The dollar: what won't rise will fall (Daily analysis 13.01.2022)

13 Jan 2022 9:48|Bartosz Sawicki

Neither the tightening rhetoric by the Federal Reserve nor the new forty-year record of inflation in the United States worsened investment sentiment and supported the US currency.

The dollar is in a definite retreat. On paper, positive developments for the currency, such as the continuation of the central bank's shift towards a policy focused on fighting inflation and at the same time cyclical records of price growth (7 % year-on-year), are not becoming incentives to buy the US currency. On the contrary: it is losing value more and more sharply.

The EUR/USD exchange rate appeared above 1.14 for the first time since November. Not only did the quotations leave the multi-week fluctuation range with impetus, but they are also on the verge of breaking the multi-month trend of the US currency strengthening. If this were to happen, there would be room for a further increase of around 2%. This confirms our assumption that the highly inflated expectations of the Federal Reserve will become a burden for the dollar this year, which has exhausted its strengthening potential. We continue to forecast that one euro will cost 1.15 USD at the end of March.

13 Jan 2022 9:48|Bartosz Sawicki

This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without acknowledgement of the source is prohibited.

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