Pros and Cons of Euro Value Drop

The start of the New Year brings extra trouble for the bike business in Europe as the euro significantly dropped in value against the US dollar. Currently 1 euro is traded for 1.28 dollar (morning hours of January 11; Amsterdam time) which is up a bit compared to its closing rate on January 10 which stood at 1.2775.

The current euro value is about 15 percent down on what the currency traded for over one year ago. Where this will lead to is obvious; price increases for complete bikes; for electric bikes as well as for P&A are inevitable this year.

For everybody who’s heavily into trading with the Far East the million dollars question is now how the euro value will develop in the coming months. Financial specialist from BNP Paribas, Nomura Securities and UBS don’t believe the euro value will recover. They are pessimistic as the US economy shows signs of recoversy contrary to the euro countries that are forced to cut their debts which are expected to impact their economies. They predict a further drop in euro value this year to 1.15 – 1.10 US dollar. With that the euro value would be down close to 25% on its 2010 value. This could result in much more that only price increases.

Is a production shift on the horizon? Will it bring production back to (Eastern) Europe?

On the positive side of the euro value drop stands that it could lead to more bike sale and use. Fuel prices are soaring and are already reaching record levels. That those records will be broken is certain as the euro value continues to drop.