inflation forecast expects inflation to fall to 2.80% in 2023 and 2.30% in 2024. This will likely further strengthen the euro, causing existing euro dollar forecasts to be revised. 27, the bank stated further rises were expected. The dollar experienced a 4.89% decrease on the month.Īfter the ECB’s latest rate increase on Oct. This prompted investors to exchange safety in dollar exposure for higher risk asset classes. The sudden slowdown in inflation exceeded current market expectations, precipitating a “risk on” environment in response to the reduced likelihood of further Fed rate increases. A decrease of 0.50% in the annual rate of inflation was reported for October, reducing the expected number of 8.20% to 7.70%. Consumer Price Index figures, has provided salvation to the euro versus the U.S. A recent bounce to the upside, owing to better-than-expected U.S. The projected rates of inflation have presented mixed euro-to-dollar forecasts. Geopolitical uncertainty caused by the war in Ukraine, soaring energy prices and post-pandemic labor shortages have combined to form the “perfect storm” facing the dollar this year. As the dollar is a counter-cyclical currency, it historically performs well in unfavorable economic conditions. A hawkish Fed has increased rates six times in 2022, from 0.25% in March to 4% in November, making the dollar a destination for safety and speculative exposure to future increases.Īdditional factors have contributed to dollar strength, causing it to flourish as a haven for investors seeking reduced risk. This has led to successive Fed rate hikes, increasing dollar attractiveness for investors while encouraging savers. Surging global inflation, at a 40-year high in the U.S., is a key driver behind the dollar’s strength. USD/CAD: One dollar buys $1.33 Canadian dollars, a U.S.

GBP/USD: One pound buys $1.18, a dollar increase of 11.63% for the year.USD/JPY: One dollar buys 139 yen, a dollar increase of 22.38% for the year.EUR/USD: One euro buys $1.04, a dollar increase of 8.87% for the year.Here’s how the dollar has performed against major currencies this year, as of Nov. The index, which reflects dollar strength relative to its basket of rival currencies, showed a dollar increase of 14% on the year at its high. September saw the greenback reach a 20-year high as the dollar roared to 114.10 on the ICE Dollar Index (DXY). Dollar Performance and Drivers in 2022ĭollar strength has been a core theme for 2022. This euro-dollar forecast will examine the factors that may influence the world’s most traded currency pair over several time horizons. It is likely the current inflationary climate-in addition to eurozone economic woes-will drive further euro declines into 2023. As investors flee to safety amid economic and geopolitical uncertainty, a strengthened dollar has compounded the relative weakness of the euro and most other dollar-paired currencies.

It has become a choice for capital inflows seeking both safety and exposure to a hawkish Federal Reserve (Fed). dollar has been greatly strengthened by its status as a counter-cyclical safe haven. Most EU countries are expected to enter a recession by the end of 2022, according to the European Commission. A cost-of-living crisis will likely hinder the euro’s relative strength going forward. 15, eurozone-wide inflation-predicted to average 8.5% for the year- continues to stagnate growth. 27 for a second straight month, prompting the euro to strengthen.Īlthough the euro has increased by 5.19% in value against the dollar since Oct. The Central Bank increased interest rates by 75 basis points on Oct. The European Central Bank (ECB) provided some respite, and the euro has since rebounded. This occurred after the region’s economic outlook worsened, thanks to the closure of Nord Stream 1, which drastically limited the available energy to fire the eurozone economy. Following a protracted downtrend against the dollar since February, the beleaguered euro (EUR) has suffered an 8.80% decline compared to the dollar (USD) so far this year.īy September, the euro plummeted below parity to 0.9685, levels unseen since June 2002.

Euro comparison