Barclays says the USD is overvalued circa 5 to 10%, but there are still supportive factors. Sees EUR/USD higher.

Via a Barclays note, analysts are looking for a small decline in the US dollar over the year ahead, citing "our views of a stable backdrop for risk and commodities alongside moderate USD overvaluation."

But says there are topside risks for the dollar, pointing to potential persistence in ongoing disruptions:

• China slowdown
• supply bottlenecks
• the energy crunch

which could all provide a tailwind to 'safe haven dollar demand'.

On central banks, sees markets repricing the risks for other central banks catching up towards Fed hawkishness.

Forecasts for EUR/USD, the analysts 'see room for modest appreciation of the euro driven by relative monetary policy expectations"

• Q4 2021 1.15
• Q1 2022 1.16
• Q2 2022 1.18
• Q3 2022 1.19
• Q4 2022 1.19

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November 22, 2021 at 11:34AM
Eamonn Sheridan
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