Why the euro could collapse before it does: CNBC

CNBC’s Andrew Ross Sorkin says he sees a big chance that the European Central Bank will have to hike interest rates soon.

He also suggests that we could see a sudden drop in the value of the euro.

The currency is now trading at around 6.5 percent, down from about 7 percent in early September.

But, according to Sorkins assessment, there is a strong possibility that the currency could fall further as the ECB and other central banks raise interest rates.

The Fed is likely to begin raising rates in September.

Sorkines opinion on the situation has not changed, however, he said.

“The market is starting to believe that this is a time when they can expect the euro to start to go down, and that’s where the Fed should start raising rates,” Sorkinos comments on CNBC.

The euro has been losing value in recent weeks, and some analysts say it could fall as low as 1 percent to 2 percent.

But Sorkino believes that the market will likely react negatively to any further rate hikes.

SORKIN: I think we are in for a big, big drop in value of this currency.

The markets will react negatively, but we’re not going to see that, we’re just going to have a big bounce-back period.

The market is reacting very negatively.

I think it is going to be a really big crash, a lot of bounce-backs, and we are not going be able to do anything about it.

CNBC’s Stephen Dubner has more on the market reaction to the ECB rate hikes, including the possibility of a sharp drop in euro-denominated bonds.

Read more about the euro crisis on CNBC’s front page.