A changeover from the US Dollar to the Euro is fast becoming a highly sought after option, especially when one considers that one could actually buy goods and services with it. One would no longer have to depend on US dollars for transportation costs, payment of utility bills, borrowing money or buying stocks and shares.
The move is widely expected in the next five years, but the question remains, will it happen? The answer to this is clear; "No".
The reason for this is that the global financial markets will not react well to such a changeover, since every financial instrument including the USD, Euro and Yen will react to this process in their own way. The major player in the global finance market is the U.S. Dollar, and this will remain so for quite some time.
The best option available to an investor who wants to buy goods and services with Euro at a significant discount, is to hold foreign currency futures contracts. The Euro has lost value compared to other currencies in recent months, mainly due to a slowdown in the Chinese economy, which in turn is driven by its government's policies.
The trend is likely to reverse, and the Euro is expected to become the most preferred alternative to the USD. But there are risks involved, and to protect oneself against them, the investor must first consider his short-term strategy, in order to identify his likely short term losses.
While the AUDUSD is the best performing currency in the world right now, the reality is that other currencies will suffer at least as much. Thus, the decision to invest in EURUSD for the short term cannot be completely ruled out, even though the Euro and USDCAD have more upside potential than AUDUSD.
After all, it has already gained rate of interest, which is not easy to achieve, in an otherwise depressed market. The gain rate will continue to grow over the coming months, and the discount will increase.
But how can one benefit from the current weakness of the Euro? There are two choices: either buy EURUSD in order to take advantage of the reduced risk, or sell them as soon as they recover.
The former option is likely to yield a higher profit, while the latter might also bring about some losses. If one has a large amount of EURUSD, it is better to continue with these.
If one doesn't have a large sum of EURUSD, he will have to choose between a strong gain and a strong loss. A stronger gain is likely to yield better overall returns, and a weak one is likely to lead to losses.
What will be the option if EURUSD remains below the level of EURUSD USD? It is possible that the Euro will fall below the USD too, so that the move from USD to Euro will be no more than a very slow one.