The year 2022 has proven to be nothing else full of disasters for the global economy. It is after two years of the pandemic that its true impact is being felt all over the world.
Due to the pandemic, the entire world faced major setbacks and countries lost complete control over the supply chains, thus, the economies.
Even the countries with the largest economies and with the strongest currencies have started to feel the impact of the macroeconomic downfalls.
Countries such as the United States and the European region have taken most of the damage. These countries and regions were used to strong and thriving economies.
For them, inflation had been a once in multiple decades thing. Therefore, there is great panic and fear among the people living in these regions because they are now facing the worst economic pressure.
The pressure has been building up due to the constantly increasing inflation rates and other kinds of negative factors directly impacting the economic foothold.
Due to the economic downfalls, the USD and EUR have become quite unstable. Let us take a look at the latest happenings negatively impacting USD and EUR.
United States Dollar’s Performance
Although it may seem that the USD has been performing well in the forex market but in the future, its growth may become a problem for the country.
For years, the United States has remained a country with the strongest economy. Therefore, it did not take the increasing inflation rates very lightly and decided to deal with the situation very promptly.
Just as the oil prices rose and the inflation rates went up, the US Feds adopted a strategy to increase the interest rates with aggression to deal with the situation.
The Feds announced that if the data surrounding the country’s employment rates, consumer price index and other key factors comes positive, it would continue increasing the interest rates.
So far, things have worked out in favour of the United States where the NFP and the CPI data for the past few months have been positive.
Therefore, the Feds have continued hiking the interest rates to fight inflation. This, in turn, has increased the value of the USD versus all major currencies, including the basket (six) currencies.
For now, the traders may be flying high and jumping here and there in joy as the USD continues surging. But the situation may change once the inflation rates are under control and the Feds tone down the interest rates.
When that happens, the value of the USD would collapse significantly versus all major currencies such as the euro, yen, yuan, sterling, and many more.
Euro’s Performance
It can be considered that Europe has the second-largest economy and it is all thanks to Germany. Indeed, the country has the second-largest economy in the world, which has continued boosting the overall economy of the European continent.
Just like the United States, Europe is also plagued by inflation rates and although Europe adopted the same “interest rates hike” policy as the US, things did not go in favor of the EU.
For Europe, the oil rate hikes are not the only problem in the entire continent’s major problem is the energy crisis.
Europe is mainly dependent on Russia for its energy supply. As Europe has severed its relations with Russia, the country has reduced its energy supply to Europe, which is delivered through Germany.
Now the country is facing a crisis much worse than the US and it also had to take a U-turn in its interest rate hike policy.
This is the reason why the value of the USD is now higher than the EUR as the USD currently stands at €1.03.
As per the market experts, the USD has a much higher chance of making a recovery once it faces a decline. On the other hand, the EUR will need a lot of time until its value moves toward recovery.