USD Euro Exchange Rate
With the US Dollar going on sale literally, many Europeans have now been monitoring the USD Euro exchange rate in anticipation of a future slide on the US Dollar, with the 2 Aug 2011 deadline looming for US Congress to pass the bill to raise its debt ceiling. Ironically, just 2 months back, the Euro is in a similar situation where finance ministers from the Eurozone struggles with approving a 114 billion loan deal to Greece.
The situation now makes forex trading tricky, as it is for even a common tourist deciding if he/she should actually start exchanging any USD/Euros. In the next few days, volatile fluctuations are expected for both the US Dollar as well as for the Euro – failure by the congress to approve raising the US debt ceiling will most likely see the US Dollar fall below 1 USD = 0.60 Euro levels. Currently, 1 USD trades at 0.69 Euro.
Conversely, while the USD will see a slight respite in currency depreciation should the congress approves on the elevated debt ceiling, any upside are likely to be very limited. Already, the US Dollar has slide against the Euro by some 3% in the past 4 months and the long term trend is likely to continue. Strategically, United States will likely push for future depreciation of the US Dollar to effectively lower the value of their debt against major currencies (including the Japanese Yen, Swiss Francs and the Chinese Renminbi). Thus, we forecast that should the congress approve the debt ceiling (they will most likely do so), the US Dollar will trade at 0.66 Euro by Dec 2011.
The effect of the lower value of USD had specific effects on the prices of stocks listed on both the NYSE and NASDAQ. While foreign traders will be eyeing the bellweather stocks of IBM, HP, Yahoo, Microsoft, Walmart and even Coca Cola, it remains to be seen if a depreciating US Dollar will present a better opportunity to trade come year-end.
With too many unknowns, one thing is certain – the average tourist to America will be gladly snapping up local products on top of the photographs they will be taking.
