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A weak euro is a consequence of the European Central Bank’s quantitative easing programme to stimulate the economy.  These monetary policy changes create recovery momentum for Europe and also raise competitiveness of exported goods and services.

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After a series of rate cuts and Quantitative Easing stimulus implementations, the Euro started sliding further, to the point that it almost reached parity with the US dollar.  Today (at the time of writing this article), you still hear analysts forecasting that the EUR/USD pair will be moving towards a discount on a per USD basis. Other analysts are already revaluing the EUR/USD to trade at 0.8000 at some point this year.

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In my opinion, Greece is an overhyped subject, and its rough journey to repay the IMF and their Euro partners will be endless. What would be a real event was if Grexit came true. I guess that the setback, which leaded to Lehman’s failure, still lingers in everyone’s mind, even though Greece is a country, and not a private entity.

How could these changes affect the EUR/USD in the near future? Fundamentally, if I get back to my history textbooks, this resembles a hybrid strategy mixing Japan’s remedy policy after the 1997 financial crisis (though there were no negative rates at the time), and the way the US fire fight their way through the current financial crisis. Based on the historical performance of both economies, the current monetary policy, could give some traction to the Eurozone recovery.

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