|Euro / LP||1,740.74||1,759.35||-1.06%||-5.34%|
|Euro / Dollar||1.1547||1.1671||-1.06%||-5.34%|
Lebanese Forex Market
To-date, the Lebanese Pound (LBP) remained steady within the official range of USD/LBP 1,514 to 1,514.5, with a mid- price of USD/LBP 1,514.25 in the week of October 8, 2021.
This week, the national currency depreciated against the dollar in the parallel market and reached approximately USD/LBP 19,000 by week ending October 8, 2021. The devaluation of the national currency against the dollar could be explained by the excess demand for the foreign currency in the parallel market, amid the decision of BDL to decrease its share of subsidizing the essential goods like oil and gaz. Moreover, the government is preparing for the negotiation with IMF, while the unification of the exchange rate is one of many difficult requirements imposed by the latter. Our outlook for the Lebanese economy remains uncertain, as these negotiations may face many political and social obstacles.
In turn, the dollarization ratio for private sector deposits decreased from 80.37% in December 2020 to 80.21% in July 2021.
As for Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1740.74 to €/LBP 1759.35 by October 8, 2021. Moreover, the Nominal Effective Exchange Rate (NEER) of the LBP slightly increased weekly by 0.31% to stand at 142.65 points on October 8, 2021.
International Forex Market
The Euro/USD depreciated against the dollar from last week €/USD 1.1671 to €/USD 1.1547 by October 8, 2021. No doubt that the devaluation of Euro against the greenback is related to the high inflation rate in Europe. The Pandemic Emergency Purchase Program (PEPP) may back fire on the European economy, as the expansionary monetary policy adapted by the ECB has increased inflation rate.
Gold price slightly increased by 0.31% at the end of this week to $1,759.76/ounce, despite a strong US dollar. Our outlook for gold is negative, as we expect that the price of gold will retreat amid the coming weeks, amid positive expectation on US job data that will be released soon.
In addition, Crude oil prices increased this week by 5.74% and recorded $82.47/Barrel. In fact, the steady increase of the black gold is understandable amid supply shortages and the increase in global demand as the world economy recovers from the pandemic. However, this huge increase in its price from 16$ per barrel on April 2020 to more than 80$ on October 2021 may not be its own making, as the political monetary adopted by several central banks in different countries may have contributed on the increase of an international inflation rate.
This week, a gas crisis has occurred amid a political conflict between Russia and most of the European countries including UK. Russia did not deliver a sufficient volume of gas to north-west Europe as Russia considered the biggest supplier to Europe. Russia may be putting pressure on its western partners in order to speed up approval for the controversial Nord Stream 2 pipeline and the problem was compounded by container and supply bottlenecks.