Euro's Role in EU

Written by Research | 18 February 2010

Ideal Levels for the Euro

The Euro's value and it's identity as a common currency for the EU has been suffering recently by concerns of a weaker currency because of the sovereign debts in the European community of nations led by Greece. The EUR/USD's decline from 1.5100 area on early December has extended below 1.3600.

These price levels are more appropriate for Euro Zone's economy according to Columbia University Professor, Robert Mundell - Nobel Prize who happend to author the unification of a common curreny in Europe.

The recent TV interview on Bloomberg News where Robert Mundell affirmed that the European Union indeed has paid for the price for an overly strong euro in the past and they can no longer afford a second anymore as exports may suffer more. He also made mention that the EU nations should not allow the Euro vs. the USD to appreciate above 1.40 on the next decade. And the ideal price levels should be around 1.2500 - 1.3500 where the EU wold benefit more in trade relationships.

These remarks made have been considered by many although, the market's reactions are uncertain despite of the fact that the continued concern of the EU deficit problems are focused in the market place. The free flow of risk capital in the market has always been the basis of the law of supply and demand working in a free market place. However, the market has been quiet lately since the the prices stalled after the lifeline for Greece were announced by Germany and the European community's support that led to the current market conditions.