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Euro Trading at Just Off Two-Decade Lows

Hillary Opondo Jul 14, 2022

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The slight pullback in the US dollar value allowed the euro to edge away from its two-decade lows. This decrease comes amid recession fears and surging energy prices. Nonetheless, all other risky assets like the euro attained a gradual gain. Investors still grappled with a possible pause in interest charge hikes and recession risks

The forex market volatility has sustained its high levels at 11.2 percent since late March 2020. These stats reflect a nervous forex market as investors focus on the equivalence between the dollar index and the single currency. Most forex analysts believe parity is within the markets, and investors should be wary about it. The euro increased to 1.02 by 0.2 percent after striking a two-decade 1.01615 low.

The Deutsche Bank’s global forex research team clarifies that if the US and Europe fall into a recession during the Q3 trading period, it may attain the 0.95-0.97 EUR/USD levels. This case could be more evident if the Federal Reserve keeps hiking rates. In any case, the dollar index measures the exchange rate against six counterparts. Yet, it slipped from its 107.27 peak to 106.88 by 0.2 percent, a record level since 2002.

On the other hand, commodity-linked exchange rates strengthened while copper prices increased. Red metal investors were reluctant to stake following recession fears that resulted in the lowest level for the last 20 months. The Australian dollar rose to o.6822 by 0.7 percent against the US dollar. This exchange rate comes after it attained its level of 0.6762 in May 2020.

The Swiss Franc hovered above the 0.9872 highest level in six years against the euro. Analysis indicates that the Swiss central bank is more likely to tighten its policies after inflation rose above the SNB (Swiss National Bank’s) 0.2 percent range since March. In any case, the bank hiked its interest rates policy for the first time in a decade.

For that reason, the Swiss National Bank is prepared to rally around its Swiss franc's strength on the markets and chop off imported inflation. Most importantly, the US dollar weakened against the Britain pound despite uncertainties among crucial UK cabinet members. The sterling increased to 1.1977 by 0.5 percent. It rose at 85.21 pence by 0.2 percent against the euro.

Conclusion

Analysts explain that broader economic concerns on global recession impacted the pound more than the political turmoil in Britain. Commodity-linked currencies strengthened, but the heightened recession fears and the nervous market implied volatility. 

Copper prices climbed despite the surging energy prices fanned recession fears and interest rate hikes. George Saravelos, global head of forex research, explained that Britain's political turmoil had less impact on the euro just off two-decade low volatility. Above all, the Swiss national bank's and Deutsche bank are determined to curb inflation.

Hillary Opondo

All the content is provided for general information only and trade signals should not be construed as any form of regulated advice. It does not take into consideration your personal circumstances, including your investment objectives, risk profile, tax status, knowledge and understanding or financial situation. Past performance is no guarantee of future results.