The US dollar was somewhat in a bad state by the end of this week, but continues to be optimistic. Although it immediately declined after the results of the Fed meeting, it still recovered some of its losses.
On the morning of March 18, the price of the US currency increased in relation to other global currencies, primarily to the European one. Earlier, EUR rate declined to 1.1962 against the USD, which is lower than the previous level of 1.1978. At the same time, the EUR/USD pair started at the level of 1.1965, paving the way for a recovery.
Experts believe that the Fed's decision on the interest rate and the prospects for the US economy was the reason why the dollar sharply collapsed. It should be recalled that the regulator left the key rate in the previous range of 0-0.25%, confirming analysts' forecasts. In 2021, the leaders of the Federal Open Market Operations Committee (FOMC) expect to maintain the current rate level.
The Fed made a positive decision regarding the further development of the US economy. Experts emphasized that the regulator has significantly improved its forecasts for the US GDP growth rate for this year. Economists polled by The Wall Street Journal expect US GDP to increase by around 6% in 2021. If this comes true, economic growth will be the strongest since 1983 (it was 7.9%). At the same time, the calculations of the FOMC representatives imply that rates will remain unchanged until the end of 2023.
According to analysts, the US economy will expand by 6.5% this year against the previous forecast for US GDP of only 4.2%. However, the economic growth rate is expected to slow down to 3.3% in 2022 and to 2.2% in 2023. Based on the current estimates, the annual growth of the US economy will be around 2.3%. Meanwhile, the unemployment rate in the country is expected to decline this year from the current 6.2% to 4.5% (against 5% in the December forecast). The forecast for 2022 and 2023 is 4.2% and 3.7%, respectively. As for the US core inflation, experts proceed from the calculation of the level of 2.2%.
On another note, the Fed plans to continue the program of quantitative easing (QE) and buy up assets for $ 120 billion in the near future. At the same time, it is ready to adjust the current policy in case of risks that hinder reaching the employment and inflation targets. The US monetary authorities also intend to adhere to a soft monetary policy.
Technically, the US dollar is unfavorable of the current situation, which usually causes an imbalance in the EUR/USD pair. Earlier, the regulator said that it will continue the current strategy until there is noticeable progress in employment and in terms of price stability.