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The US currency ends the year with growth, surpassing the European one once again. However, it is too early to call the latter an outsider, since it has a chance to recover. At the same time, the US dollar is taking advantage of the moment, rising in price on the wave of risk appetite.
Currently, the market is dominated by risk sentiment amid easing concerns over new strains of COVID-19. On Wednesday morning, the EUR/USD pair traded slightly in the green zone. The pair was moving around the level of 1.1305. According to analysts, it will remain in the range of 1.1290-1.1320 until the end of the year.
The moderate increase of the US dollar is due to the decelerating fears about the state of the US economy after the quarantine restrictions were lifted. The US currency was supported by positive news about Omicron, as the national medical regulator, CDC announced the stabilization of the situation with the new strain. In view of this, analysts say that the prospects for the US economy have improved.
In the coming months, the dynamics of the USD will be shaped by the market expectations about the tightening of monetary policy. The Fed's monetary policy is at the forefront, due to which the current trend towards the US dollar's strengthening will continue. According to preliminary estimates, the EUR/USD pair will reach the level of 1.1000 in early 2022. This is facilitated by high inflation rates and the expectation of a tightening of the Fed's monetary policy.
Experts admit a slight slowdown in the pace of USD strengthening, but its price will continue to rise, relying on the power of the national economy. According to experts, the US economy is actively recovering, demonstrating high growth rates and attracting the attention of investors.
Analysts are sure that the US dollar will maintain its status as the No. 1 currency on a global scale, and this situation will remain in the medium and long-term planning ranges. Meanwhile, the European currency will remain on the sidelines in 2022, but it is not in danger to be a long-term outsider. Experts expect the euro to weaken amid the ECB's soft monetary policy and the aggravation of the alarming situation on the European gas market. At the same time, analysts are not in a rush to abandon the euro, which did not reach the bottom although it sharply collapsed.
The currency strategists at the UBS bank expect the US dollar to strengthen in 2022. It will continue to rise in the near future, despite the growing US national debt, as the regulator will accelerate the curtailing of the quantitative easing (QE) program.
"The US dollar will strengthen its position as the Fed moves to tighten monetary policy ahead of other central banks," - UBS emphasized.
The last main event for investors ahead of the New Year will be the weekly statistics on the US labor market, which will appear on Thursday, December 30. According to preliminary estimates, the number of applications for US unemployment benefits over the week increased to 208 thousand from 205 thousand a week earlier. At the same time, experts believe that possible negative news will not affect the dynamics of the US dollar.
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