Market outlook : the euro (July 2012)

 

The euro has been on a decline since 2008

The euro is down around 18% from a February 2011 high of over $1.49

Currencies typically depreciate when economic conditions decline. Since austerity slows economic growth and the de-leveraging cycle in Europe will likely last another year, expect further declines in the euro.
 

European leaders have shown themselves to be behind the curve since the credit collapse in 2008. Last week's pathetic interest-rate cut showed investors that European leaders may not act fast enough if the need arises.
 

This conservative thinking could eventually drive the euro to $1.
 

All of Europe's major economies are heading towards recession. At the same time, European leaders remain cautious and undivided. The deleveraging, economic slowdown and political divide all point to a lower euro.