What is the USD dollar’s future trajectory in 2022?

The essential thing to remember about forecasting and projections is that they may assist you in preparing for a variety of different situations. By planning ahead of time, we may enhance our capacity to regulate our emotions and make better judgments if we can “just” avoid being obstinate.

What will be the US dollar’s movements against other major currencies in 2022? Is there any chance of a rise in the dollar rate? We address these issues by examining the most recent expert forecasts and examining the factors to consider while trading the US dollar.

Factors indicating a possible growth for USD Dollar

According to one of the top lenders, in the United States, Wells Fargo,  the Dollar’s recent run of dominance, which saw it dominate global foreign exchange markets in 2021, is not expected to end anytime soon. Furthermore, it is estimated that the Dollar will continue to strengthen in 2022 and 2023, indicating that the currency is amid a protracted cyclical upturn. However, with Covid still in its early stages and the Omicron variation offering additional challenges to the global economic recovery, the dollar’s return in 2022 is far from certain.

Notwithstanding the lingering uncertainty around the Omicron variant and the continuous volatility, there are several reasons to be optimistic about the US dollar. With a robust economic recovery on track, monetary tightening to combat significant inflation worries, and excellent job figures, a positive mood toward the dollar is expected to persist throughout the new year.

When comparing October to September, sales at department shops increased by 2.2%, sales at electronics stores increased by 3.8%, and sales at online retailers increased by 4%. While these data provide strong evidence that the United States economy is increasing, it is crucial to highlight those greater inflation levels have a distorting influence on sales figures. Furthermore, sales in the United States increased by 1.7% in November, a considerable increase above the predicted by experts.

Furthermore, the unemployment rate declined by another 0.4% in November, bringing the overall rate down to 4.2%. New employment statistics released by the United States Department of Labor in early December suggests that the labour market is continuing to improve.

USD Dollar vs EUR and GBP

The US dollar is expected to continue to gain momentum versus the Euro until 2022. The EUR/USD exchange rate is predicted to decline to 1.10 by the end of 2022, according to ING. Perhaps the only scenario that would result in a considerably higher EUR/USD in 2022 is a robust global recovery, a eurozone renaissance (like in 2017), and a dovish Fed. With supply chain disruptions projected to exert downward pressure on GDP in manufacturing-heavy Europe next year, such a scenario seems improbable.

GBP bears also note the contentious relationship between London and Brussels and the likelihood of the EU-UK Trade and Cooperation Agreement collapsing. ING forecasts that the GBP will similarly lose value versus the USD by 2022. According to ING’s estimates for the more common GBP/USD cross rate, which indicates the amount of dollars required to purchase one pound, the exchange rate is predicted to decline from 1.36 at the end of 2021 to 1.34 at the end of 2022.

So, what is in store for the USD Dollar?

Nonetheless, it is still quite hard to predict what will happen to the US dollar in 2022. Despite these generally encouraging findings, the appearance of Omicron may jeopardise the recovery’s ability to persist. This, in turn, might influence the US dollar projection for 2022, as the US dollar continues to be exposed to significant levels of volatility. In light of this, both ING and Goldman Sachs provide positive projections for the US currency.