Since the Euro was launched as the currency of the EU about 20 years ago the Euro & US$ have never again been equal. Over those 20 years the Euro has been as strong as 1.30, and was pretty consistly held around 1.20 over the last few years. Meaning a US traveler would be spending 20-30% more per dollar to pay for everything in the EU. In July of 2021 the Euro started showing weakness vs the US$ while it sat around 1.18 in July of 2021, and that was the cataclyst month that started the descent of the Euro. Over the last year while mass inflation gained in both markets the Euro was on a major downward trend. A few months ago it seemed to have bottomed out at around 1.05. A decrease of over 13% in less than a year. So what happened now to all of a sudden continue a downward trend?
The actions of the US Fed to increase interest rates over the last few months as a way of trying to tame inflation have resulted in the US$ becoming stronger againist foreign currencies. The ECB however has not actioned any interest rate hikes for the EU yet. So being Euro inflation is high and without controls in place unattractive to the market buyers and the US$ becoming very attractive and strong. This has caused the Euro in July to drop another 5% bringing parity with the US$ for the first time since the Euro was born. So we are now looking at $1 = 1 Euro. How long will this last? Finanical experts forsee a weak Euro for several months to come. So it's a good time to be a tourist in Europe for American travelers.
On average a 15%-20% discount on everything within the EU compared to pre pandemic times. Wow that sounds medevil, lol. The only down side? Well inflation has things both state side and across the Atlantic the highest they've ever been. Though the weak Euro is actually benefical to the EU tourism recovery, that was absoutely devastated over the last two years. Enticing more US Travelers to decide to book vacations to Europe this summer & fall.
We US travelers have become accustomed to the high Euro over the years and we all knew and budgeted accordingly to cover that additional 20% in costs. So it's really nice to sit down to a glass of Chianti in Tuscany for 5 Euro, and it actual costing you 5$, and not 6 or 7$.
Looking to take advange to the exchange rate in Euro? Thinking of hopping on a flight and making your money go futher? Here are some pointers to make the best of this oppertunity.
1. Always use an ATM in Europe to withdrawl local currency: Never exchange currency at a bank, or conversion exchange office. They will charge you some upwards of 8-10% on top of the exchange rate. There goes your 20% Euro discount reduced in half! ATMs give you the exchange rate of the day based on mid market rates. In addition your bank may charge you a small surcharge of a couple Euro for the withdrawl.
2. Always pay with your credit card if possible as much as possible: This will also give you the mid market exchange rates of that day, BUT NEVER accept the option to accept a conversion rate. What do I mean? You're buying a belt at Gucci, for 200,00 Euro. The cashier offers you the rate of 200,00 Euro or a US$ charge rate of $220.00. Why pay $20 more? Accept the Euro rate of 200! As well try to use credit cards that have no foreign transaction fees. This typically is 3-4% on your credit card per charge. This eats away at that Euro savings you are getting right now.
3. Pre payment options: I can offer options to prepay hotel & land arrangements for my clients based on contracts with my contacts having the Euro as it is daily. This could be benefical to clients who have trips planned later this year or in 2023 when the Euro may start gaining ground on the US$ again. In the process costing you more money for the same services and arrangements, than if paid now. Sure a 10% gain on 1.000,00 Euro only means $100, but a 10% gain on 10,000 euro, make that $1,000!
4. VAT: Everything you buy in Europe has VAT (Value Added Tax), this tax varies county to country. However when shopping in Europe if you spend over a certain Euro amount on a single receipt you are entitled to the VAT refund. Again this amount you must spend per receipt also varies from country to country. If you qualify for VAT refund you can usually get the refund in US$ before leaving the EU at most major train stations and airports. A simple example I give to clients is you're spending around 150,00 in Italy at a fashion boutique and about to check out. In Italy a minimum spend per receipt for VAT refund is 154.95 Euro. Exceeding this amount would entitle you to somewhere between 11.6%-15.5% VAT refund. That extra 5 Euro in spend now entitles you approx 15-23 euro back!
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