In recent months, the US Dollar has become the markets’ favorite safe haven but when the global economic recovery arrives it could well prove to be the leader on the way up too. As mentioned earlier, traders are confident that the currencies of countries that are ahead in vaccinating their citizens against the coronavirus, like the US and the UK, will be the first to recover economically from the slump caused by the pandemic.
That means central banks like the Federal Reserve and the Bank of England will also be the first to begin tightening monetary policy, perhaps while the European Central Bank is still considering a rate cut to boost activity.
This is all bad news for EUR/USD, which is now back to where the ECB would prefer it to be and could conceivably drop to the lows around 1.16 last seen in early November – though not, of course, in the short-term.
