After several years of the Eurozone crisis dominating currency news, there have been many who have been asking a crucial question: Is Europe through the eye of the storm, or is there worse to come? In Britain, more than a few people were becoming incredibly concerned this time last year, as the exchange rate on sterling to euro was stuck at 1:1.10. Some corners of the media suggested that sterling might even regress to a 1:1 rate against the European currency. But after one well-timed speech by David Cameron in December 2011, sterling hasn’t gone beneath 1:1.20 against the Euro for any significant length of time. This year has seen further austerity measures placed across the region, with seemingly constant riots in nations such as Spain and Greece. So we must ask ourselves, is 2012 the ‘low point’ for the Euro, or is it going to get worse in 2013?
To answer this question, we need to look at the stronger nations in the union, Germany for example. Whilst the German government seem happy to continue to fund ailing countries, the German people have been wondering throughout 2012 if their taxes should fund the failures of weaker economies. Likewise, the populace in weaker nations like Greece have been furiously opposed to visits by German politicians, and have reacted violently to austerity measures. If people bring these anti-austerity measures to polling stations and elect anti-austerity political parties, analysts predict that the crisis has the potential to be measured in decades, rather than merely years.
From a UK perspective, things are looking comparatively good. Unemployment has been gradually falling for the past few months, and we officially came out of recession last month. So why isn’t the value of sterling rallying more strongly against the euro? The answer lies in the fact that people tend to forget just how strongly Britain is linked with the Eurozone. EU nations trade, on average, 60% of their exports with each other. Until the crisis in Europe is resolved, Britain is likely to suffer, and the value of the dollar against the euro is unlikely to see any massive changes on the scale we saw last December.
So what can people do in order to prepare for any sudden changes and the possibility of a long-term crisis? Obviously reading up on current events is obviously a must. It really is quite amazing how small changes can severely affect the value of a particular currency. In nations such as America, we’ve seen shifts in currency value based purely on car sales in certain states. Secondly, keep an eye on other major currencies, especially the dollar. The Euro and the dollar appear to be on a kind of see-saw. If one gets weaker, the other gets stronger. Thirdly, if you’re looking to make any currency transfers, shop around; make sure you use a broker rather than the high street banks. Nobody is ever going to look back on 2012 as a positive year for the Euro. The best any of us can do is not to get caught out by an extension of the crisis into 2013.
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