Euro (EUR) Outlook & Projections
Did you know the eurozone (the 19 countries which use the euro as a currency) is actually the world’s 2nd largest economy?1 In recent years, the European Union (EU) has faced considerable challenges, and the AUD/EUR exchange rate has fluctuated substantially in the last ten years from a high of over A$2 to a low of A$1.10.
Please keep in mind that we do not provide personal advice or specific exchange rate forecasts and predictions; however, here are some general considerations you can use when evaluating forecasts and making your own decisions regarding the best time to transfer your money internationally.
Some Key Considerations in EUR Valuations
When attempting to anticipate the movement of the USD/EUR exchange rate, investors may take into account these eurozone-specific factors:
The globalization backlash. In this era of peak globalization, many advanced economies--including the US and UK--have witnessed rising opposition amongst the population in regard to current policies. Any attempt made by politicians to revise current labor and trade agreements could profoundly affect the outlook for the euro. Anti-globalization policies could increase labor costs, spur inflation, and affect tariffs and duties, all of which can hurt profit margins.1 When considering your international money transfer, keep an eye on upcoming elections, referendums, and anticipated policy announcements, because they could have powerful effects on trade balances and the future USD/EUR exchange rate.
The sovereign debt crisis. It began with Greece, Portugal, Spain and Ireland, but the sovereign debt crisis triggered by the 2008-2009 global financial meltdown is still sending shockwaves through the eurozone. As of 2016, the world’s oldest bank, Banco Monte Dei Paschi in Italy, is in dire need of a bailout due to 360 billion euros worth of bad loans to small Italian businesses battered by recession.2 The conflict is a trifecta of uncertainty: constituents in non-indebted E.U. countries are tired of bailing out their neighbors, Italy has the 3rd largest GDP in Europe, and the International Monetary Fund (IMF) doesn’t expect Italy’s economy to recover to pre-2008 levels until sometime around 2025. That said, the eurozone still boasts some of the world’s biggest and best-known companies with really reliable balance sheets (think Daimler, Airbus, L’Oreal, and Unilever.) That’s why it’s important to take into account the diversity of the eurozone environment when reviewing euro forecasts.
The German economy. Germany is the 3rd largest export economy in the world; it is simultaneously the world’s 3rd largest importer.3 Its major export is cars, and its manufacturing sector drives the European economy (pun totally intended). The German Chancellor is one of the most influential people in the EU, so you may want to keep an eye on Germany when deciding the best time to transfer your money overseas to the Europe.
Speculation. Professional currency traders attempting to tap into investor sentiment can play a key role in driving EUR movements. A prime example of this came during the 2016 UK referendum on EU membership, known as Brexit, when the pound sterling (GBP) hit a 30-year low against the US dollar. Part of the pound’s decline was based on concerns that it would no longer attract capital flows from abroad. Similarly, a tense immigration situation in many member states, concerns of terrorism in France, and the resurgence of far right political candidates may all sway investor perceptions and the subsequent euro valuations.
If you’re ready to make an overseas money transfer, you should know that big banks charge big margins on foreign exchange transactions, often up to 5%. Instead, register with OFX and lock in the rate you need. To find out why thousands of people around the world trust OFX to complete their international money transfers, call us for more information.
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Currency markets can be fickle, so it can be difficult to determine the best time for your overseas money transfer. At OFX, we offer a number of risk management tools to help you make the most of your money.
If you’re looking for a more general discussion about exchange rate Outlooking and macroeconomic factors to consider, check out this article.
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This communication has been prepared by sales personnel of OFX or its affiliates. Sales personnel are not research analysts and are not accredited, licensed or otherwise qualified to provide advice on market conditions. This commentary is intended for informational purposes only and does not constitute substantive “research” as that term is defined by applicable regulations. Any opinions, views or analysis expressed herein are subject to change without notice and may differ or be contrary to the opinions of other OFX personnel. OFX is an online foreign currency exchange money transfer service and does not offer any form of margin or speculative trading facilities; and neither it nor its employees are in the business of providing, and do not provide advice to consumers or investors. The information contained herein does not take into account the financial situation or objectives of any particular person and should not be construed as business or investment advice or investment recommendations. Recipients of this communication should exercise independent judgment and obtain advice from their legal, tax or financial advisors.The information set forth in this document has been obtained from third party sources that are believed to be reliable, but its accuracy and completeness cannot be assured, and such data may be incomplete or condensed and in fact provide only a limited view of a particular market. Consequently, any person acting on the analysis, opinions or views expressed herein, does so at his or her own risk. OFX and its affiliates will not accept liability for any loss or damage, including without limitation, any loss of profit, which may arise directly or indirectly from use of or reliance on information contained in or derived from this communication.