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Dollar Eases as Forex Market Deals With Falling Yields




  • EUR & GBP Try to Strengthen on Treasury Yield Weakness
  • Geopolitics Takes Shine from Optimistic Outlook
  • Stocks Positive after Broad Recovery

The USD forex market has started to show some weakness in the last 24-hours amid a broadly more positive market outlook that has taken away the need for a safe haven as the USD typically is. This has presented an opportunity for both the Euro and Pound to consolidate at higher levels with both having struggled recently. Meanwhile, relations between the US and Russia have become a central point and slightly dampened the optimism around in the market. This has not changed things on Wall Street where stocks will be looking for a third consecutive rebound day.

GBP & EUR Take Advantage of Weakness

Both the Euro and Pound have gained some ground at the start of this week. The former is trading back closer to 1.13 despite mixed news from German economic data where long-time leader Angela Merkel has stepped down to be replaced by Olaf Scholz after 16 years as Chancellor.

The GBP has also managed to summon some strength to now trade around 1.325. Strength has been harder to come by for Sterling as the Omicron case number continues to be an issue there alongside more long-running problems surrounding Brexit. There is also a feeling among those forex trading the Pound that the spike in new variant cases of COVID-19 may push the Bank of England to delay any interest rate hikes. Despite the uncertainty this brings, the widespread outlook on Omicron seems to be better than expected.

US-Russia Relations Chill Sentiment

A risk-on mood has been taking hold in forex and beyond according to forex brokers. This comes as the Omicron variant has not derailed economic progress as much as had been expected. Combined with the softening of US Treasury Yields again yesterday, the sentiment was extremely positive. This has been shaken slightly by the meeting between US President Biden, and Putin yesterday.

The talks outlined the US position and opposition to any invasion of Ukraine by Russia has been made extremely clear. This would most likely result in harsh economic sanctions. The tone of the meeting, alongside any potential consequences, has taken a little of the positive edge from markets.

Stocks Looking for Continued Bounce

Wall Street is hopeful of another positive day following a recovery that has been strong across the board in all sectors to start the week. Tech, in particular, soared back to life yesterday with a 3.5% gain in the sector. Yesterday was also the best day for the S&P500 since March as big names rallied back.

Early trading in the pre-market shows small gains on all the major indices, though easing of concern in regard to the virus may be replaced by geopolitical worry. The next additional point of focus for traders is likely to be US CPI numbers due on Friday. These are sure to guide the direction of the Fed’s next move as far as inflation is concerned.

Anthony is a financial journalist and business advisor with several years’ experience writing for some of the most well-known sites in the Forex world. A keen trader turned industry writer, he is currently based in Shanghai with a finger on the pulse of Asia’s biggest markets.