Fundamental Analysis for March 9/10 2022

As investors ditched safe-haven assets in favor of stock allocations, the dollar index bottomed around the 98 mark, moving away from a nearly two-year high of 99.40 reached earlier this week. The most active selling was against the euro, which was sparked by news that European Union members were considering issuing a joint bond to fund energy and defense spending. All eyes are now on the February US inflation report, which might impact the rate at which the Federal Reserve tightens. With tensions between the West and Russia over Ukraine clouding the outlook for policy, the ECB meeting on Thursday will be a crucial driver for the foreign exchange market.

Comment:

The dollar index bottomed around the 98 level, moving away from a nearly two-year peak of 99.40 touched earlier this week as investors dumped safe-haven assets in favour of equity allocations. The most pronounced selling activity was against the euro, a move triggered by reports that European Union countries were discussing common bond issuance to finance energy and defense spending. Now, all eyes turn to the US inflation report for February, which might influence the pace of Federal Reserve tightening. The ECB's meeting on Thursday will also be a key driver for the foreign exchange market, with tensions between the West and Russia over Ukraine clouding the outlook for policy.

Forecast for the Future

According to Trading Economics global macro models and analysts' expectations, the US dollar will trade at 96.06 by the end of this quarter. Looking forward, we estimate it to trade at 97.33 in 12 months' time.