The Euro has held up well against the American dollar ever since the US Federal Reserve raised interest rates in December for the first time since 2006, after a year of solid economic data.
Now many are starting to wonder how long the party will last and we may see the Euro unravel as 2016 unfolds.
The USA went through an unprecedented economic recovery, fueled by record low interest rates and a quantitive easing program introduced in 2008 worth trillions of dollars, which finally started to bear fruit towards the end of 2014.
During this time, the European union took a wait and see approach before finally giving in an introducing a stimulus package of their own in September of 2014, to revive the economy with an extension announced in January of 2015, which seems to have been too little too late.
If we look back at the American scenario the EUR/USD pair, was trading at around $1.40 after 6 years of stimulus (2008-2014) before the measures finally kicked in and sent the Euro tumbling to today’s rate of around $1.09.
Many will say that the European Central Bank lost precious time in introducing their stimulus measures, and should have made a move much earlier, considering some of the warning signs, including the Greek debt crisis, along with problems in Portugal and Spain.
If history is anything to go by and we follow the US dollars example, the Euro is likely to see further falls as we head into 2016 before the monetary policy measures introduced by the ECB begin to show results.
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