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Dollar Fails to Gain in Forex Market Despite Yield Increase

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  • Treasury Yields Increased Further
  • Euro Pressured by German Inflation Concerns
  • Stock Sell-Off Continues on Wall Street

The US Dollar forex market failed to make any meaningful ground on the Euro or Pound during the Wednesday trading session. This is despite the fact that US treasury yields have regained momentum and continued to the upside. The Euro settled slightly lower closer to 1.13 though the pair is moving toward a positive week overall. It was another torrid day on Wall Street with major indices continuing to move lower, and some, into correction territory.

Treasury Yields Move Higher Still

The benchmark US 10-year Treasury yield moved higher today and finished the session close to 1.87% and another fresh high over the recent period. At times throughout the day, this figure had peaked above 1.9%. This comes as traders continue to wait in expectation of rate rises from the Federal Reserve with inflation an ongoing concern. Despite this move, the Dollar did not improve meaningfully and the Dollar Index stayed within a tight range.

At present, it appears little will change the landscape for the US Dollar or yields as those in forex trading approach the environment with a sense of caution. The market is attempting to price in rate hikes from the Fed, but as yet it is unknown just how many of these there will be. 

German Inflation Hits Record High

In important news for those trading the Euro, German inflation was confirmed to be at its highest levels since 1993. This sent the US yields for their highest mark of the day alongside the Euro before both settled down. The ECB has so far continued to adopt a more supportive approach to the economy than in the US. 

At the end of the day, the Euro closed lower with forex brokers though the relative inaction of the USD today meant that the common currency did not lose too much ground finishing at 1.134 against the greenback. Sterling meanwhile continued to push slightly higher as CPI data exceeded expectations again though any upside remains capped by the ongoing political struggles in the UK.

Major Indices Continue Downward 

Wednesday was another tough day for Wall Street. All three of the major indices continued to move lower. The Dow Jones and S&P 500 both posted daily losses of close to 1%, while the NASDAQ moved into correction territory as another day of selling pressure saw it drop 1.15% to sit almost 10% below its November high. 

The spike in yields will not have helped the tech-heavy NASDAQ as growth stocks and high multiple names rely on easy and cheaper access to capital. This is getting more difficult in a rising rate environment. Despite posting positive earnings, bank stocks have also endured a difficult week, while travel names continue to be hampered by the Omicron variant. This delay in recovery combined with a more hawkish Fed outlook, has caused trouble for stocks.

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.

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