23.12.202108:35 Forex Analysis & Reviews: EUR/USD: Euro is in favor during the pre-holiday, but for how long?

The European currency continues to compete with the American one. This is clearly visible in the EUR/USD pair, where each of the pair's participants is acting in their own interest. The euro is in favor, but this victory may be temporary.

The US dollar was in the lead this week. It sometimes loses its position, but then recovers the previous losses. It was much more difficult for the euro, which had to struggle with a constant decline and most often unsuccessfully. In such a situation, the EUR/USD pair did not leave the range of 1.1250-1.1300, moving downwards.

But by the end of the week, the situation had improved. On Thursday morning, the EUR/USD pair was trading around the range of 1.1341-1.1342. The Euro currency has strengthened noticeably, despite a number of provoking factors, including the tense epidemiological situation in Europe associated with the spread of the Omicron strain of the coronavirus, and the ECB's delay in curtailing stimulus programs.

On Thursday, the US currency declines amid the growing optimism of investors about the outlook for the global economy in 2022. In this situation, the demand for safe-haven assets, primarily USD, is falling, depriving the latter of its fulcrum. At the moment, the euro is winning in the financial market. However, experts doubt that this will last long globally. Many analysts believe that the near-term prospects for the US dollar are much better than for the European one. This is supported by the Fed's actions aimed at tightening monetary policy in 2022. At the same time, the ECB is not in a rush with similar decisions, and this negatively affects the euro's dynamics in the medium-term planning range.

During the middle of this week, the European regulator made a hawkish note to the dovish mood of the monetary authorities. However, this short-term surge, hinting at the possibility of tightening monetary policy, did not affect the markets in any way. Similar inaction was caused by macro data on US GDP for the third quarter of 2021. It can be recalled that the indicator turned out to be better than expected: the GDP estimate was raised to 2.3% from the previous 2.1%. At the same time, the key index of consumer confidence (Conference Board) in December increased significantly from the previous 109.5 to 115.8, the highest level since July this year.

According to analysts, US GDP data were ignored for two reasons: they did not exceed market expectations, and the activity of most investors before the New Year and Christmas holidays has already decreased. At the same time, the positive market sentiment associated with the December increase in consumer confidence in the United States will be temporary. According to experts, the problem still lies in the threat posed by the Omicron strain of COVID-19 and the high level of "pandemic fears" that will negatively affect the January dynamics of the EUR/USD pair.