The widespread economic recession has had, and will continue to exert, a negative influence on the Euro's performance in the global marketplace. Although the Eurozone is in a recession, it is still performing much better than most global currencies, and will likely continue to do so well into 2010, if not beyond.
The aggressiveness of the ECB could increase drastically in coming months, in order for them to combat slowing growth trends. They will likely cut interest rates, although have recently been reluctant to do so due to inflation. Inflation is closely tied to the price of oil, which has fluctuated quite a bit in recent years. Since oil prices are expected to climb, inflation is expected to increase proportionately.
There is currently a strong move in Iran to move oil trade from the US Dollar to the Euro due to the Euro's superior stability. With the recent election in Iran, we see conservatives still in power. These conservatives are traditionally not US-friendly. France and Germany are warming up to Iran a little bit, which dictates which way policy goes since are economic juggernauts of Europe. Iran is the natural hegemon in the Middle East, and therefore has the most deciding power regarding how oil is traded. With US military might on the decrease, our ability to project our power and influence around the world makes it less likely that oil will be traded in dollars in perpetuity. This would have a great global impact on the Euro's strength in the global currency market.
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