The once-lacking volatility among major currencies is back again, and this time it is the remarkably steady US Dollar which is creating a gulf between itself and some of its peers on the other side of the Atlantic.
This morning, the US Dollar rose in value against the Euro and British Pound so significantly that it plunged the Euro and British Pound to sudden lows, with the Euro hitting its lowest value against the US Dollar in over a month, and the British Pound hitting its second lowest point in over a month against the greenback.
The sudden upsurge of the US Dollar against these two majors is quite fascinating, and demonstrates the US Dollar’s continued strength despite the precarious economic and geopolitical circumstances that surround the United States.
This morning, the British Pound headed down to 1.20 against the US Dollar, and the Euro to 1.07.
The United States has been faced with similar economic challenges to those faced by Europe over the past two years, and in some cases has had greater difficulties such as higher inflation this time last year, before it subsided in November 2022, and even more stringent lockdowns and involvement in geopolitical instability than some parts of Europe.
Despite this, the US Dollar has held up extremely well, and now that the inflation level in the United States is back to 6.5% and has been for some momnths compared to double figures in the United Kingdom and Europe ranging from 10% in the western European nations to over 25% in some of the Baltic states which are European Union members, things continue to improve for the Dollar.
It may appear that the lower US inflation figure compared to that of Europe and that of the US a few months ago is a good thing, but this has caused higher costs for large corporations in the United States who have to continue to pay more for supplier contracts or to operate their subsidiaries in Europe, leading to lower revenue figures for many.
The US involvement in the ongoing Ukraine war is also a huge cost, and potentially destabilizing factor, however despite having spent over $100 billion on it, plus pledging to escalate the situation by sending more munitions and last week’s revelation by an American investigative journalist that the Nord Stream explosion which occurred in November 2022 was allegedly the work of the US armed forces, the Dollar continues to grow.
Whether its overall stability compared to European and British currency is artificial, or whether the US economy is genuinuely less encumbered than that of mainland Europe or Britain is debatable – however this level of volatility in the light of such unusual times is of great interest within the currency markets.
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