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Forex Market Remains Strong Amid Geopolitical Turbulence

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  • Dollar Holds Ground Despite Improving Sentiment
  • Other Major Currencies in Tight Range
  • Wall Street Recovery in Motion Following Sell-Off

The forex market continued to hold steady on Friday as the market sentiment returned to being somewhat positive after a day of caution and heavy selling on Thursday. The major driver behind this risk aversion has been the changing geopolitical situation with Russia. Though diplomatic solutions remain on the table, the pressure to find a resolution also continues to mount. With this in mind, the Pound and Euro both recovered slightly in the early hours while remaining lightly traded. Meanwhile, Wall Street was left reeling yesterday although the futures market looks positive at the moment.

Dollar Remains Strong With Trade Still Cautious

There is still a feeling of caution among those forex trading on Friday. Little has changed overnight in relation to the Russia-Ukraine situation and this has created a cloud of uncertainty among forex brokers, and the wider market not only in currencies. Typically, such times of instability are a signal for traders to move to the US Dollar, but with so many other issues happening, there has been little significant movement.

The greenback had strengthened slightly yesterday, though this move now seems to be reversed with the US Dollar Index moving back below 96.00. Inflation concerns are also ever-present in the American mind with US consumer prices rising 7.5% in January, the biggest increase in a 40 year period. Still, Treasury Secretary Yellen has said she retains faith that the Federal Reserve will keep the recovery on track.

Other Major Forex Currencies Trade Lightly 

Uncertainty around the key political issues in Eastern Europe has also hampered trading in the Euro and Pound. Both currencies are trading in a tight range with investors unsure of which way to move in the current situation. The Euro remains close to 1.135 with just preliminary consumer confidence and home sales data to come later in the day. 

The story has been similar for forex brokers in trading the Pound. It has edged higher on Friday to hold above the 1.36 mark but the key movement may well be news-driven with the focus on a meeting between US President Biden and leaders of Canada, France, Germany, Italy, Poland, Romania, Britain, the EU, and NATO to come. 

Stocks Try to Regain Some Traction

The Dow Jones suffered its worst day of the year so far on Thursday. The index shed more than 600 points as traders adopted a risk-averse mindset which grew throughout the day. The key factor at play again seems to be political tension combined with persistent uncertainty around inflation and fiscal policy in general.

Early trading in the European session and US futures market seems brighter with the index showing a 0.5% increase. This has similarly been reflected in the Nasdaq and S&P 500. Both were sold-off strongly in yesterday's session and have started to recover in the early hours.

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.