It has been a challenging week for the US Dollar forex market but in particular the wider capital markets amid a slump that has seen significant value fall of all the major indices on Wall Street and which has led to a Dollar that appears to lack direction heading toward the end of the week. The currency has flipped in both directions with traders seemingly unsure of their best strategy and awaiting the next market moves. Tech has led the sell-off throughout the week although all sectors are seeing a bounce back in early trading today.
Dollar Uncertainty as Traders Continue to Wait
Such a significant sell-off on Wall Street would typically see a spike in strength from the Dollar as many of those in forex trading typically opt to flock back to the currency as a well-utilized safe-haven asset. This has so far not been the case though with many unsure how to react to the confluence of events led by inflation worry.
With some analysts openly questioning the Fed strategy of continued quantitative easing even as the US, in particular, continues to reopen, there are some fears that too much may have been injected into the economy and an outlook that sees inflation running well beyond what is needed and expected. The US Dollar Index is trading slightly up today by still below the key level of 91 points.
GBP & EUR Stay Above Water
While the Dollar continues to struggle in figuring out the current economic situation, forex brokers are seeing no such uncertainty with the Euro or Sterling although the latter remains slightly pressured a touch above 1.40. It is likely that the holding back of the closely watched US 10-Year yield today has kept both currencies in the driving seat at least for the moment.
The Euro also remains well supported despite the current environment, trading at just below 1.21. The fact that US employment claims reduced by more than expected has likely assisted in maintaining this level with another new pandemic-era low of 473,000 initial claims compared to the 490,000 that had been expected. The continuing claims still remain very high though which is a cause for concern among experts.
Markets Rebound Following Torrid Week
Wall Street has endured an intensely difficult week as it just can’t appear to shake off inflation fears despite the best efforts of the Fed. Big losses have been posted through the week with some of the biggest down days of the year across the board. This has been particularly evident with the NASDAQ which has shed 4% this week so far.
Signs of recovery are showing today though as the Dow Jones has gained more than 400 points at the time of writing with other major indices both in the green for the day by more than 1%.