Currency trading using the Euro has been erratic; with the velocity of forex trading bouncing and rebounding to streams of Euro Zone related news. Speculation is rife within the currency focused foreign exchange markets with some traders attempting to ‘guestimate’ the future of the Euro. Unless you have been sitting at your desk with your eyes closed and ears covered it is hard to miss the fact that the Greek and Irish debt crisis has rocked Euro Zone stability. The latest knockout blow comes in the form of a rather pricey €85 billion rescue package for the Irish economy.
Forex Traders are beginning to question the finite value of the Euro itself – just how many more blows can the currency take before it is floored in the forex ring? There are multiple answers to this question moving in many directions however two key possibilities can be identified. The first is that the Euro will regain its stability and has a durable, sustainable future and the second is that in time the value of the Euro may slip beyond economic return.
Global media has spread the word ‘contagion’ at epidemic speed and it is this principle which proves a key threat to Euro confidence. In order to create a sustainable future, this ‘contagion’ must be contained within the Euro zone. The Irish rescue package was certainly created at a far more rapid pace than financial aid for the Greek debt crisis and perhaps the speed of this reaction will ease any aftershocks associated with the crisis. Spain and/or Portugal’s level of economic infection from this ‘contagion’ may serve as a measure of the Euro’s potential ability to bounce back, when verging on disrepute.
The value of the currency itself is under scrutiny from the EU member states, states that are at its beck and call. It is unlikely that Germany, one of the most economically prosperous countries within the Euro zone, will be submissively dragged down by the weight of less efficient economies. German frustrations are already being vented with its current effort in the German courts to freeze EU bail outs for Greece. Telegraph journalist, Ambrose Evans Pritchard reminds readers German citizens were offered a pledge by their leaders that an end to the Deutschmark would not ‘lead to monetary disorder or leave them liable for Club Med debt.’ As Euro debt begins to become top heavy on the shoulders of more prosperous economic regions, speculation is growing regarding a possible departure from the Euro for Germany. Such a departure could also be followed by the closely connected Netherlands which could inevitably shatter the value of the Euro.
The inherent instability of the Euro has always been widely if not loudly acknowledged, simply because of its sheer connectivity. It is unlikely that an external event will bring an end to the Euro as we know it, but it is likely that the Euro’s own inherent instability may cause its demise. Perhaps the greatest flaw of the Euro is not its exposure to multiple geo-political events but instead its member states. Forex traders will be closely monitoring the spread of budgetary contagion and German movements.