Is the Euro in Trouble?
Posted by Allison on 20 January 2015, 13:52
Up until the middle of last week, the Swiss franc was pegged to the value of the euro. This meant that regardless of when you checked the exchange rate, the franc was always worth a set amount against the European single currency.
However this is no longer the case. It was decided that the Swiss franc would no longer peg the value of its currency against the euro. What does this mean in reality? Well, let’s take a look at how much the euro was worth against the Swiss franc before all this started to happen. Back in the early days of 2015 we were looking at a rate of 1.2010. Nothing much to worry about there. However on the day the pegged rate was removed, the euro instantly slid against the Swiss franc by quite an appreciable amount – some 14% in fact. This meant the euro started that fateful day on 1.2010 and ended it on a shell-shocked 1.0280. Yes you did read that right.
While many goods and services across Switzerland suddenly got a whole lot pricier – quite literally overnight – the story didn’t end there. You see, while the euro had been jogging along fine against the US dollar, it had a shock there too during this fateful week. When Thursday 15th January rolled around, the euro lost some ground against the US dollar too. At the start of the week it was worth 1.1813 against the dollar and by the end it had slid to 1.1588. Not as major a drop but a drop nonetheless. Another drop was seen against the British pound too, so all in all it was a week packed with woe for the euro.
So where does all this leave the euro? Well, while the soaring value of the Swiss franc is causing problems for pretty much everyone in that country, the euro is struggling even more. The euro is struggling to maintain any kind of reasonable exchange rate, while the increase in the Swiss franc shows how powerful other currencies can sometimes be (even though it is creating problems at present). So will we see the demise of the euro? It could well happen yet.