FX.co ★ EUR/USD: US dollar is searching for pros and cons upon Yellen's arrival, while euro is aiming for new highs

The goals of both the dollar and euro in the EUR/USD pair slightly changed. If earlier, the priority was to be in demand, now it is relevant only for the Euro. The US dollar is at a loss, weighing the potential advantages and disadvantages of Janet Yellen's arrival back in the government, who is the former Fed chief.

Most analysts believe that her term as Finance Minister will help the USD to regain its former confidence. As a result, the US monetary policy will become more predictable, which will positively affect the dynamics of the indicated currency. However, there are some problems here. Earlier, Ms. J. Yellen stated that the strengthening of the national currency increases the US trade deficit and hinders economic growth in the country. In this regard, experts do not exclude surprises during the period of J. Yellen's term as Finance Minister.

Any changes in the behavior of the US currency that will appear in monetary policy under J. Yellen carries certain risks. A lot of experts believe that the dollar's total weakening has begun in the financial world and it is difficult to answer how long this period will last, due to the inevitable difficulties with its dynamics.

Many market participants hope that with the arrival of the new Treasury Secretary, the US dollar will find a way to stop weakening. The euro, in turn, took advantage of the current situation in which uncertainty reigns. In view of this, it managed to increase its positions. However, its long-term growth was prevented by several factors, including a clear reduction in business activity in the Eurozone. Against this negative background, euro's growth slowed down, which negatively affected the dynamics of the EUR/USD pair. Today, the pair successfully broke the level of 1.1900 and is headed for new peaks. It is currently trading near the range of 1.1932-1.1933, looking for other levels.

Experts believe that now is the time to re-evaluate many financial measures. The authorities in several countries concluded that fiscal stimulus is not worth it, since central banks have reached a dead end, reaching the bottom of interest rates. As a result, the Fed has to keep printing money and keep yields at current levels. According to analysts, Ms. Yellen will continue to act in this direction, ensuring fiscal and monetary coordination. As for the long-term consequences of her tenure as Finance Minister, it will be unfavorable for the US dollar.

The US dollar's current decline, which will continue until next year, may be positive for other currencies. First of all, the euro will benefit from this, spreading upward impulses to the means of payment of other States.

On the other hand, Credit Suisse's analysts estimate that many emerging market (EM) currencies will gain confidence next year amid a weaker dollar. Experts say that some of them think that they will rise in the upcoming year. This investment company is also confident that the EUR/USD pair will rise to the level of 1.2500 by the end of 2021 amid a reduction in political and economic risks.

Nevertheless, they do not exclude a temporary growth in the dollar's price, which investors will turn to in search of a safe-haven currency. Analysts concluded that a similar situation is possible in case of increased market volatility or another surge in COVID-19.