The new week may bring more surprises to the American and European currencies. By now, the euro has lost the lion's share of its gains, and the greenback has somewhat withdrawn, trying to distance itself from conversations about the upcoming de-dollarization.
The US currency resists endless statements about its collapse in the near future. At the same time, experts do not rule out such a scenario, but not in such a catastrophic form as many market participants imagine. According to analysts, the hegemony of the dollar is threatened by the emergence of a new global currency that will be used in trade operations between Russia, China and Iran. India may join this trade union.
The current strengthening of Western sanctions forces the "disgraced" states to look for ways out. One of them is the creation of a mutually beneficial trade union. Many countries, such as Russia, Iran and China, are trying to implement this option. States under sanctions can use the most appropriate currency in mutual settlements instead of USD. The implementation of such a scenario will negate the dominant role of the greenback. As a result, the global demand for it will drop sharply, experts are sure.
These issues will become relevant in the foreseeable future. However, now the greenback feels confident, taking advantage of the euro's weakness. On the morning of Monday, April 18, the US currency rose significantly against the European one amid expectations of an early rise in the Federal Reserve's key rate. The EUR/USD pair was near 1.0790, a critically low level of recent weeks. However, many analysts believe that in the medium term, the euro will recoup.
Experts believe that the reason for the aggressive short positions on EUR recorded at the end of last week is disappointment in the current European Central Bank strategy. Recall that the ECB, unlike the Fed, still remains cautious in its actions. At the same time, market participants were counting on a more hawkish rhetoric of the central bank against the background of tension in geopolitics. The existing dovish tactics of the ECB undermines the euro's position and reduces its potential in the medium and long-term planning horizons.
The current situation does not allow the euro bulls to recoup, who expected the ECB to accelerate the reduction of the asset purchase program. However, the ECB is in no hurry to tighten the monetary policy, and this keeps the market in suspense. According to analysts, the EUR/USD pair will remain under pressure amid a prolonged divergence in the strategies of the ECB and the Fed. At the same time, a possible ECB rate hike in July is unlikely to narrow the gap with the Fed regarding monetary policy.
Against this background, the US currency is the most attractive tool for investors. This is not hindered by the threat of a potential energy collapse that could paralyze the global financial system. According to experts, the rise in price increases the strengthening of the USD, giving the Federal Reserve carte blanche for a more decisive tightening of the monetary policy.
The US currency is supported by expectations of an early rate hike from the Fed. However, the greenback's current positions are a little shaken by statements about de-dollarization and the possible rejection of it in mutual settlements between Asian countries. Against this background, many large funds increased short and long positions on USD. Over the past week, short positions on the dollar have increased by 60%, and their volume has become the highest in the last seven months. The continuation of this trend contributes to the dwindling of the US currency, analysts are sure.
