The Euro to USD is above 200-DMA in December 2022, with the hike in interest rates. The US Dollar has weakened to 104 levels, strengthening the Euro further.
Euro to USD Currency Pair in 2022
The Euro started the year 2022 at 1.1330 levels. 1.1484 level in mid-January was the highest point for the EUR/USD in 2022. It reached its lowest point at 0.9570 levels in September 2022. The Euro is moving with a positive trajectory.
The EUR to USD is currently trading above the 200-DMA in December 2022. The EUR/USD currency pair surged almost 1100 points from the September lows.
In 2023, investors can expect the EUR/USD to surge higher, as long as the currency pair trades above the 1.0350 level in the currency exchange market.
Euro to Dollar Climbs Above 200-DMA in December
The 200-DMA for the EUR/USD currency is placed at 1.0343 in December 2022 and closed comfortably above this level last week, December 16, 2022.
The EUR/USD currency pair fell below the 200-DMA in March 2021 when the pandemic began. It continued to trade lower and weakened to the lowest point at 0.9535 in September 2022. But the Euro gained strength from the low points and surged above its 200-DMA in December 2022. It is trading above this psychological level at 1.0343 for more than two weeks.
The European Central Bank raised rates in December 2022 to slow down inflation levels in the Eurozone. The ECB has set a target to bring inflation to 2%, but it has a long way to go, says ECB Chief Lagarde. The ECB increased rates similar to the Fed, as the US interest rates saw a hike by 50bps on December 14. ECB President Christine Lagarde said the economy requires higher rates as inflation remains stubbornly high. Any hike in rates will strengthen the Euro further.
EUR/USD Below Parity in September 2022
The EUR/USD touched its highest point at 1.1485 in February 2022 and traded at its lowest point at 0.9535 in September 2022. The Euro to US Dollar Index slipped almost 16.9% in 2022.
The Euro currency dipped below parity and fell to 0.9535 in September 2022. The Dollar Index surged to its peak, at 114 levels, in September, another reason for the fall in the Euro currency. The Euro to USD fell to a 20-year low in September 2022, while the USD was at a 20-year high. The rise in the Dollar Index was the reason behind the fall in the EUR/USD index level in the currency market.
High gas and energy prices hammered the single currency to below $1. The ECB took urgent measures to address the decline in the performance of the European industries. The Russian-Ukraine war brought a curb on gas deliveries to the Euro bloc, causing an increase in crude prices. Brent crude prices are at $81.57 per barrel. WTI prices are at $76.36 per barrel.
ECB Hikes Interest Rates
In July, the ECB raised rates for the first time in 2022. Interest rates are currently at 2.5%, but they remain lower than rates in the US at 3.5%. Bank of England increased rates to 3.50% in December 2022. Central banks across the globe slashed rates during the lockdown period to nearly 0%. But, with high inflation hitting the developed countries, rate hikes are seen in the US, the UK, and the Eurozone.
Interest rates are a key tool for the government to bring down inflation. Inflation remains too high, and the Governing Council decided to raise interest rates in the December meeting. Interest rates increased by 50 basis points and are expected to rise further in the Eurozone. Currently, interest rates in the European Union in December 2022 are at 2.5%, increasing from the previous rate of 2%.
Inflation numbers in November are at 10.0%, while it was 10.6% in October. Measures taken by the ECB to control inflation are paying off, and the inflation rate is slowing down. However, people in the Eurozone are facing a high cost of living. Mortgage rates have increased, and paying off loans is a financial strain for European households.
The Euro to British Pound currency pair is at 0.8713 in December 2022. The British Pound and the Euro currency have gained strength with weakness settling into the US Dollar.
The EUR/GBP is trading within a range, between 0.8550 and 0.8800, from October to December 2022. The United Kingdom and the European Union were slow to hike rates in their countries, while the Fed hiked rates early in the US.
US Dollar Slips Below 200-DMA
High inflation in the US, which was at a 40-year high, brought the US Dollar Index to 114 levels in September 2022. However, the Fed took aggressive steps by hiking interest rates, which is currently 3.5% in December 2022. Investors preferred to have Dollar investments in their portfolio as a safe-haven currency, but the greenback is sliding lower. Weakness in the greenback is strengthening other currencies like the British Pound and the Euro.
Investors can remain invested in the EUR/USD currency pair if it trades above the 1.0350 level.