2010 was a tumultuous year for the Euro. It went as low as 1.1$ and is now trading at 1.329$. This was also the year in which we saw the bailouts of Greece and Ireland.
Now it’s time to think about the future so I want to share with you my Euro Prediction for 2011. Let me just emphasize that this is what I think may happen to the Euro in the coming year. However, as is usually the case, I’m fully prepared to be surprised by what will actually happen.
I think that the Euro is headed for another turbulent year. I think we will see it move in a wide range of prices as it reacts to both political and financial developments, inside Europe and without.
The Euro may suffer due to two major developments:
Further Bailouts
With the bailouts of Greece and Ireland still not sure of turning out as effective, Europe may find that it needs to bailout another Eurozone member. The PIIGS countries also include Italy, Portugal, and Spain. The first and third countries in that list are much bigger than Greece and Ireland. Bailing them out may prove to be impossible. If either of these two countries show further worsening in its financial conditions, the Euro will likely suffer and we may see it fall beneath the lowest levels of 2010.
US Recovery and Interest Rates
In the US, the financial recovery may be picking up steam. There are very encouraging signs of how America may be climbing out of recession and into a renewed growth. This can help the US Dollar appear more attractive in relation to other currencies, including the Euro. As the Eur/USD is the most traded currency in the world, a reduction of its prices may weigh down on the Euro across all of its other pairs.
In addition to the prospect of US recovery, there is also the likelihood that interest rates will rise in America in 2011. While it was believed that such increases will occur on 2010, the slower than expected recovery delayed such action. If the recovery will no take hold, interest rates in the US may indeed begin to climb, making the Dollar a more attractive currency, further damaging the Euro.
In addition, 2010 showed how the Euro policy is being pulled in every direction possible by the different interests of the 16 Eurozone members. This is likely to continue in 2011 and make it very difficult to determine an optimal monetary policy.
If the worst case scenario comes to pass and one or more members will leave the Eurozone to return to its former currency, the price of the Euro may take a big dive. However, the chances of this happening are very slim.
This is my Euro Prediction for 2011. Let’s see how accurate it will be.
Recommended Forex Video
Check out the following recommended Forex trading video: Weird Forex Story Video.
Image source: Wikipedia
Similar Posts:
- Euro Falling While Fears Soar
- Euro Nears Breaking Point
- US Dollar Forecast For 2011
- Euro Finds Good Support in Forex Trading
- How To Predict 5 Day Trends (With Updated Performance Results)
