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Dollar Forex Market Continues to Strengthen Ahead of Inflation Data




  • US Dollar index Higher Again Amid Market Caution
  • Key US Inflation Data to Come Later
  • Wall Street Looks to Close Out Volatile Week

The forex market from a US Dollar perspective has continued to strengthen. The currency is clearly benefiting from risk aversion in the market with many obstacles evident that are pushing traders towards Dollar safety. Among these key factors is the persistent fears over inflationary pressure. The PCE Price Index numbers are to come later in the day and are viewed as the key Fed gauge for inflation. This has pushed the Dollar Index to highs above the 97 mark. Meanwhile, futures on Wall Street were trading slightly higher as the market looks to end higher in what has been an extremely volatile week. 

Dollar Index Hits 20-Month High

The US Dollar Index which measures the USD value against a basket of other major currencies has been rising steadily of late, particularly since the reiteration of a hawkish outlook from Fed Chair Jerome Powell. The continued strength of the currency and its dominance over others at the present time has pushed the Dollar Index to its highest levels in almost two years.

It is the first time in 19 months that the index has broken through 97.00 and it is up almost 2% on a weekly basis which would mark the largest upward movement in the index in 7 months. This move comes as those in forex trading opt for the safe-haven Dollar ahead of its rivals with inflation fears continuing and the prospect of Fed tightening causing widespread disruption to markets. 

All Eyes on Upcoming Inflation Figures

Due out later today in the US, the December Personal Consumption Expenditures (PCE) Price Index figures will be looked to by traders and forex brokers alike as to the current state of inflation in the market. This is also well known to be the preferred measure of choice for the Fed when it comes to assessing inflation. An unexpected number from the PCE today could certainly move the needle again. 

Record strong growth in GDP numbers for the last quarter also helped the Dollar retain strength. The figures showed the economy grew at a 6.9% annualized pace according to the Commerce Department on Thursday. This exceeded analyst expectations of a 5.5% increase and meant that the 5.7% annualized rate of growth for 2021 was the largest since 1984.

Stocks Trying to Finish Wild Week Strong

Stock futures rose slightly on Friday morning as the street looks to close out what has been one of the most unpredictable weeks in recent memory. Trading in markets has been characterized by wild swings from high to low on a daily basis as investors try to balance sentiment, economic, and geopolitical concerns.  

Apple has been a notable winner going into the day. The stock has risen 5% since the closing bell yesterday as they reported their largest ever single quarter in terms of revenue.

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.