The days of the weak euro seem to be over. The euro has bounced
back from the nadir of $0.88 to $0.96 now. But it's still way below
the level of $1.17, when it was launched nearly 18 months ago. At
the time of its launch, I forecast that the euro would slump to 1:1
against the dollar. When it reached that level, I expected it to
turn round and head back up. But that prediction has been
confounded so far.
Up to now, the euro's recovery has been undermined by relatively
weak European growth compared to the US; a big deficit on interest
rates between Europe and the US; and huge capital flows into the US
from Europe.
Over the last couple of years, euroland has run a $140 billion
annual basic balance of payments deficit and Germany alone has
accounted for almost 60% of that....
