In a report by CNNMoney, a resurgent American economy has strengthened the dollar drastically in recent months, against almost every other currency.
That is particularly true compared with the euro, which is getting slammed by gloomy growth in the Eurozone.
According to the report, the United States dollar will catch up to the euro and the two currencies will be about equal by the end of next year.
That’s a dramatic turnaround considering €1 bought you $1.60 back in July 2008. The two currencies have not been equal since late 2002. Presently €1 fetches $1.18 in the international markets – a much better rate for any American travelling to Europe.
“It’s a combination of good things here and bad things there,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.
The Euro’s weakness is reasonable, given the continent’s economic struggles. Growth has been practically absent and unemployment is trapped near record highs.
Things have gotten so bad in the euro zone that consumer prices drop in December, marking the first bout of deflation since the Great Recession.
Now the European Central Bank is on the edge to launch a new stimulus programme. While that programme could improve the economy, it’s also likely to depress the euro’s value further, at least initially.
The euro will drop to $1.08 at the end of 2015 and trade at equivalence with the dollar by the end of 2016. The euro could even fall below the dollar beyond that according to Goldman Sachs prediction.