![]() ![]() ![]() This is supported by the International Monetary Fund’s (IMF) predictions that inflation will fall to 3.50% in 2023 and 2.20% in 2024. 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.
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