The euro has gradually regained its lost ground. In the past three and a half months, the exchange rate of the euro against the U.S. dollar has gone up.

(Reuters)

[Financial Channel/Comprehensive Report] As energy prices cool down, market fears of a deep recession recede, and the European Central Bank turns hawkish, the euro gradually regains its lost ground. In the past three and a half months, the euro has risen by 13% against the U.S. dollar.

The Fed raised its policy rate by 4.25 percentage points last year, the largest single-year increase in 40 years, the Financial Times reported.

The widening interest rate differential between the dollar and other economies has attracted investors to the United States, boosting the dollar, and the surge in energy prices exacerbated by the Russia-Ukraine war has threatened the European economy and weakened the attractiveness of the euro.

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The euro fell below parity with the U.S. dollar in September last year. Recently, due to cooling energy prices, market fears of a deep recession, and the European Central Bank turning hawkish, the euro has launched a major counterattack. In the past three and a half months, the euro has risen by 13% against the U.S. dollar. Comes to 1 euro to 1.08 dollars.

According to the report, with the slow cooling of US inflation, the Fed is expected to slow down the pace of raising interest rates, and even start to cut interest rates in the second half of this year.

In contrast to Europe, MUFG currency analyst Lee Hardman believes that the Fed took the lead in raising interest rates last year, which was higher than other central banks. But now, the European Central Bank has surpassed the Fed for the first time. It is expected that the European Central Bank will raise interest rates from 2% to 3.25% in the middle of this year. That would remove one of the dollar's big advantages.

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