Euro weakens, but just part of the economic picture

Scott Tong Dec 14, 2011

Euro weakens, but just part of the economic picture

Scott Tong Dec 14, 2011

Steve Chiotakis: European negotiators will hold talks tomorrow on a new treaty leaders agreed to last week. The treaty would strengthen budgetary oversight to lessen the debt crisis. Meanwhile, there are fresh concerns that ratings agencies could downgrade the entire eurozone, and that has the U.S. dollar today at an 11 month high against the euro.

What does that mean for Europe and what does it mean for the United States?

Marketplace’s Scott Tong reports.

Scott Tong: One dollar today buys you 76 euro cents. That’s up from 69 a year ago. So if you travel to Europe, your dollar goes further: it buys more German hotel room, or Belgian chocolate, or Chateau LaTour. But it cuts both ways. If you sell stuff, you want a weaker currency, which helps the Europeans.

Gabriel Stein is an economic forecaster at Lombard Street Research in London.

Gabriel Stein: Obviously if the euro is weak and the dollar is strong, Airbus will do better than Boeing, for instance, all things being equal. German machine sales for instance will do better than American.

Now he and others are quick to say exchange rates are just a piece of the world picture. If “Joe the Plumber” here in the U.S. doesn’t have a job, he won’t go to Europe. Nor will “Guiseppe the Plumber” over there buy an American car, or medicine, or almonds. It doesn’t matter, whatever the exchange rate.

In Washington I’m Scott Tong for Marketplace.

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