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Euro Forex Market Continues to Slide on Dollar Strength

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  • Euro Moving Backwards as Safe Haven USD Favored
  • Sterling Also Dips Lower to Start Week
  • Stocks Looking Toward Dismal Open

The Euro continued to fall in early trading on Monday as the forex market favored the US Dollar as the sentiment of caution remains in the market. The Dollar moved higher despite a tailing of off bond yields from their highs. This comes ahead of preliminary PMI data that could influence traders. Sterling also continued to drop back. Meanwhile, Wall Street is braced for a continuation of the sell-off that gathered pace last week despite a busy earnings season.

Euro Dropping Off as Dollar Regains Strength

The US Dollar showed relative weakness to end last week. This was largely due to the falling back of US Treasury yields with some such as the benchmark 10-year yield having climbed to their highest levels since prior to the pandemic. This drop in the yield was met with a weaker Dollar on Friday that presented the Euro an opportunity to hold ground. 

This situation has turned around on Monday after a quiet weekend for both currencies. The Euro is now giving way further to a US Dollar that is buoyed by its safe-haven status. This, combined with the Friday comments by ECB President Christine Lagarde, has created a lack of appetite for the common currency going into the new week.

Sterling Follows Euro Downwards

Risk aversion in the global market has also taken its toll on those forex trading the Pound. The UK has been challenged on all fronts recently with the assault on the position of PM Boris Johnson and widespread calls for his resignation amid alleged COVID-19 breaches. The Pound has continued to slip through the European trading session on Monday. 

This comes as, on top of the domestic turmoil, the UK reported disappointing figures in relation to private sector business activity for January. Underwhelming retail sales on Friday also ensured that the Pound would break a multiple-week positive run and finish almost 1% down on the US Dollar. This momentum looks to have continued into the new week as Sterling holds its lowest mark in weeks close to 1.35. 

Wall Street Woes Set to Continue

The major sell-off that ended last week on Wall Street looks set to carry on. European markets finshed lower again for the day and the early trading in the US looks grim. Futures trading on all the major indices is down yet again with the NASDAQ bearing the brunt of the selling before the bell. 

The move comes as the S&P 500 endured its worst week since March 2020 last week. Focus is very much on the Fed policy meeting which wraps up on Wednesday and could decide the next move in the market. Investors are anxious to confirm the size and frequency of any interest rate hikes to come. This anxiety is displaying in the currency market sentiment and negatively moving prices.

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.