Euro drop against US dollar reflects economic performance in Europe

The start of the new year 2015 saw the euro plunge to its lowest level against the US dollar in nearly nine years. On Tuesday the euro was trading at USD 1.1956 after it had dropped to USD 1.1860 on Monday.
According to analysts, the drop is due to a combination of several factors including the resurfacing of the Greek crisis, drop in oil prices and concerns of deflation in the EU.
The US oil price has fallen below USD 50 a barrel for the first time since April 2009.
The President of the European Central Bank, Mario Draghi, said in a recent interview that the risk of negative inflation in Europe had increased.
"Inflation has been low for some time now. This is partly due to falling oil prices and corrections of high prices in some countries, but also to weak demand," he noted.
Draghi said the European Central Bank will soon present plans to buy government bonds in an effort to stimulate greater consumer demand and avoid deflation.
Economists think that injecting more money into the economy will stimulate demand and increase prices.
Analysts are, however, forecasting that economic performance in the 28-member European bloc will continue to be weak in 2015 and hence the euro will also continue to remain weak against the US dollar.
Moreover, the outcome of the elections in Greece on 25 January is also being watched carefully and with concern in Brussels.
A victory of the leftist Syriza party would raise fears of Greece's exit from the euro zone and consequently further weaken the common currency and lead to lower economic growth in the EU.