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Forex Market Major Retreat Continues

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  • Broad Weakness Despite More Positive Mood
  • Euro Falls Further on ECB Plans
  • Wall Street Bounces After Torrid Week

The forex market has continued to be volatile moving into the middle of the week. The US Dollar which has continued to show its safe haven strength throughout this period also showed some weakness in the early hours as a more positive mood attempts to take hold. This has not stopped the Euro from further decline as traders sold on ECB plans deemed not hawkish enough. At the same time, Wall Street is trying to emerge from a brutal period of selling that began the week with markets trying to snap a multiple-day losing streak.

Hint of Optimism Weakens USD

Those in forex trading will be well aware of the command the US Dollar has shown over the market in recent weeks and even months. This strength has made it challenging is not impossible for the other currencies in the market to gain any ground on their most traded pair. Both the Euro and Pound have been doing so in small movements very recently, though that work has all been taken away in short time by the Greenback. 

Even today as the Dollar shows some weakness with the general mood looking slightly more positive, it has not been enough for the Pound or Euro to gain on. The latter has actually fallen in early trading below 1.05 with Sterling also struggling below 1.21 against the Dollar.

Major Currencies Continue to Falter

Neither the Euro nor Pound could take advantage of what forex brokers expect to be a broadly more positive day, resulting in Dollar weakness. The Euro has been hampered by ECB comments and plans on how they will reinvest Pandemic Emergency Purchase Programme (PEPP) redemptions. The Central Bank announced they would be doing so with flexibility. Governor Pierre Wunsch striking a tone that the market has deemed dovish and resulting in a further sell-off for the common currency.

The Pound on the other hand has traded in a similarly poor fashion. Though it has managed to erase some losses overnight, the currency remains stuck below 1.21, a low level for the pair. This comes as the UK is preparing to abandon some parts of the Brexit trade agreement with a legal battle on the horizon with the EU.

Stocks Positive With Fed Hike Expected

As the stock market toiled in bear market territory, there has been a glimmer of positive movement in the futures heading into Wednesday. The comes with strong action expected from the Fed to combat what has now become runaway inflation. 

All three of the major US indices advanced in early trading with the Nasdaq the biggest gainer moving up more than 1%. The Dow Jones and S&P500 both have been on the back of five-day negative runs. Traders will be broadly hoping that these early gains can hold and signal a turning of the corner for stocks.

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.

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