“The dollar could fall short against the euro and the main currencies”: and the prevailing prediction of many experts who trade forex currencies. On the world foreign exchange market on average the turnover, according to the Bank for International Settlements, amounts to $ 5.1 trillion a day, or $ 210 billion an hour. The US currency is the absolute protagonist.
Compared to 2016, the data referring to 2019 are up by 30%. However, it is not easy in this whirlwind of exchanges to be able to predict future trends but, at the moment, the most popular opinion of observers is that the dollar should lose ground and also quickly.
The reasons for this estimate are different. First of all, and above all there is thevery high US fiscal deficit, which sooner or later will have to be refinanced. Then inflation that with the rapid recovery of the American economy begins to be seen with increasing intensity. Hence the fact that, once the pandemic is over, the dollar may no longer be considered a safe haven currency. According to expert estimates, the euro / dollar exchange price could be between 1.23 and 1.25 at the end of the year or even exceed it.
And this not only because of the “weakness” of the American currency but for the strength of European politics which, finally, strongly supports important economic recovery programs. The Recovery Plan, which alone will give something like 220 billion in loss funds and loans to Italy, is a powerful and concrete example of this.Many opinions agree that this time Europe, more than the United States, will soon attract capital to European equity funds, the main beneficiaries of the current revaluation.
The euro could thus become a player on the market again. The yuan, the Chinese currency, has not been so for some time and can be considered a reserve currency. According to many observers, however, the appreciation of the yuan against the dollar will continue throughout 2021, from 6.35 yuan per dollar in the second quarter of the year to 6.25 at the end of the year. A strengthening that could last until 2022.
For the GBP forecasts, on the average, are not so optimistic. The economic recovery in the UK may be faster than in Europe with Scotland appearing to have calmed down in its demands for independence at the moment, but the balance of payments and fiscal deficit are similar to America’s. These factors could penalize the British currency.
In short, in this understandable chaos perhaps Europe, which has finally “opened the purse strings”, it could economically strengthen its currency. And perhaps this is the only positive note after the Coronavirus drama.