My goal today is to discuss an interesting question raised by an economist and not very often discussed. We often say or hear that from 2008 to 2010, the financial market speculated against our currency, the euro, in view of its possible collapse. In fact, we often hear people say that the financial markets bet a lot on the collapse of the euro. I don’t know a lot about rules governing financial speculation but I know for sure, or I would know, that the currency is determined by supply and demand on currencies market throughout the world. And the euro remained very strong and overevaluated during this period. So the big question is : why the hell do we have a strong euro just in the setting of the weakest european economy and bad economic situation in Ireland, Spain, Italy, Cyprus ? Let’s just remember that the euro reached almost parity with the livre sterling in the aftermath of the lehman brothers collapse. I would reasonably think that a strong currency is awarded by a level of demand more important than supply on currency markets and when demand is more important than supply that’s mainly because investors all over the world trust a currency especially when in the setting of the worst financial crisis since 1929. I will may be learn soon than you can bet against a currency by making its price to increase a lot. This is not logical for me, but I am positive financial markets are not everytime logical or can act against commonsense to gain money (like products created by Mr Tourre).
This is a possibility, there is another one. The EU and the eurozone is the safest in the world and furthermore the euro is safer than the USD. So, its price just reflects trust of markets.
What’s your opinion ?