The Euro Continues Its Plunge

After dropping by 5% yesterday, the euro today fell another half percent in trading against the dollar, bringing it to 1.18 to the dollar — a nine year low. Nervous chatter is filling the pages of the financial media, about how the euro could even drop to parity with the dollar, and that the only hope for survival is for ECB president Mario Draghi to really let loose with quantitative easing at their next meeting on Jan. 22 — three days before the looming Greek elections.

“I’d say there’s a good chance it gets there [euro-dollar parity] before the [U.S.] election next November (2016),”

Marc Chandler, chief foreign exchange strategist at Brown Brothers Harriman, told CNBC.

“We know the Fed’s going to be raising rates sooner or later, and the ECB is going to be easing sooner or later. I just see a steady grind lower.”

As the euro was tanking, German Chancellor Angela Merkel travelled to London for six hours of meetings with Prime Minister David Cameron — appropriately enough, in a museum. Purportedly they were discussing the future of the United Kingdom in the EU, but it’s a good bet that the Greek crisis was actually foremost on their agenda.

Iceland, meanwhile, announced that it is planning to formally withdraw its application for EU membership. As Nigel Farage, head of the British UKIP party, stated:

“This move by Icelandic authorities and the increasing Mediterranean opposition to the EU shows that the idea of the inevitability of EU integration has been smashed. More and more people throughout Europe either no longer wish to join the EU or, as in Greece, to leave the euro currency all together.”