US Dollar Forex Market Retains Strength as Risk Aversion Continues

• EUR/USD Weak on German Data Surprise
• Sterling Also Struggles to Advance
• Stock Market Looks to Continue Recovery

The US Dollar has been unrelenting in its strength of late. Despite a temporary pause, this trend has continued and looks set to dominate through to the weekend with a sense of risk aversion returning to the forex market on Friday. This has been capped by a downside surprise from some German data today that has further weakened the Euro, while the British Pound stays under this similar kind of pressure with Brexit and other domestic worries. On Wall Street, stocks are trying to climb again into the weekend following a strong rebound in the previous session. 

Euro Fails to Advance on USD Opportunity

The Euro was presented with an opportunity through the middle of the week and a supportive tone from the Fed, to gain some ground on the Dollar and climb from the low point it stood. In reality, it has not managed to do this as the pair remains around the 1.175 mark. The window of opportunity now seemingly shut as the Dollar is again finding buyers. 

This comes after a Wednesday press conference from the Fed Chief Powell in which the probability was raised that the Fed will start to roll back some of its stimulus supports starting near the end of this year, and concluding by mid-2022. This was delivered with the same supportive tone from the Fed, and did little to impact those forex trading the EUR/USD yesterday. 

Pound Also Restrained by Greenback Strength

Forex brokers actually noted that the Dollar was sold off more following the Fed announcement as it coincided with the bounce back in the equities market. The Pound also felt this, but just like the Euro which has been hampered by underwhelming German IFO figures today, they have their own challenges. These include Brexit and a hawkish Bank of England.

Responding to this renewed strength in the Dollar, there is little the Pound can do as it continues to trade below 1.37. The main issue at play is, just like the Euro, a stronger Dollar is more powerful than both, particularly with COVID cases still at play, and the still ongoing Brexit border issues in the background.

Wall Street Hoping for Friday Boost

It has been a rollercoaster week on the street for most stocks. The sell-off of Monday and continued hangover on the following day were replaced by a couple of much more positive sessions, particularly on Wednesday. This is something that investors hope can carry into the weekend.

This positive ending to the week looks unlikely as stock futures have again dipped sharply across the board. Concerns persist in the equities market over any spillover from the Evergrande saga in China which contributed to the slide at the beginning of the week. Add to that a seasonal turn toward caution in September, and traders will be glad to see the turn of the month.