Economic European situation and the value of the Euro in connection with the Argentinean Currency

From ends of 2º Trim. they are observed in Europe inflationary nature problems as likewise certain possibilities to enter in recession (countries like Denmark, Spain, England, France and Germany are in at least one of these two situations).

On the other hand USA sees a similar situation: inflation and recession.

Europe sees to be in danger the previously expected growth to the prospective rate.

In the specific topic of the value Argentinean Peso - Euro we see that the changes for the past year were:

=> 4.30 $/Euro: Relationship in August 2007
=> 4.50 to 4.70 $ / Euro: Flotation range among Nov '07 and March'08
=> 5.10 $/Euro: Highest level reached in May'08
=> 4.40 to 4.50 $ / Euro: Fall until ends Julio'08
=> 4.70 to 4.36 $ / Euro: Soft slope that takes place among August '08 and the day 03/09/2008

Some international analysts speak about a value to Dec '08 of + /- 4.88 $ / Euro (this derived starting from a relationship 1.60 U$ / Euro)

I believe that it is not an easy year as to make a prediction about values to futures, on one hand the rocking price of the barrel of petrol makes that the economies ascend and lower in function of the same one.

If we observe the situation in Argentina, the thing doesn't go better, to the problem with the farmers is added the great increase of the prices that makes that the inflation level in the Country gets to a worrying point (and the lacks of coincidences between the private readings and the proportionate ones by the official organism: INDEC makes that this uncertainty in the readings is developed). The maintenance on the part of the government of the value of the dollar (which falls at international level) since tries to stay a relationship of favorable (exports / imports) exchange. The possible payment to the Club of Paris announced in these last days gives a favorable small breeze to the government for the recognition that this measure has had from certain European governments.

As they come, all these they are variable to keep in mind.

In summary, I believe that - being this nothing else that my personal opinion - the relationship Euro- Arg. Peso should not vary in excess in the next months. An appreciation of the Euro of + /- 10% is feasible and the negative reading - if it was given - I don't expect it to be bigger to 0.25%; this would give us values compared with the one from yesterday (03/Sept./2008) (4.36 $ / Euro) from 4.796 $ / Euro to 4.251 $ / Euro

See you on my next post!

Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008