Why is the Euro so strong?

[Johnnytheboy]

I should start with the statement that I'm a glorified gardener so don't understand currency fluctuations, but I'm a glorified gardener that imports plants from the Eurozone, at an ever inctreasing price.

I'm baffled by the fact that that the Euro is strong against the Dollar and Sterling. I know both those currencies have problems of their own, but my understanding is that the Euro is actually getting stronger against them both.

Given the current worries about the €'s very existence being in jeopardy, why is it not reflected in weakness in its value? Or is it weak against everything else but the £ & $ and I just haven't been told?

Can anyone more economically literate than me explain?

[Andy Zarse]

In one word? Germany.

[Puggit]

If When Greece defaults, can we expect the Euro to suffer at least something?

[Johnnytheboy]

But surely Germany is second only to France in being exposed to potential Greek default?

I'm just amazed at the tranquility in the exchange rate.

And annoyed at how much my plants cost me.

[Bing o]

Well, it looks like GBP has just dropped below 2 Sing Dollars to the pound, so I'd say that Sterling is pretty fked all in all.

[Eric Mc]

The pound is also week - partly because the Government wants it that way.

[turbobloke]

Eric Mc said:

The pound is also week - partly because the Government wants it that way.

We should worry when it's only a day.

[Puggit]

Eric Mc said:

The pound is also week - partly because the Government wants it that way.

Quoted for posterity

[Johnnytheboy]

But does anyone know if the Euro is weak relative to other currencies than the ones I mentioned? In my mind that would make sense. Unless I'm fundamentally not grasping how the currency market is influenced by events.

[audidoody]

The markets think UK interest rates will stay low for the foreseeable future.

[Johnnytheboy]

audidoody said:

The markets think UK interest rates will stay low for the foreseeable future.

Pardon my ignorance: can you (in gardener-friendly language) explain how the one influences the other?

Will this mean Sterling investments will produce a relatively poor rate of return compared to those in other currencies?

[Eric Mc]

Puggit said:

Eric Mc said:

The pound is also week - partly because the Government wants it that way.

Quoted for posterity

As they always say - a week is a long time in economics (or is it politics?)

[munky]

Johnnytheboy said:

audidoody said:

The markets think UK interest rates will stay low for the foreseeable future.

Pardon my ignorance: can you (in gardener-friendly language) explain how the one influences the other?

Will this mean Sterling investments will produce a relatively poor rate of return compared to those in other currencies?

Correct - your understanding isn't as bad as you make out

The Eurozone has a higher base rate than either the UK or the US, which (everything else remaining equal) means money flows into the currency to seek the higher relative returns, which means the currency appreciates. There are a dozen other factors that can affect it but that's the textbook one.

[lockhart flawse]

You have missed an even more important factor - the Euro appears to be strong against the US$ and other currencies because the US economy is perceived to be in an even worse position than the Eurozone economy with the huge quantitive easing having had little apparent effect on job numbers and by extension, output. From memory I think the 4 PIIG economies combined only contribute something like 15% of the total Euro zone GDP with Greece as low as 2.5%. Germany and France together contribute something like 64% of the Eurozone GDP and they are both growing. The markets appear to think that Greece will be kept going one or another by its Euro "partners" for now at least and so the Euro exchange rate is staying relatively firm as a safer haven than other currencies like the Dollar - the usual safe harbour.

L.F.

[RemainAllHoof]

Isn't it to a country's benefit to have a poorish rate because then it increases exports?

[voyds9]

SO my question is why is the French economy so strong. The French have a short working week, strike for small reasons and seem to expect large wages.

[XJSJohn]

Bing o said:

Well, it looks like GBP has just dropped below 2 Sing Dollars to the pound, so I'd say that Sterling is pretty fked all in all.

good timing, was planning on popping back to the UK next month for a short jolly!

[HundredthIdiot]

voyds9 said:

SO my question is why is the French economy so strong. The French have a short working week, strike for small reasons and seem to expect large wages.

They make excellent cheese.

[dandarez]

Eric Mc said:

Puggit said:

Eric Mc said:

The pound is also week - partly because the Government wants it that way.

Quoted for posterity

As they always say - a week is a long time in economics (or is it politics?)

Is 'bad' (or shud that be 'week'?) gramma an spellin cachin on PHs?

Year cudn't month it up in a day, cud year?

Maiks year ashaimed to cum from a naishun wiv sutch (alejedlie) hi ejaculaishun ejucaishun standerds.

[Esseesse]

voyds9 said:

SO my question is why is the French economy so strong. The French have a short working week, strike for small reasons and seem to expect large wages.

Good question. I do not know but maybe France makes lots of money selling surrounding countries electricity?