Influence of the euro exchange rate on our daily lives

When financial experts talk about the euro crisis, billions in debt and inflation, it is not always clear what that means for you and I personally. What are the consequences for your disposable income if the euro rises or falls?

The consequences for you if the euro rises

Declining competitiveness

A strong euro is often associated with a weak dollar. And a strong euro or a weak dollar, respectively, can lead to a declining competitive capacity of Dutch companies, because our exports become more expensive as a result of the exchange rate. This can result in heavy losses for companies that export to dollar countries. And that in turn has consequences for our labor market.

Lower gasoline prices

Since the price of oil is traded in dollars, a weak dollar means we receive more oil for the same amount. In such a case, the price of gasoline may become lower.

Prices in the supermarket

Imports to the Netherlands will become cheaper because a strong euro should have a positive effect on this, at least in theory. The low dollar lowers the cost of imports, so many imported products in the supermarket should be cheaper. But the question is whether wholesalers actually pass on their purchasing savings to the customer one-on-one. That would of course be desirable.

Cheaper holiday accommodation

Travelers to the United States in particular can be relieved. After all, staying in the United States is becoming cheaper due to the rise in our European single currency. Because the local products maintain their price regardless of the exchange rate. However, a euro is now worth more. This makes a difference of several cents on a bar of chocolate alone. For larger expenses, the savings are of course correspondingly higher.

Booked package trips

These will not become cheaper in the short term if the euro rises. The prices remain valid until the expiry of the current catalogues. Tour operators like to justify this measure by pointing out that hotels and flights were purchased well in advance, regardless of exchange rates.

The consequences for you if the euro falls

Items of American origin

A weak euro makes the US dollar especially strong. And it is precisely with such a strong American dollar that exporting Dutch companies enrich themselves, at your expense, that is, at the expense of the Dutch consumer. So you have to pay for it because you have to pay more for the more expensive imports. If you paid 90 euros in the store for your favorite Levi’s jeans six months ago (approximately 135 US dollars), now you have to pay around 104 euros for the same model because the euro has become less valuable compared to the dollar.

More expensive imports

This is especially fatal for companies that import a lot from abroad. They clearly buy more than just one pair of jeans on the global market. Moreover, the majority of Dutch companies import more goods from abroad than vice versa.

More expensive (holiday) stay in the US

It is logical that it will also be more expensive for you there where you have to pay in dollars. For example, a stay in the United States will become considerably more expensive due to the fall of our European single currency. Because the local products maintain their price regardless of the exchange rate, but a euro is now worth much less. Even that bar of chocolate can therefore be a few cents more expensive.

Cheaper exports

A weak euro certainly makes Dutch products cheaper abroad, such as in the US and Asia. As a result, more is exported to these countries and Dutch companies can grow.

Deteriorated market position

Due to unstable currency: The Netherlands is losing its attractiveness as an industrial location due to the low euro exchange rate. Hardly a single foreign company invests in a country that has an unstable currency. So overall there will be fewer jobs and the market situation will deteriorate.

Package tour prices

Anyone who has booked a package holiday should listen carefully. The higher prices are generally only felt locally. However, package holidays that have already been booked do not immediately become more expensive. But some tour operators use a margin in their catalogs to hedge against price fluctuations. If the euro then falls and the costs of hotels and flights rise for the provider, he can demand the price at the top for new bookings. Ask your tour operator about this.

Rising fuel prices

Because oil is paid for in US dollars, if the euro is weak the oil price will rise for us. For 50 euros we get less fuel with a weak euro than with a strong euro. According to oil traders, only a fraction of the price increase from January can be traced back to the dollar rate. But the current mood on the oil market and the dollar exchange rate do not bode well for prices at the pump.