The world was turned upside down by the coronavirus pandemic and over the course of 2021, the situation has changed dramatically for many countries in Europe.
Of the countries who use the euro as their main currency, France was the hardest hit by COVID-19, recording a total of 7.39 million cases. Recurrent lockdowns and closing of borders meant that many economies were almost completely dormant, causing unemployment to rise and interest rates to fall, negatively impacting the value of the euro.
When learning what is forex trading and how does it work, it’s important to research the factors that can affect the performance of a currency pair, to plan ahead for future events that could cause prices to fluctuate.
Prices in the forex market can change quickly and with effective planning, you can manipulate short-term fluctuations in prices to make gains on your investment.
This article however, is concerned with the long-term difference in value of the euro, from January to November, considering how the reopening of European economies and a return to normality has affected the currency’s performance.
The euro — January 2021
January was a cold, dark month for the majority of countries in Europe. Submerged in the depth of winter and in a pandemic, the outlook was bleak since many countries were facing strict lockdown restrictions including border closures.
This meant that citizens were forced to stay inside their homes, travel only for necessary purposes and stay away from other people as much as possible. Economic activity was at an all-time low in Europe, with sectors like hospitality and retail being the hardest hit.
Many individuals had been made redundant and most companies were not hiring new employees, meaning unemployment rates remained extremely high in many countries in the EU.
Although the situation in January was anything but bright, the future began to look more hopeful, as the first coronavirus vaccines were approved in this month. This meant that plans were made as to how the inoculations would be distributed in Europe, and people could begin to feel more optimistic about a future return to normality.
This optimism saw the euro increase in value, recording its highest price point since January 2018, with the euro to US dollar (EUR/USD) exchange rate sitting at 1.2122.
The euro — November 2021
On the surface, many EU countries seem as though they are revelling in their return to normality — with bars open, streets bustling and people enjoying normal socialisation once more. However, in reality, many European countries have been hit by a fourth wave of the virus, with hospitals once again inundated with COVID-19 patients.
The World Health Organisation revealed that infection rates had risen by 7% in Europe and the death toll had increased by 10% in a single week. This meant that almost two-thirds of all new infections globally existed in Europe, and although deaths and hospital admissions are far lower than in 2020, the fourth wave has raised extreme concern in the continent.
Many countries have already begun to impose restrictions in an attempt to curb transmission rates, with the Netherlands being the first western European country to impose a partial lockdown in response to the fourth wave.
In addition, France is rallying to provide more individuals with a booster vaccine and Berlin has prevented unvaccinated citizens from visiting restaurants.
As a result of the COVID-19 concern that’s circulating in Europe, the euro’s value dropped significantly and the EUR/USD currency pair was trading at 1.1313 in mid-November.
When comparing the performance of the euro in January and November, it’s evident that market sentiment has been significantly impacted by the future outlook for European nations, with regards to the coronavirus pandemic.
Despite being deep in lockdowns and enforced restrictions in January 2021, the approval of vaccinations caused traders to become hopeful that economic activity would begin to resume.
In comparison, the majority of European countries have had their lockdown restrictions lifted and are living freely in November. However, the threat of the fourth wave of the virus could mean that these limitations will need to be brought back, putting a hold on the economic recovery of some European countries.