The Euro fell to a 9-year low on Monday.
The euro has dropped to its lowest rate since 2006. As of Monday, the euro is trading for about $1.19, but dropped as low as $1.1864. The last time the euro dropped under $1.20 was in June of 2010.
Since March, the euro has dropped roughly 14 percent, and Business Insider reports that analysts indicate a further decrease of the euro. “Societe Generale are expecting a slide to just $1.14, and Goldman Sachs are forecasting a fall to $1.15. Either of those would send the euro to a 12-year low against the dollar, back to levels last seen late in 2003,” they reported.
A looming problem regarding the economic condition of Europe is the upcoming elections in Greece. The election on January 25 has the potential of putting the opposition party of Syriza in power. The left-wing party intends to exit the euro system and negotiate to eliminate part of its large debt. Syriza is ahead in the polls.
The European Central Bank will meet on January 22 for their first meeting of the year. Many believe that Greece’s potential exiting of the euro, which has earned the monomer of “Grexit”, would be unfavorable. The Grexit would leave Europe without repayment of its debt and encourage other European nations in severe debt to follow suit.
Germany, also a member of the currency bloc, would be heavily affected by Greece’s departure. On Sunday, however, German Chancellor Angela Merkel allegedly stated that she is not adamantly against the Grexit. Merkel’s response drew heavy criticism.
Another reason for the decline of the euro’s exchange rate is the U.S. dollar. The U.S. economy has grown in comparison to Europe’s. CNN reports that the U.S. economy grew 5 percent in the third quarter, and is quickly creating jobs.
European Central Bank President Mario Draghi is expected to act upon the euro’s decline soon.
