How Will Greece Affect the Euro?

The Euro-Dollar (EUR/USD) is the most heavily traded currency pair in the world. Some forex traders don't even deal in any other currency pair at all as this one offers the greatest volume and liquidity.

Naturally, the future of the EUR/USD will also greatly determine the direction of the currency pair as a whole. In this article, I want to share my Euro Dollar forecast for 2011. I hope that it will help you make this year a successful one.

First, a little background. 2010 was a turbulent year for the Euro. It went as low as 1.1$ following the terrible Greek financial crisis and subsequent bailout. Today, the Euro is trading for 1.353$ after a prolonged recovery. Even the minor bailout of Ireland, another Euro country is severe financial trouble went by with relative ease. All this will likely make 2011 a challenging year for the Euro and may lead to lower Euro-dollar prices.

On the other hand, we have the US. While the financial crisis of late 2008 is still showing signs of slowing down the biggest global economy, there are indications that the US is steadily recovering. With very lot interest rates and financial easing measures taken by the Federal Reserve, the US Dollar may have little room to rise. This may mean that the first months of 2011 will be good ones for the EUR/USD. However, I predict that in 2011, interest rates in the US will begin to rise. When this happens, the value of the Dollar will likely increase across the board.

All in all, I predict a good year for the Dollar and a difficult one of the Euro. How accurate will this Euro Dollar Forecast for 2011 be? We shall have to wait until December and see how right I really am.

Knowing where the Forex market is going to go is always difficult. In this article, I'll focus on just one currency, the Euro, and predict how it will fare in 2011. Will this be a good or bad year for the Euro?

Euro Prediction For 2011

The Euro is a collective currency, used by 16 countries in Europe. Among those countries are strong economies such as Germany and the Netherlands, but also weak ones such as Spain, Italy, Ireland, and Portugal. The Euro policy and central interest rates are determined by the ECB, European Central Bank. However, each country governs itself so there is financial unity but not an administrative one.

This makes it hard to create and uphold the best monetary policy for the Euro. The weak countries would like a weak Euro to make their exports more attractive but the stronger ones would like a powerful Euro to give them more purchasing power. In 2011, as Europe is still recovering from the crisis of 2008, we will see those conflicting pressures increase, one thing which will weigh down on the Euro.

In 2010, two major aid packaged were given to two small members of the Eurozone whose economy was in virtual ruin: Greece and Ireland. This led to a lot of pressure on the Euro, driving it as low as 1.1$. There is every chance that another aid package will be required in 2011. Some say that Portugal will be the recipient.