The dollar is still stuck in the financial pit. The greenback fell to an 8-month low on Thursday, once again yielding to the euro. Market participants expect the USD to rise after the release of US macro data, but some doubt the greenback's success.

The US currency weakened against other world currencies on Wednesday evening, January 25, ahead of the US GDP report. According to preliminary forecasts, the data for the fourth quarter of 2022 may show a slowdown in economic growth in the country. According to analysts, the figure slowed to 2.6% on an annual basis. Note that in the previous quarter, US GDP grew by 3.2%.

In anticipation of important events related to the release of reports and central bank meetings, the dollar approached its eight-month low. A gloomy US corporate earnings season and growing recession fears in the United States added more fuel to the fire.

EUR/USD is under pressure. On Wednesday, January 25, the pair had to overcome the resistance zone near 1.0900. On the morning of Thursday, January 26, EUR/USD traded around 1.0914, trying not to slow down.

In the current situation, the euro won against the dollar. EUR/USD continues its uptrend, the euro bulls need to jump over the recent high of 1.0926. Rising above this level will allow the euro to test the peak of 1.0936, recorded in April 2022. According to analysts, a breakthrough will open the way to the psychologically important 1.1000 mark.

Many analysts pay attention to the dollar's prolonged decline, which is due to fears over the recession in the United States. Recall that such a scenario implies a prolonged economic downturn. Against this background, investors do not expect the Federal Reserve to pause in the process of aggressive interest rate hikes. In addition, Wells Fargo economists recorded a number of signs the U.S. economy may be slowing. According to them, "with the Fed no longer leading the charge on interest rate hikes and U.S. economic trends set to worsen, we now believe the U.S. dollar has entered a period of cyclical depreciation against most foreign currencies."

However, the greenback will not give up, but expects to get support from the Fed after the central bank meeting, which will be held next week. The results of the event will be published next Wednesday, February 1. Experts believe that the US GDP data will influence the central bank's further decision on monetary policy.

Prior to the meeting, markets have priced in a 25 bps interest rate hike. This is slightly lower than last year's hikes (by 50 bps and 75 bps). In addition to the Fed, the Bank of England and European Central Bank will hold meetings next week. Markets expect them to deliver 50 bps rate hikes. The ECB is seen most likely to remain hawkish. According to Kiwibank economists, the situation is quite favorable for the euro. The reasons are relatively mild winter in the eurozone and low probability of the spiral of energy crisis. As a result, "a warm winter in the EU prolonged the summer of the European currency," analysts said.

The current situation is not too positive for the greenback, but in the medium term USD dynamics will improve. Goldman Sachs told clients it sees a 35% chance of a US recession in the next 12 months. The experts expect a "soft landing" for the U.S. economy and further growth of the dollar. Goldman Sachs believes that inflation has already reached its peak, so there is no reason to worry. At the end of 2023 - the beginning of 2024, experts expect inflation in the range of 2% to 3%. At the same time, experts fear chaos in the global market, which may provoke a tightening of financial conditions and increase downward pressure on economic activity.