Two Minute Tips

What the dollar’s rise means on both sides of the Atlantic

March 24, 2015

Share this article:

Berlin (via Flickr.com user Nico Trinkhaus)

The dollar to euro exchange rate is the lowest its been since the early 2000s, and if you’re an American who has been craving a European trip, now is the time to go. (See the end of this story for a sample money-saving itinerary.)

The dollar’s huge upswing against the euro ($1 = €0.91) is largely thanks to policy decisions in both monetary unions. The U.S. Federal Reserve is slowly backing away from its long quantitative easing program, while the European Central Bank is injecting funds into the Eurozone to stave off deflation.

The relative strength of the U.S. economy — which added 295,000 jobs in February — amid turmoil in Europe over debt crises in Greece, Spain and Italy is another factor in the rising disparity between the two currencies.

How is this showing up?

Cheap flights, for one. Thanks to a huge promotion from the Icelandic carrier WOW air that offers flights to Iceland for less than $200, U.S. travelers can fly to Reykjavik and then venture east to top tourist destinations at ludicrously low prices.

Once you’re on the continent, cheap airline carriers such as EasyJet and Ryanair can take you almost anywhere in Europe for less than $100.

The strength of the dollar, however, cuts both ways. Here are some potential impacts.

  • While it will be easier for Americans to venture abroad this summer, a strong dollar might result in a steep drop in international tourism in the states.

According to Reuters, travelers from abroad typically spend more than $200 billion in the U.S., and a 10 percent appreciation of the dollar would cause a 2 percent decline in international tourism.

Luxury designer brands like Michael Kors, Tiffany and Kate Spade, who usually count on Europeans flocking to their stores in the summer, could be especially hurt by the dollar’s rise.

Some cities like New York — which had 9.9 million international travelers in 2013 — will likely still see a rise in overseas tourists, but Deutsche Welle points out that they might spend more conservatively on hotels, eating and shopping. Overall, Reuters says international travel to the U.S. will rise by 3.5 percent in 2015, as opposed to 5 percent over the past decade.

The greenback’s rise, however, could slow that growth down as American exports become more expensive.

 A Sample Itinerary

In light of cheap flights to Iceland and the euro’s fall, I planned a theoretical trip for an adventurous American with a $4,000 budget.

The journey begins on June 4 and brings our lucky traveler (from the D.C. area) to Reykjavík, Paris, Berlin and Budapest for less than a grand in air travel.

Paris, one of the most expensive cities in the world, will probably be where our adventurer will drop the most dough.

The other three cities should be inexpensive thanks to favorable exchange rates ($1 = 136.777 Icelandic Krona and $1 = 277.93 Hungarian Forint), and cheap room and board options in Berlin. (Who knows, he/she might drop everything and join Europe’s “post tourist capital” for good.)

They’ll return on June 22 refreshed and satisfied that they took advantage of the dollar’s appreciation.

Here’s the itinerary:

• Jun 4: WOW air, $226, 7:25pm Baltimore (BWI) to Reykjavík (REK)
• Jun 8: WOW air, $136, 11:50am Reykjavík (REK) to Paris (CDG)
• Jun 11: easyJet, $44, 9:20am Paris (CDG) to Berlin (TXL)
• Jun 16: easyJet, $44, 3:20pm, Berlin (SXF) to Budapest (BUD)
• Jun 19: AirBerlin, $212, Budapest (BUD) to Reykjavík (REK)
• Jun 22: Wow air, $271, 3:30pm, Reykjavík (REK) to Baltimore (BWI)

In total, our traveler will spend $933 on air travel, leaving them with $3,067 to spend on room and board.

Bon voyage!

***

Learn how to cover money better on your beat. Register for one of our upcoming workshops.

More Like This...

three people sitting at a table reviewing graphs and charts

The ABCs of funding rounds

Someone might have a great idea for a startup, but it’s not going to go anywhere without money. Initially, investors will start a business with their own savings or borrow

three people presenting to a group of executives in an office

Experts’ tips for evaluating startups

Covering startups can be exciting and frustrating all at the same time. The newest billion-dollar startup can become the hottest topic in the business and tech media overnight, and its

Two Minute Tips

Sign up now.
Get one Tuesday.

Every Tuesday we send out a quick-read email with tips for business journalism.

Subscribers also get access to the Tip archive.

Get Two Minute Tips For Business Journalism Delivered To Your Email Every Tuesday

Two Minute Tips

Every Tuesday we send out a quick-read email with tips for business journalism. Sign up now and get one Tuesday.

Our New Look
The Reynolds Center for Business Journalism is starting 2023 with a new look that we hope better illustrates our core mission to provide accurate and authoritative resources about business journalism, in order to help both reporters and news consumers understand the importance of business news and to demystify the sometimes arcane topics it covers.
Businesses, markets, and economies move in cycles – ups and downs – which is why our new logo contains a “candlestick” chart representing increases as well as downturns, and serves as a reminder that volatility is an unavoidable attribute of modern life. But it’s also possible to prepare for volatility by being well informed, and informing the general public to help level the information playing field is the primary goal of business journalism. The Reynolds Center is committed to supporting that goal, which is why the candlestick pattern in our logo merges directly into the name of our founding sponsor, Donald W. Reynolds.
Our new logo comes with a shorter name. Business is borderless, and understanding the global links in supply chains, trade, and flows of funds and people is essential to make sense of our fast-paced, globalized world. So we’re dropping the word “National” from our name and will aim to provide content that is applicable to business news globally.
We hope you like the new look. Best wishes for 2023!