is problematic to say how the euro will behave in the future. The price today is not stabilized, in fact, like the EU economy itself after the crisis, not only at the end of 2014, but also in 2008-2009. The difficult factual situation does not prevent many analysts from believing in a very promising future for the European currency. It remains only to observe what happens to the euro next.