Line chart tracks trading regimes for euro, yen, and pound versus the dollar.
Left Y-axis: Yen per dollar (LHS); Right y-axis: Dollar/euro and pound (RHS, reverse scale); x-axis: 2018 – 2021
- Dollars per euro begin the period near 1.2 (Jan 2018) and end it at 1.16 (end of Q3 2021).
- Dollars per pound were at near 1.4 (Jan 2018) and were at about 1.35 (end of Q3 2021).
- Yen per dollar changes from just over 112 (January 2018) to over 111 (end of Q3 2021).
Dollar weak/strong points:
- Dollars per euro: near 1.25 (Q1 2018); near 1.1 (Q1 2020)
- Dollars per pound: near 1.4 (April 2018); near 1.2 (Q1 2020)
- Yen per dollar: over 114 (October 2018); near 102 (Q1 2020)
Sources: Bloomberg and Wells Fargo Investment Institute. Daily data from January 1, 2018 to September 30, 2021.
Key Takeaways
- We expect the euro to recover its losses versus the U.S. dollar in 2022, as U.S. growth slows to converge with the eurozone and as slowing bond purchases lead eurozone yields moderately higher.
- The yen may remain within recent relatively narrow trading ranges. The pound may recover if the U.K.’s successful vaccination program allows earlier economic normalization, but gains may later be offset by growing economic costs from Brexit.