The US currency does not take self-confidence. Its financial potential is still huge, despite the refusal of a number of countries to settle in USD. Against this background, the euro has to be content with the role of a squire and support the power of the greenback. At the same time, the capabilities of the EUR are much inferior to those of its rival.
According to analysts, the geopolitical factor associated with the Russian-Ukrainian conflict will have a stronger impact on the euro's dynamics in the long term than on the USD. The latter has enough strength to withstand a prolonged negative impact, which cannot be said about its rival for the EUR/USD pair. As a result, the eurozone economy may suffer much more seriously than the US one.
The divergence in approaches to monetary policy between the Federal Reserve and the European Central Bank adds fuel to the fire. In this key issue, the gap between central banks is widening. According to experts, the ECB is slowly moving towards raising the interest rate, and the Fed has already raised it and intends to repeat these measures. As a result, the differential of monetary policy rigidity of the leading central banks increases, which further strengthens the US currency against the European one.
The protracted Russian-Ukrainian conflict confuses investors who behave very cautiously and prefer to invest in safe assets such as the dollar and gold. The current situation puts pressure on the EUR/USD pair. The classic pair has long left the 1.1100 high, and in the future could not stay near 1,1000. On the morning of Tuesday, March 22, the EUR/USD pair was trading at 1.0988, trying to return to the previous range.
The current geopolitical crisis has hit the European currency the hardest. Against this background, experts fear that the eurozone economy is sagging, which is desperately resisting negative effects. However, the euro does not have the same potential as the dollar, which, according to the apt expression of economists, the American authorities have turned into a global weapon. Against this background, the euro looks like a squire with a warrior and is forced to wear his combat accessories for a strong opponent.
The greenback uses his dominant position, rightly believing that it is not easy to find a worthy replacement for it. The current dynamics of USD can be characterized by the saying: "Dogs bark, but the caravan goes." The US currency is stubbornly making its way up, skillfully bypassing obstacles. Currently, there is no viable alternative to greenback. According to Jack McIntyre, portfolio manager at Brandywine, now is not the right time to "challenge the dollar." The global economy will not cope with this task, the expert is sure. As for the euro, yuan or Swiss franc, these currencies are well suited to diversify the investment portfolio, but not to replace the USD.
Earlier this week, on Tuesday, the greenback rose in price against other currencies amid an assessment of the comments of Fed Chairman Jerome Powell. Recall that the head of the US central bank spoke about the future prospects of US monetary policy. According to Powell, if necessary, the central bank will additionally raise the key rate. This statement provoked another rally in the US currency market.
Against the background of geopolitical tensions between Russia and Ukraine, the dollar is extremely popular among investors as a safe haven asset. This contributed to the growth of the USD index by 2.12%. The continuation of the geopolitical crisis increases concerns about the deterioration of economic and inflationary consequences for the global economy. The main blow will fall on the eurozone economy, experts are sure. The risks of negative impact remain both for the US economy and for the EUR/USD pair, whose immediate prospects are difficult to assess.
