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Dollar Forex Market Returns to Further Strength

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  • USD Correction is Short Lived
  • BoE Intervention Strengthens GBP
  • Caution Continues to Dominate Stock Market

The US Dollar forex market has quickly recovered from an earlier slump as its period of dominance continues amid a market mood that is cautious verging on negative again entering the middle of the week. In the UK, the major news surrounds the fact that the Bank of England has moved to intervene in the bond market in an effort to shore up the market in the UK where Sterling has slipped badly. The negativity has also crept over to Wall Street where stocks continue to trade lower to start the day.

Dollar Strengthens Following Earlier Blip

The US Dollar market had slipped a little lower on Tuesday but this dip was very short-lived as the greenback gained later in the day and into the early hours of Wednesday. The US Dollar Index, a measure of the currencies strength against a basket of other major currencies peaked at yet another multi-decade high. As yet, there seems no end in sight for the dominant Dollar. At the time of writing, the Dollar Index was trading above 114.00, a level not seen by many in forex trading. 

The USD is generating most of its traction from a risk-averse market that has shown no sign of changing course. There are several major reasons behind this caution, not least economic policy, and the ongoing geopolitical issues in Eastern Europe. Powell and Christine Lagarde will both speak later today with both having a potential impact on the currency.

Bank of England Step Into Bond Market

Sterling has suffered great losses in recent days. This comes amid the recent change of government and economic strategy that appears to have taken forex brokers and the majority of those trading the market by surprise. The Central Bank has put in place a bond-buying plan that aims to help stabilize the slide of the currency. 

The move is somewhat unprecedented and shows the struggles that both Sterling and the UK economy, in general, have faced since the government shakeup and new fiscal approach. The Chief economist for the Bank of England himself concluded that a significant monetary policy response was required to try and arrest the slide the currency has faced on the global market in recent days. The GBPUSD is currently around 1.07.

Stocks Open Tentatively

There has been no better news for stocks as they fared cautiously to start the US trading session. The major indices in the US are all coming into mid-week on the back of a very mixed but predominantly lower start. The 10-Year US Treasury Yield dipped slightly after having touched the 4% mark. This is its highest point since 2008. 

On the street, the S&P 500 is up slightly after bouncing from its latest low point of 2022. The Nasdaq however is trailing and lower with losses from Apple weighing on the average. The Dow Jones is also trading cautiously higher.

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.