Here’s Why the Eurozone Is Headed for a Currency Low

Euro Zone

The euro hit its top height against the U.S. dollar, and is not slated for a rapid slide back down, likely dropping 6 percent against the dollar in the first-quarter — according to Bloomberg’s assessment of trading patterns. Analysts at Citigroup Inc. (NYSE:C) told Bloomberg that the impending drop saw its beginnings in December when the euro didn’t rise above $1.3812.

When the expectations of fifty analysts and economists were compiled and the median taken, Bloomberg reports that the euro’s fall will likely be 2 percent down to $1.33 by the first-quarter’s end. “The pressure from the euro up-move is waning. The long-term move that the euro has had since the middle of 2012 is likely coming to an end now,” said Karen Jones of Commerzbank, to Bloomberg. Come to an end, and fall a fair ways, if analysts are to be believed.

The eurozone managed to exit the most extended period of recession last year. However, inflation is still a concern at present, down to 0.8 percent in December, considerably lower than the European Central Bank’s hoped for upper limit of 2 percent inflation.

“December’s fall in euro-zone CPI [Consumer Price Index] inflation will add to concerns that the region could suffer from a bout of deflation and increase the pressure on the ECB [European Central Bank] to take more action to support the economy,” said Ben May, economist with Capital Economics Ltd., to Bloomberg.

Still, the President of the ECB, Mario Draghi, has insisted that despite the low inflation numbers being seen, the eurozone has not yet hit deflation. “But we must be very careful that we do not permanently fall below 1 percent inflation and thus into the danger zone,” said Draghi, echoing many who worried about stagnation in the European economy. Concerns in the eurozone are hardly surprising considering the weight put on the economy by struggling nations such as Greece and Spain, with Germany under attack from the American Secretary of Treasury for too much dependence on exports.