# Load Packages 
library(readr)
library(dplyr)
library(lubridate)
library(ggplot2)

#Import the data 
euro_exchange <- read_csv("Data/euro-dollar-exchange-rate-historical-chart (1).csv") %>%
  mutate(date = mdy(date)) %>%
  select(Date = date, ExchangeRates = value)

Purpose Behind Selecting the Euro

The euro is one of the most important currencies in the world due to its influence upon the global village. This is because the many countries that use the euro are some of the most industrialized and powerful nations in both economics and politics. It is also one of the strongest currencies, being one of the very few that is more valuable than the US dollar. The European Union and the United States are also frequent trade partners on a variety of common goods such as vehicles, tree nuts, and alcoholic drinks. These strong ties to one another creates an interesting situation to take a historical look into and analyze. Here we have some of the first recorded exchange rates between the euro and the dollar:

knitr::kable(head(euro_exchange))
Date ExchangeRates
1999-01-04 1.1825
1999-01-05 1.1774
1999-01-06 1.1622
1999-01-07 1.1706
1999-01-08 1.1577
1999-01-11 1.1498

In the graph below is a visualization of the euro to dollar exchange rates since the debut of the currency in January of 1999. Areas between green lines signal times of the euro strengthening against the dollar, while sections between red lines indicate time periods it grew weaker. While not all major changes are discussed, some of the most important ones are discussed in the following sections.

ggplot(data = euro_exchange) +
  geom_line(mapping = aes(x = Date, y = ExchangeRates)) +
  geom_vline(xintercept = as.Date("2008-07-20"), color = "red") +
  geom_vline(xintercept = as.Date("2008-11-15"), color = "red") +
  geom_vline(xintercept = as.Date("2014-04-15"), color = "red") +
  geom_vline(xintercept = as.Date("2015-03-15"), color = "red") +
  geom_vline(xintercept = as.Date("2017-04-01"), color = "green") +
  geom_vline(xintercept = as.Date("2017-09-15"), color = "green") +
  theme_bw() +
  labs(x = NULL, y = "ExchangeRate (Euro to USD)", title = "Exchange Rates Between the Euro and USD", subtitle = "1999-2021", caption = "https://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart")

Major Rate Changes

The Subprime Mortgage Crisis

The subprime mortgage crisis that began in America caused that entire economy to go into a recession, and it soon began to spread throughout the world due to America’s central position in the world economy. This worldwide recession worried investors because it spread more than originally thought, and caused the European economy to soon fall too due to the close trade and financial ties. This unexpected recession made the euro to dollar exchange rate to plummet, as seen in the below graph.

Source: https://www.thebalance.com/what-is-the-euro-to-dollar-conversion-its-history-3306091

knitr::include_graphics("SnapCrab_NoName_2021-11-17_22-35-16_No-00.png")

Multiple Affects from the World Economy

The depreciation of the euro against the US dollar was due to multiple reasons from across the world. The first was due to the strengthening of the United States economy, and as a result the United States dollar grew in value too. The European Central Bank also began to launch its own version of quantitative easing through government bond purchases to combat the possibility of deflation. Finally, the potential outcome of the Greek elections in January of 2015 worried many because the leading party was going to try to negotiate for a bailout of the Greek debt crisis, worsening the EU’s total economic situation. As a result, we see in the following graph the depreciation of the euro and the corresponding appreciation of the USD:

Source:https://money.cnn.com/2015/01/05/investing/euro-slump-deepens/index.html

knitr::include_graphics("SnapCrab_NoName_2021-11-17_22-45-43_No-00.png")

Election of Donald Trump

The election of Donald Trump was a reason for the appreciation of the euro against the United States dollar. Due to the intense investigation into the ties between Russia and Donald Trump, along with doubts about the administration’s ability to fulfill their proposed agenda also caused the euro to appreciate.The dollar also depreciated due to these same actions. These effects can be seen in the international exchange graph below:

Source: https://www.thebalance.com/value-of-us-dollar-3306268

knitr::include_graphics("SnapCrab_NoName_2021-11-17_22-47-29_No-00.png")