NOVEMBER 11, 2004
A boring but very significant F1 problem
One factor which is important in the current economic slump in Formula 1 is the exchange rate between the US dollar and the Euro. Many of the teams negotiated their sponsorship deals in US dollars but have to pay out large sums of money in Euros, not only the continental teams which build the cars within the Eurozone but also the British teams which spend huge sums in Europe, travelling to races and tests and paying continental suppliers.
Yesterday the euro hit an all-time high against the dollar at $1.2985 before dropping back slightly. A strong euro means everything in Europe costs F1 teams more money.
The reason that the dollar is so weak is because of the price of oil, which is raising fears about the strength of the US economy, in addition to the country's high trade and budget deficits under President George W Bush.
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