The Euro to Dollar lost almost 5.5% in 2021. In January, it started the year above the 0.90 levels. But in December, EUR/GBP trades at 0.85 levels.
Euro to Dollar Exchange Pair Lost 5.5% in 2021
The Euro to Dollar today faces selling pressure, trading just at the 200 DMA at 0.8505 in the foreign exchange market.
The Pound to Euro today moves on a positive note. It saw a surge from 1.10 levels and trades at the 1.16 levels in December.
1 Euro in the USD exchange rate in the foreign exchange market is trading at 1.1248 in the foreign exchange market on Tuesday, December 2021.Â 1 Euro to USD saw a rise up to 1.2350 on January 6, 2021. It did not touch these levels again in 2021. The exchange pair slipped to 1.1703 on March 31, 2021. The EUR/USD currency pair has been trading within the 1.2250 and 1.1950 ranges for most of the year in 2021, showing signs of further weakness.
Bank of England Backtracks from a Rate Hike
Bank of England may hike rates soon. An increase of a hike by 1% may take place. Bank of England officials sent a strong signal of a rate hike at the previous meeting, but it did not materialize.
Bank of England’s head Sanders says that a change in policy settings may come in soon. However, the Omicron variant may put off rate hikes for a few more months caution, analysts.
The furlough scheme in the UK helped the labor market sustain through the corona pandemic. The lockdown restrictions in the country hurt businesses and the job market. However, after the easing of restrictions, the job growth in the country is robust, showing that the economy is moving ahead positively after easing restrictions. The latest Flash Composite PMI in the UK shows that job growth is good, and it reassures officials about bringing a hike rate.
The omicron variant will still play a strong hand in the Bank of England decision on policy rates in the next central bank meeting.
The EU is under pressure from the increasing covid cases. Europe will not bring a rate hike in the near term due to the covid fear, but the UK might hike rates soon. Hike rate expectation by the Bank of England has been positive for the British Pound in the forex currency exchange.
Northern Ireland Protocol Issue
The fishing row between the UK and the EU escalates. Brexit talks did not bring a smooth outcome to the fishing waters issue of the UK. French fishing crews claim that the British have access to the EU market, but the British waters are inaccessible to the EU fishermen. The British government does not respect the Brexit agreement, says the fisheries committee in France.
Businesses show improvement as the economy bounces back after the pandemic restrictions. However, the hospitality sector remains sluggish. The coronavirus pandemic is a constant threat to the economy. In 2020 and 2021, the different corona variant issues have slowed down the economy from fast recovery. Brexit issues affect the hospitality sector too. The work from the home policy followed in several offices affects the hospitality sector, as people need not travel. They prefer to stay away from city centers and live in suburban locations. Travel restrictions and fear of getting infected affect the tourism and hospitality sectors.
High costs and shortage of workforce are some after-effects of the Brexit event. Mitchells & Butlers, the restaurant and pub group, says that Christmas bookings show a slowdown. Presents sent from the UK to the EU get delayed, and in some cases, they go missing. The custom paperwork for people moving from one place to another, between the EU and the UK, is a tedious job. The cost of sending couriers from one place to another has gone up along with an increase in paperwork.
Health experts claim that the Omicron variant causes mild infections with low fatality risks. However, there is not sufficient data on the finding. It has eased down the fear of economic fallout.
US Dollar Index
The Fed may hike rates sooner than later, as inflation is high. Analysts expect the Fed to raise rates by May 2022. Fed Chairman Jerome Powell said that a faster tapering in quantitative easing is the solution to curb inflation.
The US Dollar Index is trading at 96.41 levels during trading hours on Tuesday, December 2021. The DXY shot up to 96.84 levels in the last week of November. Fear of the new Omicrant variant keeps the safe-haven currency in the forex market higher.
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