Dollar Forex Market Moves Lower as Confidence Returns

• USD Continues Move Lower From Friday Peak
• PMIs Could be Key Driver
• Stocks Look to Continue Rebounding Higher

The US Dollar forex market has taken a weaker turn to start the week as a renewed sense of confidence enters the market. This follows a period of intense risk aversion with inflation and Fed rate hikes being the key drivers behind a crisis of confidence. The US Dollar Index is now off its Friday peak and seems as though it will decline further as final PMIs are awaited both from the Eurozone and on the US docket later in the day. Meanwhile, Wall Street is looking to continue its recovery run into a third day as confidence seems to be returning to traders. 

Dollar Weakness Set to Continue 

The US Dollar Index, a measure of the USD strength against a basket of other major currencies, had touched almost two-year highs on Friday around the 97.50 point. Since then, it has been on a downward move as the risk aversion which had captured the market slowly moved toward a more calm, if not optimistic outlook from those in forex trading. 

This has caused the US Dollar to lighten up as traders move more away from the well-known safe haven. Also in play is the US Treasury yield. This has also moved lower in recent days and kept Dollar traders on the back foot with more positivity returning to the market as many may feel the threat of multiple Fed rate hikes led to an overly cautious momentum building in recent weeks.

Attention Turns to Final PMI Figures

Forex brokers and traders alike will be fixed on the final PMI figures to be released today. Both the Eurozone and US have PMI data coming today which could provide some direction to all the major currencies at play. German retail sales, as well as the January labor report from the largest economy in Europe, will be first to come, closely followed by data from other member states throughout the day. 

Figures are also due from the US where the ISM Manufacturing PMI will be the key focus while at the same time the bond yields will remain pivotal in a market that has been particularly turbulent in the last weeks. Traders will also be looking ahead to the ECB meeting later in the week and this may impact the upside of the Euro.

Wall Street Trying to Continue Positive Run

Stock futures in the US rose slightly in the early hours as the street looks set to continue a bounce back which started at the end of last week. Despite a major bounce on Monday, particularly from the tech-heavy NASDAQ, major indices posted some crushing monthly losses. 

As traders look to reverse the January sell-off which came throughout a busy earnings season, a lot will depend on any future news from the Fed and how the upcoming data matches up to the current economic situation, especially around inflation.