As Sterling Stabilizes Against USD Euro Struggles with High Inflation

The forex market continues to show increased volatility, despite the effort from many countries to properly stop the value of their currencies from dropping. Even though many countries are trying their best to make sure that their currencies do not drop lower than a certain value, they are doing so at the cost of their foreign exchange reserves.

The only currency to really be thriving has been the US dollar, which has just now stagnated from a bullish run. But even during this stagnation, many analysts believe that the currency could continue to make gains.

Fortunately, various other currencies are starting to catch up to the US dollar, namely the UK sterling. The pound has been making serious gains against the dollar as it begins to stagnate. The surge in prices has the investors in a good mood, as all of them are starting to have faith in the market again.

However, while some currencies are making tremendous gains, others are starting to struggle under the best of times. The Euro in particular has been struggling as a result of the dollar surge, especially right now as inflation data from countries like Italy, France, and Germany was much higher than expected.

Inflation Data from the EU is higher than Expected

One of the first things that various countries are struggling with is the constant rise in inflation. Furthermore, the increased inflation leads to increased interest rates, which can eventually lead to various financial institutions having trouble growing or making better returns.

And as inflation currently shows no signs of possibly slowing down, the higher-than-expected inflation data coming out of the EU right now should not be coming as a surprise.

Italy in particular saw a major surge in its inflation rate, with its HICP rate increasing to 12.6% year to year, compared to the original 3.4%

Euro Continues to Struggle

The EUR/USD took a sharp turn as the forex market opened this Monday, reaching a new price of 0.994. Given that Italy was, the country that was hardest hit by the pandemic and the stay-at-home protocols, the country technically came to a screeching halt.

If the rest of the market reacts to the rise in inflation rates as badly as the Euro, then it is very likely that the rest of the market will continue to struggle to make something of a major recovery.

Is there Hope for the Overall Bearish Market?

The EUR/GBP market was similarly bearish, which goes to show that the entire market will likely be making a major comeback if things hold out well enough. If the macroeconomic conditions surrounding the market start to change, then it is also very likely to improve.

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