Still stronger Euro ahead

[Say_What]

<clips>

The Euro is expected to continue its strong appreciation against the US dollar and could easily breakthrough the 1,30 psychological benchmark according to market analysts following the latest US labour market data released last week and the European Central Bank’s decision to keep basic interest rates unchanged at 2%.

Unemployment in the US actually dropped two tenths during December from 5,9 to 5,7% but the number of new jobs created was far lower than expected: a thousand, compared to the 43,000 of November.

Last week the Euro rise to record levels against the greenback had prompted Germany’s Economy and Labour Ministers to publicly call for a rate cut, but the European Central Bank, ECB, didn’t respond to the request.

In the first press conference of the year, January 8, ECB president Jean.Claude Trichet said that following “our regular economic and monetary analysis, we continue to judge the current stance of monetary policy as appropriate to preserve price stability over the medium term; accordingly, we have decided to leave the key ECB interest rates unchanged at their low levels”, adding that indicators point to an ongoing economic recovery in the euro area and, “although recent exchange rate developments are likely to have some dampening effects on exports, export growth should continue to benefit from the dynamic expansion of the world economy. Import price developments in the euro area should become somewhat more favourable, thereby helping to contain inflationary risks. We will continue to carefully monitor all developments that could affect our assessment of risks to price stability over the medium term”.

http://www.falkland-malvinas.com/Detalle.asp?NUM=3106

[Gretchen]

1. The Euro will be cut at 1,30

The economy of will suffer greatly if they do not do something to keep the Euro in check. The prices of European exports to the US have skyrocketed over the last two years. It will be a huge blow to European manufacturing.

[aneerkoinos]

2. Not really

The whiners are allways the loud ones, those who are happy about current rate keep silent.

Lot of the stuff that Europe exports to US is posh and shiny that rich people dig. Rich shopping maniacs don't care about price, if it's cheap they DON'T buy it. What this might affect is third party markets where European and US products compete, but also here different products are affected in various ways, it's actually too complicated to make significant generalizations.

So, some European manufacturers will get hurt a bit, some may benefit (cheaper imported resources), a huge blow it is not. In the final count it is moot point, since the large bulk US demand is gowing away in any case now that consumers are starting to drown in their debt with no jobs, no matter what. Or... hey, maybe new tax cuts and even lower rates would keep the US consumers consuming?!!

[htuttle]

3. You're right

Most of the 'price sensitive' imports here in the US come from Asia. The stuff that gets imported from Europe was already expensive in comparison, and it's aimed at a different market (people who are willing/able to pay more for better perceived quality).

on edit: I wanted to add that the dropping dollar should have some tangible benefits for European businesses. Fuel (denominated in dollars) should be cheaper in euros now than it was when the oil price was lower but the dollar higher.(ie., $25/barrel + Euro@.81 vs $34/barrel + Euro@1.26).

Same is true of gold, which is also demoninated in dollars, of course.