financetom
Euro-Dollar
financetom
/
Forex
/
Euro-Dollar
/
Euro / Dollar: Wells Fargo Forecast Dollar Strength in 2022 and 2023
News World Market Environment Technology Personal Finance Politics Retail Business Economy Cryptocurrency Forex Stocks Market Commodities
Euro / Dollar: Wells Fargo Forecast Dollar Strength in 2022 and 2023
Mar 22, 2024 2:17 AM

Image © Adobe Images.

The Dollar's run of strength that saw it dominate global FX markets in 2021 is not set to end soon, according to one of the largest lenders in the United States.

Wells Fargo say they anticiapte further Dollar strength in 2022 and in 2023, suggesting a long cyclical upturn for the currency is underway.

Forecasts for the year ahead show the Dollar's rally will push the Euro to Dollar exchange rate (EUR/USD) below 1.10.

"With the Fed having started the tapering of its bond purchases and expected to raise interest rates beginning in the second half of next year, given our revised outlook for Federal Reserve monetary policy, our outlook for the U.S. dollar has also evolved," says Nick Bennenbroek, International Economist at Wells Fargo.

"We now expect an extended period of U.S. dollar strength and see broad-based greenback strength through late 2023, compared to our previous forecast that U.S. dollar strength would only last into the early part of 2022," he says.

EUR/USD reference rates at publication:

Spot: 1.1318High street bank rates (indicative band): 1.0920-1.1000Payment specialist rates (indicative band): 1.1216-1.1260Find out about specialist rates, hereSet up an exchange rate alert, hereBook your ideal rate, hereThe Dollar has strengthened against the Euro through the duration of the year, with the strength accelerating in the second half of the year as investors grew increasingly confident that the Federal Reserve was moving towards raising interest rates.

"As the Fed and foreign central banks become more active over the next several quarters, we believe monetary policy differences will become increasingly important for currency performance during that period," says Bennenbroek.

"In fact, one prime example of how monetary policy divergence could be very consequential for currency performance is the ECB and the euro," he adds.

Wells Fargo finds that although the European Central Bank (ECB) has paid attention to quickening inflation trends across the region, it has so far expressed less concern about inflation pressures than most other major central banks.

ECB President Christine Lagarde recently said that the central bank expects Eurozone inflation to eventually recede and that if "we were to have any kind of tightening approach to the current situation, it would actually do more harm than good."

"That is consistent with our view that the ECB will taper its overall bond purchases only very gradually during 2022, and why we also expect the ECB to keep its Deposit Rate steady at -0.50% through 2022 and 2023 as well," says Bennenbroek.

It is this divergence between the outlook for ECB policy and a faster acting Federal Reserve that underpins Wells Fargo's revised forecast for the EUR/USD exchange rate to fall toward the lower end of a $1.05-$1.10 range.

Comments
Welcome to financetom comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
Related Articles >
EUR/USD and USD/JPY – Latest Sentiment Analysis
EUR/USD and USD/JPY – Latest Sentiment Analysis
Aug 16, 2024
EUR/USD and USD/JPY – Latest Sentiment Analysis Recommended by Nick Cawley How to Trade EUR/USD EUR/USD Sentiment Analysis Current positioning: 32.46% of traders are net-longThe ratio of short to long traders is 2.08 to 1Changes in positioning: Net-long traders: Up 9.28% from yesterday, down 17.58% from last weekNet-short traders: Down 10.10% from yesterday, up 15.36% from last weekInterpretation: The analysis...
EUR/USD and GBP/USD
EUR/USD and GBP/USD
Aug 29, 2024
EUR/USD Analysis Current Position: 30.60% of traders are net-long (buying)69.40% of traders are net-short (selling)The ratio of short to long positions is 2.27 to 1Changes in Long Positions: Increased by 20.19% since yesterdayIncreased by 44.60% since last weekChanges in Short Positions: Decreased by 5.87% since yesterdayDecreased by 3.33% since last weekMarket Interpretation: We generally take a contrarian view to crowd...
IG Client Sentiment Report: GBP/USD, AUD/USD Reveal a Common Flaw
IG Client Sentiment Report: GBP/USD, AUD/USD Reveal a Common Flaw
Aug 30, 2024
AUD/USD Overview: 37.84% of traders are long, with a short-to-long ratio of 1.64:1Long positions: ↑ 1.20% from yesterday, ↓ 12.53% from last weekShort positions: ↑ 1.79% from yesterday, ↑ 15.53% from last week Recommended by Richard Snow How to Trade AUD/USD Retail traders as a collective tend to be trend fighters, which is not optimal when markets are trending. The...
Sharp Rise in the Unemployment Rate Amplifies September Rate Cut Odds
Sharp Rise in the Unemployment Rate Amplifies September Rate Cut Odds
Aug 2, 2024
NFP, USD, Yields and Gold Analysed A disappointing 114k jobs were added to the economy in June, less than the 175k expected and prior 179k in June.Average hourly earnings continue to ease but the unemployment rate rises to 4.3%USD continues to trend lower as do US treasuries while gold receives a boost Recommended by Richard Snow Get Your Free USD...