FOREX-dollar is reaching a 20-year high, while euro struggles
FOREX-dollar is reaching a 20-year high, while euro struggles

As investors braced for a busy week of central bank meetings, including a possible Federal Reserve interest rate hike, the dollar maintained at a 20-year high on Monday, while the euro struggled around the USD1.05 mark.

Trading was calm because markets in Asia and London were closed for public holidays. Investors expect the Federal Reserve to raise rates by 50 basis points when it meets next week, and the question is how hawkish Fed Chair Jerome Powell will sound in his post-meeting remarks.

As the Federal Reserve struggles to rein in surging inflation, markets are pricing in a flurry of rate hikes. This, combined with expectations of a far slower rate of External Commercial Borrwoings (ECB) tightening and concerns about the impact of the Ukraine war on the eurozone economy, has driven investors racing for dollars, leaving the euro at levels last seen in 2017.

In April, the dollar index rose 5%, its greatest monthly performance since January 2015. "We expect the dollar to remain strong against the euro, owing to a hawkish FOMC [Federal Open Market Committee] posture and geopolitical concerns. Short-term traders may choose to sell EURUSD rallies above USD1.08 "In a research note, UBS Global Wealth Management strategist Thomas Flury and senior U.S. economist Brian Rose wrote.

They have decreased their euro/dollar projections to USD1.05 for June, USD1.06 for September, USD1.08 for December, and USD1.10 for March 2023, down from USD1.11 previously. The dollar index was last seen at 103.19, down slightly from its previous close. At USD1.0555, the euro was up 0.1 percent.

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