Euro on the decline, travel on the rise
An exchange rate in favor of the dollar might mean an increase in Americans to Europe
With the euro on a rapid decline, many people are speculating whether travel to European countries will increase.
According to a CNN article, at the beginning of 2015 the euro was down by 14% since May 2014. A simple Google search will show you that one US dollar will earn you .95 euros, which is the highest the exchange rate has been in years.
Marc Chopin, Northern Arizona University (NAU) business professor, said that the euro began to decline when the European countries that use the currency began printing it in abundance.
“There’s a dramatic increase in the supply of euros coming from the European Central Bank,” said Chopin. “They have announced a program somewhat similar to the one the US has been running for a number of years…that makes the euro much less scarce, thus expecting to bring down European interest rates even further.”
According to Chopin, when the US implemented the system of quantitative easing, a monetary policy that enables central banks to try and fuel the economy when regular policies aren’t doing the trick, many other countries were implementing the same type of policy.
“At that point in time, the supplies of currencies across the developed world were all going up, so we were in the same boat with most others,” said Chopin. “So there was not much of a differential impact. The fact that we have stopped, and that Europe is ramping theirs up, and the movement of interest rates, is what driving the value of the Euro down.”
When interest rates drop in one country, but rise in another, people are more likely to move their assists to the country with the higher interest rate, which increase the demand for the dollar. Interest rates have been dropping in Europe, which is causing the decline of the euro.
While the reasoning behind the decline of the euro can be confusing, the effects are what people should focus on, particularly people interested in traveling the world.
Chopin also sees a growing number of Americans heading to Europe, taking advantage of the exchange rates.
“I think we will see far fewer European visitors to the US and we will see a significant increase in people traveling from the US to Europe. Energy costs are down, airfare at least won’t go up, it may even come down a bit, and Europe’s on sale. The European continent is in about a 25–30% off sale, as far as we are concerned because that’s the change in value of the US dollar relative to Europe,” says Chopin.
Zach Tobin, NAU study abroad adviser for Southern Europe, does perceive an increase in travel, but doesn’t believe that students will take notice or increase their travel plans because of it.
“While the euro has declined a little bit, I honestly don’t think that students are that in tune with that themselves,” Tobin said, “This is in some newspapers, and on some news sites but I don’t think any students are keeping track of the exchange rates and saying ‘ok, now is the time to go!”
While Tobin may not believe that students are paying much attention,International Business Insider, travel will be on the rise. According to the article, “Americans and other foreigners can expect to land cheap trips to continental Europe over the next few months after the euro hit its lowest since March 2006 on Monday. That means Americans could get hundreds of more euros for their dollars than they did just a year ago.”
Although students may not be paying attention, the world is, and all signs are saying that if you are planning a European trip, now is the time!