The euro has fallen so much it could be equal to the dollar this year

FX markets are not being kind to European monetary policy, no siree

Good news if you import or are going to Europe for a holiday this year – the euro has fallen against the pound to its lowest level in seven years and it’s set to drop even further.

What’s more, analysts at Goldman Sachs are predicting the euro will reach parity with the US dollar this year, with a 1:1 exchange rate expected in just six months.

The euro is already at a 12-year low against the dollar, and could fall as low as $0.80 by the end of 2017, according to Goldman Sachs, which revised its previous forecasts down.

But what’s causing the euro to slide?

Predictably, tension in the Eurozone is partly responsible for the currency’s downturn. Fears Greece will leave the single currency are causing huge disruption to investment.

Plus, quantitative easing from the European Central Bank is also playing its part in devaluing the currency, as markets favour interest rate raising economies, such as the UK and US.

Markets are responding favourably to US fiscal policy.

“After all these years of extraordinary monetary accommodation, which prevented the Dollar from trading its true strength, we see the coming normalization of US monetary policy as an important catalyst,” said Goldman.

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