Forex Traders Must Brace For Volatility In 2022 | investing.com – Investing.com

Forex Traders Must Brace For Volatility In 2022 | investing.com – Investing.com

It has been an exceptional year for the US dollar, which defied all the doom and gloom predictions to gain more than 10% against the Japanese yen. The resurgence of inflation has turned the tables with many central banks hitting the brakes, and this theme will likely persist into 2022. The dollar could continue to perform well as the Fed tightens and global growth cools, although inflation is a wild card. Politics will also return to the spotlight, with the French presidential election and the US midterms coming up. King dollar reclaims throne

How quickly narratives can turn around. This year started with the assumption that the major central banks were nowhere close to normalization as the global economy was still licking its wounds from the lockdown shock. The overwhelming consensus was that the dollar would continue to crumble under the weight of fading safe haven demand and a patient Fed.

All that fell apart once inflation fired up. The dollar sliced through its competitors as traders priced in several rate increases by the Fed to cool inflationary pressures, pushing US bond yields higher. Looking into 2022, relative monetary policy will likely remain the most dominant theme for FX performance.


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