Euro Forex Market Continues to Struggle

• The euro is still near its lows against the rising US dollar
• Inflation in the United Kingdom weighs on the pound sterling
• Positive earnings boost the stock market

The euro foreign exchange market continues to struggle into midweek under the constant pressure of the US dollar, a safe‑haven asset. The common currency has been consistently hampered lately and remains near parity as traders await new information from the ECB. In the United Kingdom, the pound sterling is also having trouble gaining traction, with inflation data having shifted sentiment negatively. However, stocks have moved in a positive direction, as earnings appear to indicate results slightly better than expected in a highly risk‑averse environment.

The euro continues to battle the lows

It remains a tough period for those trading the euro in particular. The currency has hit multi‑year lows and has even fallen below parity with the dollar in recent weeks. Its most recent recovery was stalled today, as the dollar regained strength amid a number of concerns, not only for this major currency pair but also for the market and the economy as a whole.

The first of these concerns, which particularly affects the euro, is the persistent issue of Russian gas supply in Europe. Many bloc countries fear it could cease at any moment, which would exert even more economic pressure on the region. Politically, the landscape is also continuing to shift, with doubts about the continuation of the Italian prime minister’s leadership, although he remains in office for now.

Inflation burden for the pound sterling

Europe has not been the only one struggling with its currency. Forex brokers and traders have also noted a further weakening of the pound sterling. There are again several factors at play. Notably, there is the ongoing battle with the EU and leadership uncertainty caused by Boris Johnson’s resignation, although the latter has moved the pound sterling positively. The main concerns for the United Kingdom at present are inflation and rising interest rates.

It is very likely, and this was confirmed in comments by Bank of England Governor Andrew Bailey, that a rate hike of at least 50 basis points will be considered at the bank’s August monetary policy meeting. This is made more likely by another CPI increase to 9.4% for June.

Stocks move positively

Stocks responded positively today to corporate earnings, which were overall better than expected. Better‑than‑expected quarterly results for companies like Netflix (NFLX ) helped support the market, which has been regularly chaining negative periods lately. Investors and analysts hope this signals that the bottom has finally been reached for the market.

Approaching the close of the day, the Nasdaq led the major indices and is up nearly 1.5% on the day. The S&P 500 is also up about 0.5%, while the Dow Jones remains flat. This positive momentum has continued since Tuesday and traders hope it will last throughout the week.