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USD Demand Remains high on Recession Fears

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  • Rate Hike Potential Keeps USD Strong
  • Euro Moves Toward Low Point
  • Stocks Rally to Start Second Half

The USD forex market finished the week stronger again as worries persist in the US and global economy of an imminent recession. This sentiment has kept the Dollar strong throughout the week and essentially hampered any efforts from other major currencies to gain ground. The Euro exemplified this scenario as the common currency traded below key levels at some points in the day before rebounding. At the same time on Wall Street, traders ended the week strong and made a positive move into the second half of the year following widespread disappointment with the first.

Rate HIke Fears Holding USD High

There are many factors playing into the hands of a strong US Dollar for those forex trading the currency. Not least is its already dominant and well understood role as a safe haven currency for all. Another big reason is that despite already having raised rates, many analysts and traders alike expect Jerome Powell and the Federal Reserve to continue with more rate hikes. This has furthered the case for the Dollar to move higher. 

Such moves, as happened in the market today, make it extremely challenging if not impossible for other currencies to gain any ground. Neither the common currency of the Euro, nor the British Pound managed to make any positive moves today when paired with the Dollar. 

Euro Continue to Struggle

The Euro is one such currency that has really struggled to gain any positive momentum against the Dollar in recent days and weeks. The common currency again labored today as it fell to a low below the key psychological benchmark of 1.04 today. Again, fears around a possible Fed rate hike and how the ECB may also respond prompted this move earlier in the day. 

The currency pair managed to rebound with forex brokers but the movement demonstrates concern in the market particularly related to the Fed and how other currencies will respond. Previous issues with the Euro have seemingly centered around the fact there has been too much divergence in the monetary policy between both Central Banks. The Fed has typically favored a more hawkish outlook with the ECB has remained more supportive. This is a tone which is changing though as the inflation issue continues to linger.

Stocks Start Second Half Strong 

The worst first half of the year performance in more than 20 years from the S&P 500 has prompted some moves in a positive direction today. Markets gained with the leading indices in the US all adding points to try and start the second half of the year on a more positive note. 

All three major averages were up by just about 1% in Friday trading. This is what traders will hope, a sign of better things to come from the beleaguered market. Still, however, all three are left with a fourth negative week in the last five.

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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