Just how is it that the freezing of the world’s credit markets can help you go on vacation?
There are two answers: changing Dollar currency exchange rates, and the fall in the price of oil.
One Euro today costs $1.34, whereas six months ago it was $1.60; a British pound now costs $1.49 versus $2.00 in the middle of July.
The dollar has been helped by several factors. One is that foreign investors have been trying to liquidate (turn into cash) investments in stocks, bonds and, yes, whacky mortgage-backed securities. Much of these are dollar denominated, so they needed to buy dollars to do so — and that raised demand, thus making the dollar stronger (the same happened for the Japanese Yen, but this is not a Japanese travel photo site!)
Another reason is that those trading in currencies for a living believe that the Dollar and Yen are “safe” and more tradeable than other currencies.
The fall in the price of oil, due to reduced demand from China and other large economies, has meant that airlines have been gradually cutting the price of tickets as fuel becomes cheaper. Falling demand has had something to do with that too: airlines are far more likely to pass on falling fuel costs if they think it will fill their ‘planes.
The net:take another look at that European vacation — it might be a lot cheaper now than it was 6 months ago!