A stronger euro in the offing

De trade war between China and the United States, which started last year, also provided support for the dollar. The greenback was, and is, a safe haven for investors in the 'wild financial-economic ocean'.

Less strong dollar?
At the end of 2018 and beginning of 2019, the Fed made a rare move in a short period of time monetary spin. However, that has not resulted in a less strong dollar. In fact, the euro-dollar exchange rate fell slightly further on balance in the first quarter of this year. 

Although expectations regarding the Fed's policy have changed considerably in 2019, this also applies to the ECB's plans. The bank indicated loudly and clearly that the interest rate for 2019 remains at 0%. During 'ECB and Its Watchers', a conference for those who keep a close eye on the bank, signals were also given that interest rates will also remain at 2020% in 0.

If we have a recession in the United States and/or the eurozone in 2020 or 2021 (as I expect), the official ECB interest rate will remain at 0% for a long time. In fact, in my opinion there is a greater chance that the ECB will put its words into action and start buying up corporate and government bonds again (quantitative easing) than that the bank will increase interest rates in the period between now and the end of the year. 2021 will increase.

Rising prices
The policy adjustments and their pricing on the market have kept the euro-dollar exchange rate fairly stable since the beginning of this year. However, I would not be surprised if the price rises on balance in the coming quarters to the level at which 2018 started: approximately 1,25. This has a number of reasons:

• Investors are increasingly taking into account an interest rate cut (with regard to the Fed). Since the Fed's interest rate stands at over 2%, there is plenty of room for more interest rate increases to be expected in the coming quarters. With the fact that interest rates in the eurozone are at 0%, that space is much smaller/completely absent here.
• The ECB can start again with quantitative easing, but that is already partly priced into the price. This is because the ECB reminds us of this almost every month. In addition, the Fed can also start doing this again.
• The dollar was supported in 2018 by the trade war between China and the United States. If the hatchet is buried in the coming period, this would on balance be a negative factor for the American currency. 
• The ECB will have a new president later this year. While his power should not be overestimated, this change could have an effect on the markets. This in turn has consequences for the euro-dollar exchange rate. Especially knowing that there is a very good chance that it will be someone who is less 'dovish' than Draghi.
• Tensions between the Fed and politicians are increasing. We saw a preview of this last year. If the economy in the United States declines further in the near future, we must take into account that American President Donald Trump will soon again appoint the Fed (and its chairman) as a scapegoat. 
• In line with the above, judging by the recent nominations for vacancies on the Fed board, Trump is pushing to create dissension within the bank's interest rate committee. That is not something that supports the dollar. 
• Political pressure on the Fed may also increase as the presidential elections (November 2020) approach and the campaign season begins. 

If the euro-dollar exchange rate does indeed rise in the coming quarters, I do not think it is likely that the exchange rate will break out of its bandwidth; 1,25 is the top of that bandwidth. This is because a much stronger euro, in an environment of lower growth (i.e. a risk of recession), will undoubtedly prompt the ECB to take action.