Forecasts for Euro 2010

The Euro has remained strong during the economic and financial crisis. This is because

Euro banks had less exposure to the toxic mortgage loans which defaulted.
The ECB appears less keen to purse policies such as quantitative easing (increasing the money supply) to boost the economy.
The Euro is increasingly seen as a viable alternative to the US Dollar as a world reserve currency.
The Recovery in Eurozone began quicker than elsewhere such as US and UK.

Despite these factors it is worth bearing in mind, the Euro faces real problems, especially on the periphery of the Eurozone.

Greece is facing a debt mountain of with a government debt of over 110% of GDP. Spain and Ireland's economy also look vulnerable as they struggle to survive the impact of a collapse in house prices.

The Euro looks overvalued. Euro exports are increasingly expensive compared to other currencies. This overvaluation could derail the economic recovery and make the ECB pursue a looser monetary policy to boost growth.

2010 will be a difficult year for the ECB, they have greater concern for low inflation and could be first major central bank to raise interest rates. But, the strength of the Euro could be as much a curse as a blessing and this could lead to downward pressure on the Euro.

2010 could be the year when the Euro's strength starts to change and the currency depreciates.