The dollar is more than 10% stronger than it was three years ago.
The strong U.S. economy has made a strong dollar, and a strong U.S. dollar has made for a busy international travel season.
In the past 12 days, from June 27 to July 12, the TSA planned to screen roughly 32 million people. The agency also broke its record last month for most people screened in one day.
And many of those passengers are taking advantage of cheaper prices abroad. Simply put, you get a strong dollar when the U.S. economy is strong and stronger than foreign economies.
“That’s why the Fed hasn’t been lowering interest rates yet, whereas European central banks have started doing that,” said Hady Farag with the Boston Consulting Group.
Farag said it helps that the U.S. economy doesn’t slow down, even with higher prices.
“The fact that [the] U.S. is such a consumer-driven economy, and consumers have kept spending money is a big, big part of it,” Farag said.
The result: The dollar is more than 10% stronger than it was three years ago.
Now, the Fed will cut interest rates eventually. Good for home buying and job growth, less good for international travel, said Win Thin, Global Head of Marketing Strategy at Brown Brothers Harriman.
“My best guess is the dollar would be weaker a year from now,” Thin said. “So yes, this seems to be like the summer.”
Thin said even though the dollar’s strength might peak this year, the result of the November election could have a major impact on whether international travel is as affordable next year.
