The Resilience of the Euro: A Triumph of Monetary Control

To anyone with a vague understanding of the global economy, it would be reasonable to presume that the Euro (EUR) is continuing to depreciate in value. With the robust and powerful economy of Germany the latest to stall, a resolution to the crisis seems further away than it did within the depths of the Great Recession.

Despite the high unemployment, soaring debt and diminished manufacturing output, however, the eurozone’s single currency is actually displaying signs of robust growth. At the heart of this is more stringent money market conditions and controls, which is helping to cap debt and minimising the threat of further easing by the European Central Bank.

The Facts and Figures: How the Euro has risen from a Global Crisis

In terms of bare statistics, the euro rose to a six-week high against the U.S. Dollar and an impressive five-year peak against the Japanese Yen. While economists initially predicted that this may the result of disappointing economic data from America and China, however, it appears as though the Euro’s resilience has been inspired by tighter monetary controls and improved sentiment within the region. In fact, last week’s U.S. non-farm payrolls report delivered better than expected results, meaning that the Dollar should have experienced a significant surge in value.

Given that economic powerhouse China also delivered exceptionally strong trade numbers that exceeded expectations, the strong resurgence of the Euro seems even more mysterious at first glance. This seemingly illogical sequence of events is hardly helped by the tepid economic conditions that continue to blight the eurozone region, which despite third-quarter improvement remains at the mercy of significant debt and disproportionately high levels of unemployment. So what exactly is behind the robust performance of the Euro and its continued levels of growth?

The Truth behind the Euro and its Robust Growth

To begin with, the implementation of more stringent monetary controls has had a positive influence on the economy and financial markets. When the eurozone crisis began, countries were borrowing heavily and seeking out quantitative easing as a way of stimulating short-term growth. This is a flawed strategy, however, and one that has only increased the cumulative debt shared by the region as a single state. By adopting long-term measures and resisting the urge to borrow further capital, however, eurozone members are helping to stabilise the economy and improve investor tolerance for supposedly riskier currencies.

In addition to this, there is also the suggestion that strong labor and trade data from the U.S. and China is actively boosting the eurozone and the single currency. This is because these figures hint at a powerful economic recovery, which has the potential to exceed the expectations of economists and government officials from around the world. So while  predicted considerable investor caution prior to the release of the recent labor report in the U.S., it’s better than expected findings may prove to be a catalyst for global GDP expansion and recovery in the eurozone.