Caution remains in Forex market after rate hike
- The dollar is getting strong again
- Fed and BOE rate hikes
- Stocks rally to end week high
The U.S. dollar today regained some of the strength it had lost in the previous 48 hours as the foreign exchange market assessed the impact of rate hikes alongside ongoing problems between Russia and Ukraine. . Both issues will weigh heavily on the direction of the market heading into the weekend, although other major currencies have managed to break out of a previously very weak position against the dollar. Meanwhile, Wall Street relied on gains from previous days of bullish trading to take a positive stance for the weekend.
A stronger dollar repels
More optimism from those trading the forex in recent days has seen the dollar lose some of the resolute strength it had built up in recent weeks. The US dollar index, which measures the strength of the currency against a basket of other major currencies, is trading around 98.00 and down more than 1% on the week, but it remains a high level for the index and still indicates an extremely strong dollar.
Part of the reason for the return to the safe haven dollar is likely the lack of any concrete breakthrough in the negotiations between Russia and Ukraine. Indications and tone on both sides have become more positive but this has not yet led to a ceasefire or any other step towards ending the invasion. The forex market reacted cautiously and remained focused on this news throughout the day with little hard-hitting data released.
Rate hikes digested by traders
This week, the Federal Reserve and Jerome Powell finally signed into law the long-awaited first interest rate hike. This 25 basis point increase appears to be the first of several to come this year, although the tone of policymakers has been decidedly more dovish than many had expected.
In the United Kingdom, the Bank of England followed suit in the United States with a rate hike of 25 basis points. However, this increase was accompanied by a more cautious outlook for the future of the economy. Acknowledging this, the pound struggled to find buyers and fell back near 1.31.
Largely positive week on Wall Street
Wall Street traders are moved to Friday in view of their best week on several streets. It comes as they capitalized on the positivity of the week which had seen gains of almost 5% for the S&P 500. It turned out to be the best week since the end of 2020 for the index as it added new gains of more than 1%.
The other two major US indices also ended very positive weeks. The Dow Jones was up almost 5% for the week before the start of the day, while the tech-heavy NASDAQ, which has suffered more than others lately, had posted gains of almost 6%. over the week. The two rallied to add to their positive momentum.