Dollar vs. Euro

By
Real Estate Agent with Coldwell Banker Burnet

As I was watching the news last night, I heard more about the U.S. dollar decline.   They made so many assumptions as to why the Euro has been gaining on the dollar.
For starters there is the housing bubble, that’s us again, always making the headlines and then there’s the the Fed’s decision to cut interest rates, and the rumor of mass printing???
So, which of those factors are directly affecting the U.S. dollar? Let’s take a quick look.

 

The Housing Bubble
The housing bubble in the US is well known, but the bubble in Canada, China, and Spain is just as big as the bubble in the U.S. In particular, the bubble in Vancouver is as massive as the bubble in Florida or California ever was. Vancouver housing prices are destined to crash. Don't ask me when, but only fools are buying at these prices. The housing bubble in Australia was the first to start deflating.
The point here is that housing bubbles are practically everywhere you look. So the housing bubble is not a cause of the dollar's weakness.

Cut on Interest Rates
A couple years back, the dollar was rallying when the Fed was hiking, but all of that was given back and then some when the Fed paused. The dollar further weakened when the Fed cut rates. The direction of interest rate policy is important. The expectation is the US is going to keep cutting but while the EU will keep climbing. This expectation is causing further weakness in the dollar.

Massive Printing???
The myth persists that the US is massively printing. This is simply a false.  There are extremely strict rules and regulations.

 

 

And while I think we can all agree, the U.S. Dollar has seen some better days, especially true in relation to the Euro. Remember when everyone hated the Euro a few years back, but they all love it now that the dollar is at $1.40+- vs. the Euro.

 

Dollar vs Euro

 

Comments (6)

Scott Webster
Sutton Group-Associates Realty Inc. Brokerage - Toronto, ON
GTA Real Estate
2 days ago the Canadian dollar hit $1.10 US, My wife drove to Buffalo and went shopping, so no complaints on this side of the border!
Nov 09, 2007 07:41 AM
David Yeoman
Mortgage Intelligence Inc. (David Yeoman) - Barrie, ON

Scott you beat me to the comment.  It has been a long time since the cross border shopping has gone the opposite way.  Great for the consumer but having an impact on merchants this side of the border.

I just purchased an after market item for my new Cannon DVD video camera that was priced as high as $199.00 at Future Shop / Best Buy and a local merchant matched the U.S. Website price of $119.00.

Nov 09, 2007 07:48 AM
Jason Botelho
Keller Williams Utah Realtors - Saratoga Springs, UT

Tyghre,

Great insight into the value of the Dollar.  I guess the important thing to remember is: the Dollar can not always be the envy of the World!  Hopefully the reduced rates will spark growth, and limit inflation to get the Dollar back on track!

Nov 09, 2007 07:55 AM
Tyghre Collentine
Coldwell Banker Burnet - Minneapolis, MN
I guess its about time my neighbors to the north get a deal!
Nov 09, 2007 09:04 AM
Larry Wright
nwRealty.Com - Tacoma, WA
Tyghre ... it's also US vs. Canadian dollars.  This weekend the border crossings are packed with Canadians taking advantage of their strong dollar and the Veterans Day sales.
Nov 11, 2007 07:04 AM
Tyghre Collentine
Coldwell Banker Burnet - Minneapolis, MN
Your right!  It is about time for you guys to get a deal, ha!
Nov 14, 2007 08:43 AM