Despite its storied pedigree as the world’s reserve currency, the Euro is not quite out of the woods yet. After a shaky start in the early aughts, Eurozone nations are enjoying a resurgence that can be attributed to a combination of a resurgent banking sector, increased foreign exchange reserves and a booming consumer base. This has all contributed to the euro’s relative strength, which translates into a plethora of opportunities for Eurozone residents, especially when the euro is compared to the eurodollar.
The European Central Bank’s mandate to guarantee monetary stability is the foundation on which Europe’s economic engine rests. However, the US Federal Reserve is not playing around when it comes to interest rate hikes. As a result, US consumers are getting squeezed, as well as the global economy at large. If the Fed’s policies aren’t enough to stoke inflation, the world will take a beating. For a country as storied as the United States, this is a very scary proposition.
The US dollar isn’t about to budge, but its big brothers from the east and the west are proving that the dollar isn’t the exclusive preserve of the rich and famous. There are signs of an impending currency war on the horizon, but the Euro and the GBP are proving that a dollar spent versus an Aussie dollar isn’t a bad thing. While the Euro has taken a beating in recent months, it has also beaten the US dollar in terms of GDP and inflation. Whether the dollar can keep pace or regain its rightful place as a world reserve currency is anyone’s guess. Nevertheless, the Euro and the GBP are well on their way to regaining their footing.