Forex and Cryptocurrency Forecasts for 2022
EUR / USD: first down, then up
The global economy is recovering from the effects of the COVID-19 pandemic, and this process will continue into 2022. At least. The forecast for global GDP growth of 6% is maintained this year. Growth will continue (barring further “surprises”) at around 5% next year, according to preliminary forecasts. However, this is an average indicator, and it is the difference in the recovery rates of the economies of different countries that will affect the rates of their national currencies.
You can see quite different vector behavior from the EUR / USD couple since the start of the pandemic. Having started at 1.0635 in March 2020, the pair was already at 1.2350 in early January 2021. The weaker dollar was affected by the intense pumping of the US economy with a huge mass of dollars as part of the monetary stimulus (QE) policy implemented by the US Federal Reserve.
With the start of a new 2021 and the arrival of the administration of new President Joe Biden to the White House, the market has a sense of greater stability and the impending end of QE. Especially since the macroeconomic indicators, in particular inflation and the recovery of the labor market, were encouraging. The dollar gained muscle and the EUR / USD the pair fell to 1.1700 at the end of March.
But the conciliatory sentiment prevailed among Fed leaders, the pumping of the economy with money continued, the start of the reduction in the quantitative easing program was postponed indefinitely and we couldn’t even think increase the base interest rate. And the pair broke the psychologically important 1.2000 level again, reaching the high of 1.2265.
The competition between central banks in Europe and the United States certainly did not end there. But while the ECB’s rhetoric remained accommodating, statements from some Fed executives were already ringing on a harsh hawkish note. Investors have started to expect the Fed to start canceling QE at the end of this year and complete it in 2022, in order to start raising the bank rate in early 2023. And the dollar has gained ground again, bringing the pair back to the 1.1700 area.
At its September meeting, the US regulator did not announce any specific plan to reduce the monetary stimulus program. But, if the decision-making dynamics remain the same, the Fed will lead the ECB by about six months.
Based on this, many experts predict that the dollar will continue to strengthen in late 2021 and the first half of 2022. In this case, the pair will continue to move south, first to support 1.1500 and then to 1.1200. Some particularly zealous bears are predicting the pair will even drop to March 2020 lows.
As for the second half of 2022, according to a number of forecasts, the US economic situation will stabilize, while the âslowâ euro zone will, on the contrary, begin to accelerate. A reduction in the European QE program and an increase in the euro interest rate could reverse the trend and bring the parity back to the 1.1700-1.2000 zone.
It is clear that the dynamics of the couple depend on many factors on both sides of the Atlantic Ocean: political, economic and, in recent years, epidemiological. Another major player is China, which also has a strong influence on the economies of the Old and New Worlds. Therefore, it should be understood that everything that is said is based on a view of the current situation, and can (and should be) subject to many adjustments over the coming months.
Cryptocurrencies: virtual and real gold
While there is a rough understanding and political and economic rationale for forecasting with the major EUR / USD currency pair, things look a lot more complicated when it comes to cryptocurrency. Despite assurances from influencers, this market looks more like the epicenter of mass speculation over the past 1 to 1.5 years than a reliable investment platform. The year isn’t over yet, but bitcoin has already managed to jump from $ 28,550 in January to $ 64,800 in April, then crashed to $ 29,300 in July, then repeated that rally, but on a slightly smaller scale.
The rate of BTC / USD The pair can be swayed not only by the decisions of U.S. regulators and the Chinese government, but even by the mood Elon Musk woke up in. One of his tweets can make you a millionaire or tear you to the bone. This is why NordFX Brokerage gives its clients the opportunity to make money not only on growing but also on falling cryptocurrency rates even without having a single token in stock. Why take the risk of buying bitcoin and then reselling it? After all, you can just open a sales business right away.
No one knows exactly how much the benchmark cryptocurrency will cost. Expert opinions vary widely. Some, like Standart Chartered, see $ 100,000 by the end of this year, and some predict an increase to $ 100,000, but only by the end of 2022. And some, like Nobel Laureate Robert Schiller , are sure that this bubble will burst. soon, burying the two trillion more dollars that investors have invested in this market.
Much will depend on the recovery of the US economy, the pace of the end of the monetary stimulus (QE) program, the outlook for the Fed’s interest rate hike, and the dynamics of Treasuries yields. These are factors that can drastically reduce the risk appetite of institutional investors and lead them back to more familiar financial instruments.
For ethereum, the forecasts of Standard Chartered experts are as favorable as for bitcoin and look very optimistic. A range of $ 26,000 to $ 35,000 per coin was announced in an interview with Reuters. But that’s not the limit either, especially if the bitcoin rate approaches $ 175,000 by the end of 2022.
According to a report by the major investment bank Goldman Sachs published in Forbes, the basic cryptocurrency is fortunate to lose its leadership position, giving way to ethereum. Goldman Sachs believes that the main reason for the popularity of the main altcoin is the ability to build new applications. And also the fact that many financial instruments can be replaced on the basis of its platform. This includes, among other things, loans and other banking transactions.
As for real and non-digital gold, many experts believe that this precious metal has not yet exhausted its growth potential in 2022. They do not rule out that the XAU / USD The pair could break the August 2020 record and hit $ 2,200-2,300 an ounce. However, the evolution of the price of this reserve asset will also depend on the willingness or unwillingness of investors to take risks, as mentioned above.