Many analysts agree that the greenback will regain its position in the coming year. Experts are confident in the dollar's resilience and its ability to withstand any negative phenomena.
According to analysts of Morgan Stanley, the largest bank, the Fed will raise rates twice in 2022 and this will have a favourable effect on the dollar dynamics. The financial institution's currency strategists have updated previous forecasts, believing that the regulator will raise rates in September and December next year. Morgan Stanley's previous calculations suggested that changes in the Fed's monetary policy would not come before 2023.
According to analysts of the bank, after two rate hikes in 2022, the next round of hikes will start in 2023. It will be threefold (in March, June and December). Morgan Stanley calculates that each Fed hike will amount to 25 basis points (bp). At the same time, currency strategists expect a significant strengthening of the greenback and recommend long positions in the US currency against the European currency.
At the beginning of the week, the US dollar strengthened its position against the Euro. At the same time the Euro, which had traded in the range of 1.1310-1.1298 a day earlier, markedly dropped. On Monday morning, the EUR/USD pair was near 1.1286, struggling to find a balance.
According to experts, the EUR/USD pair is dominated by bearish sentiment, which prevailed at the end of last week. In the event of a breakdown of support at 1.1281, the pair will head towards 1.1239 and 1.1192. Alternatively, the EUR/USD pair could move within the 1.1281-1.1318 price range. A bullish scenario is possible in the case of a breakdown of the powerful 1.1318 resistance level, experts emphasize.
Investors are awaiting the next Fed meeting. It is scheduled for December 14-15. At the meeting, the nuances of further monetary policy will be discussed. According to market participants, the regulator will increase monetary policy requirements in 2022 and accelerate the pace of stimulus cuts. The reason for this is the overreaching inflation rate in the US, which has not been recorded since 1982.
According to experts, the current situation is favorable for further growth of the greenback. If the Fed strengthens its hawkish stance, the US currency could hit new highs. The recent comments of Jerome Powell, Fed Chairman, were instrumental in the strengthening of the dollar. The regulator is currently focusing on price stability and the overall inflation rate. In the opinion of experts, this is necessary to maintain high labor market activity in the US. The current situation is giving the dollar a head start over other currencies, encouraging investors to take a positive approach. Against this background, analysts are optimistic about the near future of the US currency, believing that the new year will provide it and the markets with some positive events.
