Why is the EURO Strong?

Europe and United states have been struggling with the debt and fiscal problems alike but Euro seems to gain strength every day. It has not wavered in the last decade. It stands firm against Pound sterling and American dollar. The foreign exchange market is all puzzled about the euro-dollar and euro-pound trends. American tourists who have been travelling to Europe have now realized that the European market is much more stable than American because of the growth in the value of Euro.

Those financial analysts who have been claiming that Euro has gained strength are wrong. Euro has actually weakened against a great any currencies which include; Japanese Yen, Swiss franc, Australian dollar, Canadian dollar and Russian ruble. Euro has indeed gained strength against dollar and pound over the last decade. The decline in the value of euro against some of the international currencies and incline against pound and dollar is because of several factors stated below:


Fiscal and economic outlook

With the positive development in the manufacturing and production industries, this fiscal year has shown promising results in UK. But the high rate of unemployment and low rate of growth have resulted in the decline in the value of pound which continues to go down the hill for the foreseeable future. Even if there is an increase in the value of Pound sterling, it is most likely that Euro would already have taken strength against it by that time. The UK markets and industry continues to decline and as a result, Euro has gained strength.

Interest rates

There was a hike in the interest rates in UK and America earlier this year which resulted in a temporary increase in the value of pound sterling and American dollar but the reports and analysis showed that the America and UK market was not ready for the increase in the share value and thus resulted in a later weakened value.

The European Financial Stability Facility

The EFSF is specifically formed to act as the secure netting for European nations which are powerlessly mounted with huge debts. The European financial stability facilities has given the indebted European nations a firm backing and have provided them with the assurance that stronger Euro zone nations are serious when it comes to the aid to the suffering European countries.

Reserve diversification of the central banks

The central banks of UK and other countries have been diversifying and taking up Euro instead of American dollars and pound sterling which has resulted in the lower value of these currencies against Euro. Euro has stood firmly majorly because the international markets are now using it for business transactions and banks having realized the increasing trend have emerged as the major Euro holders. Governments which kept the foreign exchange reserves in the United States dollars now understand the growing economic trend of diversification and have initiated the reserves in Euro as well.

Increase in the European real estate value

The real estate value of European countries has soared high in the last few years because of which the value of Euro has also been increased against the Dollars and Pound sterling.

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