By Michelle Seiler-Tucker, Special for USDR
The US Dollar vs. the Euro The recession of 2008 greatly impacted economies across the world. In the seven years following the crash, markets across the world lifted themselves back towards prosperity with varying degrees of success. One of the fastest recovering globally significant economies is that of the United States, and while there remains years of work yet to go, we are faring much better than certain European counterparts. One of the hardest hit, and slowest to recover, is Greece, which is an anchor weighing down the recovery of the euro zone. As a result of the United States’ success, and Europe’s sluggishness, the US dollar is rallying against the euro, coming within a few cents of parity. However, today, the euro dealt a heavy blow to the dollar. The International Monetary Fund submitted a debt reform resolution to Greece in a major step towards reviving the ailing nation.
Additionally, Greece is scheduled to repay 300 million euro (329 million USD) to the IMF in upcoming weeks. While there is yet no guarantee Greece will accept the resolution and repay its debts on time, investors view the euro optimistically for the first time in years. Independent of news in Greece, the European Central Bank released data showing inflation in the price of consumer goods for the first time in six months, indicating the ECB’s quantitative easing program is seeing success. The ECB, much like the Fed, engages in quantitative easing to spur on the economy and generate a healthy level of inflation.
As a result of a faster recovering dollar over the euro, many investors bought dollars and shorted euros. However, Tuesday saw a massive reversal on investors’ positions with the positive news out of the euro zone. While a strong dollar benefits Americans abroad, it hurts Europeans seeking tourism to the US. Therefore, a stronger euro proves beneficial to tourism in the United States. This benefit is seen no better than in our own city of New Orleans, where tourism generates close to seven billion dollars annually – many of these seven billion dollars are converted from euros. However, while America may benefit from a stronger dollar in the short term, recent news from the ECB and IMF show promise of economic recovery in the euro zone, which bodes well for a stronger global economy.