According to analysts, there is a growing discord in the EUR/USD pair at the moment : the European currency is striving upward, while the American one is trying not to decline. At the same time, it is more and more difficult for the dollar to maintain its positions before the presidential elections, and the euro is successfully conquering the next peaks.
Having analyzed the current situation, currency strategists at Credit Agricole downgraded their forecast for the US currency. The reasons for this were fears about possible problems with COVID-19 in the United States and the probability of a negative scenario after the presidential election. At the same time, experts improved their forecast for the euro, noting a number of signs of economic recovery in the EU.
According to experts, a pool of assets with a high investment rating will be formed in Europe in the near future, thanks to which the demand for the single currency will increase significantly. Analysts say that this is very important both for the export-oriented economy of the European Union. The implementation of such a scenario will strengthen the economic prospects of the region and give new impulse to the EUR/USD pair. It can be recalled that the classic pair serves as an indicator of economic stability and the success of foreign trade of the countries of the European bloc.
According to the updated estimates of Credit Agricole, the EUR/USD pair may drop to 1.1800 by the end of this year and to the critical 1.2000 next year. The previous forecast called for the pair to run near 1.1500 by the end of 2020 and at 1.1300 in 2021. These figures are alarming, raising concerns about its possible collapse. At the moment, the situation is far from critical: on Monday, August 17, the EUR/USD pair is trading near the range of 1.1855-1.1856, occasionally leaving the range.
Credit Agricole believes that the clear and present danger is still hanging on the dollar. Experts thought that the reasons for this, besides the worsening situation with COVID-19, is the high probability of Joe Biden's victory in the US presidential election. If this scenario is implemented, the dollar will drop sharply, and American business will find itself in a difficult situation. According to experts, Joe Biden's victory will jeopardize further economic growth in the country. In such a situation, the Fed will maintain a soft monetary policy, which will make US assets less profitable for investors.
In any case, the European currency will win. It is supported by both the existing balance in the EUR/USD pair and the possible alignment of forces in the event of the implementation of the anti-dollar scenario envisaged by Credit Agricole. According to a number of analysts, the strengthening of the "European" in relation to the "American" one can help increase imports by the European Union and further economic strengthening of the European bloc.
Many experts draw attention to the fact that the COVID-19 pandemic has become the catalyst for the active growth of the European economy. It gave an economic advantage to the Euroblock countries and formed a positive link between the EUR/USD pair and current economic indicators. Force majeure helped the EUR/USD to rise, strengthening its link with the trade and economic performance of the EU countries. At the moment, the EU economy has a positive trade balance, a decline in which will negatively affect the dynamics of the euro. On the contrary, experts say that the increase in the trade balance will lead to the strengthening of the euro in relation to the dollar.
Analysts note the growing power of the single European currency in the export-oriented EU economy. Thanks to this, the competitiveness of European exports is increasing, which is very important in the context of the COVID-19 pandemic. The strengthening of the EUR/USD pair allows European countries to acquire an impressive amount of cheaper imports. As a result, production costs decline and GDP, exports and the EU trade balance increase.
The strengthening of the EUR/USD pair increases the purchasing power of the euro, which is very important in conditions of weak economic activity and a decline in real incomes of the population. This allows you to find a balance between consumption, savings and investment in the euro area. A stronger European currency could help the ECB and European leaders implement sound monetary and fiscal stimulus amid the pandemic. According to experts, the growing power of the EUR/USD pair will become a driver for the recovery of the EU social sphere, as well as the external and internal economy of the eurozone.