Dollar Under Pressure Despite Forex Market Demand
It has been a difficult week for the US dollar forex market, but particularly for the financial markets at large, amid a slump that has resulted in a significant drop in the value of all major Wall Street indices and which has leads to a dollar that seems to lack direction towards the end of the week. The currency swung back and forth, with traders seemingly unsure of their best strategy and waiting for the next market moves. Technology led the sell through the week, although all sectors saw a rebound early in today.
Dollar uncertainty as traders continue to wait
Such a large sell-off on Wall Street would usually cause the dollar to spike in strength, as many of those in forex trading typically choose to revert to the currency as a well-used safe-haven asset. This has not been the case so far, but many do not know how to react to the confluence of events provoked by inflation concerns.
With some analysts openly questioning the Fed’s strategy of continuing quantitative easing even as the United States, in particular, continues to reopen, there are fears that too many injections into the economy and the outlook who see inflation far beyond what is needed and expected. The US dollar index is trading slightly below the key level of 91 points today.
GBP & EUR Stay above the water
As the dollar continues to struggle to understand the current economic situation, forex brokers do not see such uncertainty with the euro or the pound sterling although the latter remains slightly under pressure above 1.40. It is likely that the hold of the closely watched 10-year US yield today has kept both currencies in control, at least for now.
The euro also remains well supported despite the current environment, trading just below 1.21. The fact that job applications in the United States were reduced more than expected likely helped to keep that level with a new pandemic-era low of 473,000 initial applications compared to the 490,000 that were expected. Persistent complaints remain very high, however, which is a source of concern among experts.
Markets rebound after a scorching week
Wall Street has been through an extremely difficult week as it just can’t seem to allay inflation fears despite the Fed’s best efforts. Big losses were recorded throughout the week with some of the biggest down days of the year across the board. This has been particularly evident with the NASDAQ which has lost 4% this week so far.
Signs of recovery are emerging today as the Dow Jones has gained over 400 points at the time of writing with other major indices both in the green for the day by over 1%.