The US dollar collapsed in a record three months

On Thursday, the dollar experienced a sharp decline following the European Central Bank's rate increase.

50The dollar index came close to its five-week low of 102.50.

Since the start of January, the US currency has seen its biggest weekly decline since the Federal Reserve put a halt to rate hikes.

On Thursday, the euro experienced a sharp rise following the European Central Bank's decision to raise its key rate to its highest level in 15 years. The ECB also cautioned that inflation is still far away, and increased its inflation forecasts for the upcoming years.

This week, the Federal Open Market Committee (FOMC) maintained its target for the Federal funds rate at 5-5.25%. However, Rabobank believes that the Fed may not have reached its peak yet. A scatter chart suggests that two more rate hikes could occur before the end of the year.

According to Danske Bank, a hawkish stance by the European Central Bank (ECB) could cause the euro to appreciate, providing selling opportunities. They anticipate that the EUR/USD exchange rate will drop in the second half of the year to 1.06/1.03 in 6 months and 12 months, respectively.

Societe Generale believes that, despite the technical downturn and the stagflationary background, there is a tactical reason for EUR/USD to target higher levels due to the currency regime's influence on the dynamics.

ING has suggested that EUR/USD could move towards the 1.1000-1.1030 range today. In the short term, the dollar is likely to remain weak against most currencies, apart from the Japanese yen, as the Bank of Japan is still very dovish.

UOB Group expects the euro to rise, however, due to the strong overbought pair, the rate of increase is likely to be gradual. The next benchmark to keep an eye on is 1.10. Support is at 1.0915 and further down at 1.0880.

TDS predicts that gold prices could increase if any information is released that suggests a decrease in inflation in the US. They anticipate that the average price of gold in the fourth quarter of the year will be $2,100.