Baku. 8 August. REPORT.AZ/ The euro exchange rate against the main rival - dollar in the coming year will remain in the range of 1.12-1.20 USD/EUR.
Analytical Group of Report believes, this will be not due to the strengthening of the euro, but because of the cheapening of the American currency from time to time. Thus, the fall of the US dollar, together with the acceleration of the economy, will lead to an increase in inflation.This, in turn, will pave the way for the continuation of the process of raising the discount rate and tightening monetary policy of the US Federal Reserve System (Fed).
Notably, yesterday the head of the Federal Reserve of the State of St. Louis James Bullard and the head of the Federal Reserve of Minneapolis Neil Kashkari noted that the Fed will not increase rate in September, but will begin to tighten monetary policy. During the financial crisis of 2007-2009, the Fed managed to get out of the crisis, providing financial markets with liquidity. As a result, during this period the regulator bought back bonds by approximately $ 4.3 trln, sending cash to financial markets.
Preservation of US-dollar at a low level for some time will accelerate inflation in the medium term, as a result, the discount rate will increase more intensively. This takes about one year. In the period of increasing Fed's discount rate up to 2.5-3%, the dollar will be cheap, and the euro - expensive. Then, approximately from the beginning of 2019, Euro will decline sharply and USD/EUR rate will fall to parity and below.
Analytical Group of Report believes, decline in the USD/EUR rate will begin again after filling the technical gap, formed as a result of a sharp decline from the level of 1.20 in January 2015.
Despite the fact that the filling of this emptiness was expected last year, the process was somewhat delayed and, most likely this will happen this year.In the next 6 months, the rate is expected to be at the level of 1.15-1.20 USD/EUR, within next 6 months - 1.10-1.15 USD/EUR and then gradually approach parity.An increase in the Fed's discount rate will lead to an increase in interest rates, an exacerbation of the liquidity problem, a drop in commodity prices and financial crisis around the world.