Week 21, 2011: The Euro

Summary: The Euro has had a tough week (at the end of a tough month) following increasing speculation that at least one member country may have to leave the single currency zone. This is reflected in a decline in the strength of the Euro both against the US$ and the GB£.

What does the chart show? This chart shows the average exchange rate of the Euro against both the US Dollar and the British Pound. By taking the average of the two, we are concentrating on the fluctuations of the Euro rather than of the two other currencies. It shows how many Dollars/Pounds a single Euro can buy, so a higher number represents a stronger Euro.

Why is the chart interesting? The peak in the chart is the 5th May 2011 - the day before serious rumours started spreading that Greece was about to quit the Eurozone. The Euro has struggled to recover ever since, continuing to decline over the past three weeks. Things were made worse today by speculation that the International Monetary Fund (IMF) might not give Greece as much money as originally planned, leaving the rest of the Eurozone to pick up the bill. With the appetite for bailouts in Europe diminishing, this could quite easily lead to Greece having to leave the Euro.

The Euro is still a long way off the trough at the beginning of 2011, which was a continuation of the hangover after the bailout of Ireland towards the end of 2010. But if any more bad news emerges around the Eurozone, it could quite easily drop at least that far.