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17.03.202209:11 Forex Analysis & Reviews: Dollar finds calm after price swing

Exchange Rates 17.03.2022 analysis

The US currency habitually swung after the next meeting of the Federal Reserve, losing its balance for a short time, then returned to stability. The European currency, the greenback's rival for the EUR/USD pair, also feels quite confident

At the end of this week, the greenback managed to maintain its leading position, despite geopolitical tensions and multidirectional macro statistics from the United States. The greenback remained stable against the euro on Thursday morning, March 17. At the same time, the EUR/USD pair was trading in the range of 1.1028-1.1029, sometimes moving sharply down and rising again.

Exchange Rates 17.03.2022 analysis

The dollar showed similar price swings immediately after the Fed meeting. At the moment, it sank sharply, and then rose significantly while market participants evaluated the results of the central bank's decision on the interest rate. Recall that the Fed increased it to 0.25%-0.5% per annum. Experts consider this a positive factor for the US currency.

This year, the Fed is ready to start reducing its $8.9 trillion balance sheet. The decision on this issue will be announced at one of the next meetings. Currently, the central bank has slightly worsened the growth forecast of the national economy (to 2.8% year-on-year from the previous 4%). At the same time, the inflation rate was increased from 2.6% to the current 4.3%.

However, the current situation did not unsettle Fed Chairman Jerome Powell. He noted the relatively stable state of the economy and the strengthening of the US labor market. At the same time, Powell promised to make every effort to slow down inflation and stressed that the American economy "no longer needs an emergency monetary policy." According to the head of the Fed, the rate hike should have started earlier.

In the near future, the geopolitical factor will remain relevant, against which inflationary pressure may increase. The implementation of such a scenario will slow down economic activity in the United States, experts believe. The situation is complicated by the emergence and twisting of an inflationary spiral. Its essence is that against the background of constantly rising prices, citizens demand an increase in wages. As a result, companies have to increase selling prices for goods and services. According to experts, this problem will remain relevant throughout 2022.

An increase in the Fed's key rate may negatively affect the global economy. According to economists, the Fed will raise rates at least five times this year. This contributes to the further strengthening of the US currency. Most FOMC representatives expect seven rate hikes of 0.25% by the end of 2022. Six more are missing from this indicator, analysts say. Note that these increases in interest rates are taken into account in futures quotes. Against this background, the greenback retains the potential for further growth and strengthening.

Larisa Kolesnikova,
Analytical expert of InstaSpot
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