Fluctuations in the Euro Exchange Rate and Future Forecasts

 Fluctuations in the Euro Exchange Rate and Future Forecasts Many of you are understandably concerned about the exchange rate of the Euro against the Bangladeshi Taka (BDT). It’s a valid worry, as these fluctuations can force you to block an extra lakh or so in funds, which isn’t affordable for everyone. Let’s dive into some research on exchange rates and financial markets. This will help you get a sense of how much you might need to block in the future and where the economy is heading. 😊 First, a disclaimer: This article is based on my limited study of financial markets and the global economy. If there are any errors, please forgive them and kindly clarify in the comments. That way, I can correct myself, and others can learn too. 🤗 The exchange rate between two countries’ currencies depends on factors like their economies, foreign reserves, inflation rates, interest rates, demand for the currency in global markets, and various economic comparisons. It’s a complex system, and economists are still working to fully understand it. To simplify things, most countries use the US Dollar (USD) as a standard for currency exchange. This has an interesting history. Thanks to the US’s stable economy, abundant gold reserves, and the dynamics of World War I and II, the Bretton Woods Agreement in 1944 established the USD as a gold-standard currency. Over time, it became a key benchmark in global trade. Whether you’re buying something from China, Thailand, or Germany, you can usually pay in USD. Like many other currencies, the value of the Bangladeshi Taka is directly tied to the USD. For example, if you want to buy 100 Euros: Even if you purchase Euros directly from a money exchanger, the background conversion works like this: **Taka > USD > Euro** This means that no matter which currency you buy with Taka, the conversion is calculated based on the USD’s value. There’s no direct relationship between Taka and the other currency’s economy. Here’s a simple example based on today’s (hypothetical) rates: - **Taka to Euro**: ~138 BDT per Euro - **Taka to USD**: ~121.5 BDT per USD - **Euro to USD**: ~1.13 USD per Euro Do the math: 121.5 × 1.13 ≈ 138. With precise decimals, it matches exactly. This is how the Taka-Euro exchange rate is determined. Here’s a tip: If you check the Taka-USD exchange rate graph (try Googling it), you’ll notice it’s fairly stable, fluctuating by 2-3 Taka per year (ignoring major jumps, based on the last couple of years). However, the Euro-USD graph is a rollercoaster of ups and downs. This Euro-USD volatility is what primarily drives the variation in the Taka-Euro rate. **Tip**: When planning to block funds, keep an eye on the Euro-USD pair. If you see the rate dipping, exchange on that day—you could save a thousand Taka or so. Also, monitor key economic decisions in Europe and the US. For example, if the European Central Bank cuts interest rates, the Euro’s value might dip slightly, or vice versa. Keep these factors in mind. 😊 Now, the big question: **Why has the Euro rate spiked?** Largely due to Trump’s tariff tantrums, the global economy is in turmoil. 😒 Trade wars are raging, with countries slapping 25-125% tariffs on each other. This has weakened the USD’s position. 😐 A weaker USD typically means a stronger Euro. The Taka and Euro haven’t directly clashed here—it’s the USD’s decline that’s boosting the Euro’s value. **Will the rate rise or fall?** Predicting this is tricky, but Trump has paused additional tariffs for 90 days (except for China), which is bringing some stability to stock markets. Hopefully, the rate will ease a bit in the coming days. **The million-dollar question: What will the Taka-Euro rate look like in the future?** This is a fascinating topic and one of my favorites. 😬 Let’s cut to the chase: The Euro’s value against the Taka is likely to rise in the future. By 2026/27, it could hit 140-145 BDT per Euro. This doesn’t mean Bangladesh’s economy will collapse (so please don’t start cursing Yusuf Sarker). 😶😶😶 Here’s a light explanation of why this might happen. Again, this is just a hypothesis based on current trends. The global economy could shift dramatically—Bangladesh could become the next Singapore, so don’t come for me later. 🫣🫣🫣 - A recent report (by Adnan Sadek Bhaiya) noted that Germany is considering relaxing its debt brake rules and plans to invest nearly 1 trillion Euros in its economy. This is positive—it’ll create jobs and boost businesses. However, Germany doesn’t have that cash lying around. They’ll likely raise it through bonds or other means (like our savings certificates), borrowing from investors or the public with interest. When demand for a currency rises, its value increases. A stronger Euro could outpace the USD, pushing the Euro-USD rate from 1.13 to, say, 1.2. Multiply that by the Taka-USD rate (120/121), and you get a higher Taka-Euro rate. - Trump’s erratic trade policies are scaring investors away from the US market, a trend that could grow. Investors may shift to Europe or other regions. Imagine someone with $10,000 in Tesla/Google stocks. If they see the US market faltering, they might sell those and buy Mercedes/Lufthansa (Germany) or Alibaba (China) stocks. This weakens the US economy slightly and reduces USD demand, lowering its value. A weaker USD strengthens other currencies like the Euro. - In Bangladesh, the interim government’s investment initiatives and rising remittances could strengthen the Taka. The Taka-USD rate might drop from 120/121 to 115-118. 😊😊😊 This is good for our economy and could lower the Taka-Euro rate slightly. 🤗🤗 However, correlation matters. A 0.1 USD rise in the Euro’s value has a bigger impact than a 1-2 Taka drop in the USD’s value, so the effect might be limited. 😢 If the Taka ever returns to 80-100 per USD, that’d be a massive shift, but it’s unlikely in the near future. Anyway, I’ve rambled enough about financial markets—hope I haven’t given you a headache. 😬 I hope this article gives you some insight into global markets, economies, and currency systems. If you can save even a few hundred or thousand Taka on your block account conversions, that’s the real win. 😊 My request: Start exploring the global economy now. It’s not just about exchange rates—it’ll help you make informed decisions about your field of study or career in the future.