In 2023, the European common currency will experience a revival. Recently, one euro was worth less than one dollar — its lowest point in two decades at $0.9538! But starting November 2020 onward, it has been able to make a remarkable comeback – with the euro standing strong now at an impressive $1.0929 as of April 2022; this equates to more than 14% growth since last September’s low!
Euro May Reach $1.12 Levels
According to Commerzbank currency specialist Antje Praefcke, the euro could ascend as high as $1.10 in the near future. But there’s more than meets the eye; technically speaking, a bullish trend remains alive and well, with first resistance at 1.12/1.13 dollars per euro. This escalating rate of exchange is mainly due to investors’ monetary policy expectations that suggest both an assertive European Central Bank (ECB) and a less active Federal Reserve (Fed).
The European Central Bank Considers Continuing to Increase Rates
Praefcke, an FX analyst, remarked that the European Central Bank (ECB) has maintained its credibility when battling inflation. On the other hand, he suggested that the US Federal Reserve’s rate cycle is likely winding down. This suspicion was further justified in recent times as several ECB reps have spoken positively of potentially larger 50 basis point increases at their February and March gatherings. In comparison, according to CME Group’s Fed Watch Tool forecasts, market participants are expecting two very mild 0.25 percentage point hikes from upcoming Fed meetings – which seems indicative of a softening trend for American monetary policy overall.
Good News for Tourism and Fuel
Good news for euro-area business travelers and tourists – a stay in America is becoming increasingly cost effective! Furthermore, companies sourcing goods from non-euro areas will have some financial reprieve as fewer euros are required to cover costs.
Heating oil customers and drivers should also feel this positively because commodities like oil are traded in dollars. If the euro rises against the dollar, buyers in the euro area have to pay less for the same amount of oil or fuel under the same conditions. The bottom line is that the strong euro should also ensure a significant drop in imported inflation.
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