Six months ago the common wisdom was that it would only be a matter of time until the ECU would implode and the Eurocurrency would become a thing of the past, its fourteen-year run at an end.
When it first came onto the world’s financial stage on January 1, 1999, it debuted at around .86 to the US dollar. That means you would need 1.14 Euros to buy one US dollar. From that base in 1999 the currency eventually rose to a price of 1.60 in the summer of 2008.
Since the peak of the enthusiasm for the Euro, it slid more than 25% before bottoming out in the early fall of 2012. The reason for the fall was multiple. The European Banking crisis following the housing market bubble in 2008 hurt the market, social unrest in many of the socialist countries also were a cause for the loss of confidence. But the biggest single factor threatening the Euro was the sovereign debt crisis in the “weak sisters”.
On Friday it appeared the final piece of the Euros recovery came into the puzzle when Italy was able to borrow money at the lowest rate in years. A €5 billion offering of three year bonds was oversubscribed at an interest rate level of 1.85%.
As confidence surges, much of the liquidity that has flooded the zone in the past three years is finding its way out of the Swiss Franc and back into Euros, a sure sign investors are willing to take on a little more risk than they have been in the past four years.
So what are the prospects for the Euro in 2013?
Unemployment levels in Greece and Spain are still in the unacceptable range of nearly 25% and even though the austerity programs in many of the countries have helped to trim their exposure to a default, Greece, Spain and Italy are still not out of hot water. The stock markets are humming in those countries and unless some unforeseen event occurs it looks like it is going to be a good year for the Euro in 2013.
Keep those stops tight.
Todd “Bubba” Horwitz