| 21/01/2022 | 14/01/2022 | %Change | YTD | |
| Euro / LP | 1,706.56 | 1,723.95 | -1.01% | -0.12% |
| Euro / Dollar | 1.1320 | 1.1436 | -1.01% | -0.12% |
| NEER Index | 151.69 | 151.40 | 0.19% | 1.21% |
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 January 21, 2022.
The Lebanese Pound bounced back this week and it has been steadily improving following the decision of the Central Bank allowing banks to provide dollars at Sayrafa rate. In turn, the national currency ended up the week at the rate of 23,100 LBP/USD.
On a different note, it is important to mention that a draft for State budget has been discussed this week showing further fiscal deficit. The Government seems beat on increasing the revenues in order to minimize the gap to be accepted by the IMF, as it is an essential step towards final discussions. In fact, many obstacles remain other that a fair budget; foremost among them are the delays to crucial audits, need for fiscal reforms and a restructuring of the banking system.
Furthermore, Jordan is about to sign a deal with Lebanon and Syria to supply electricity under a U.S. backed regional plan to help the countries ease power shortages. Moreover, the USAID has granted an additional $40 M in humanitarian assistance for people affected by the socio-economic crisis and the pandemic in Lebanon as well as the UN has allocated also $6 M to the emergency response plan (ERP) for Lebanon.
In turn, the dollarization ratio for private sector deposits decreased from 80.09% in October 2021 to 79.96% in November 2021.
As for the Euro/LBP currency pair, the Euro depreciated against the dollar-pegged LBP with the currency pair going from last week €/LBP 1,723.95 to €/LBP 1,706.56 by January 21, 2022. Moreover, the Nominal Effective Exchange Rate (NEER) of the Lebanese pound increased weekly by 0.19% to stand at 151.69 points on January 21,2022.
International Forex Market
The Euro/USD depreciated against the dollar from last week €/USD 1.1436 to €/USD 1.1320 by January 21, 2022. The depreciation of the Euro is driven by the above-target inflation and wage growth. The road ahead the Euro currency remains tough and further depreciation might take place.
The explanation is related to the Federal Reserve’s and the European Central Bank’s stimulation program which is essentially creating money to purchase financial assets leading to serious increase in inflation rates in the US compared to less worrying one in the Eurozone. Adding to this, Fed declaration to increase interest rate while ECB is unlikely to do the same move is clearly giving a strengthening for the dollars currency over the Euro.
On a further note, fast economic recovery and political stability in the US also adds more point to the dollar currency. Meanwhile, Biden administration still has three years in office, by contrast countries in the Eurozone facing a period of political shakeups.
Commodities
Gold price increased by 0.62% at the end of this week to $1,833.64/ounce. In fact, increasing inflation in the globe is likely pushing gold price up as it could be used as an inflation hedge during this period. Elevated inflation and market pullbacks would likely sustain demand for gold as a hedge today.
Crude oil prices fall this week by 1.51% to $83.92/Barrel. Oil was following a fresh seven-year high due to increasing demand as demand is on track to reach pre-pandemic levels. In fact, demand looks resilient to the new variant of the pandemic as OPEC+ coalition struggles to revive output. In turn, consumption could be higher than production.