- Dollar Strength Against Euro and Pound Continues
- Speculation Around Fed Tapering Continues
- Stocks Look for Strong End to Dismal Week
The USD forex market continued to push higher on Thursday and early into Friday in the European session. As has been the case for much of the week, the market has adopted a risk-off approach. This favors the Dollar at the expense of other major currencies. Both the Pound and the Euro have fallen further and shown relative weakness against the Greenback as speculation remains about Fed tapering measures. This has also had an impact on Wall Street where stocks have endured a difficult week despite a relatively positive close on Thursday.
Euro and Pound Continue to Struggle Against USD
The US Dollar is of course a safe haven. The global reserve currency is the go-to in times of difficulty. This includes when market sentiment is not too positive as has been the case this week. Combining this with domestic challenges for the Pound and Euro both, we can see the results in multi-month lows for the Euro, and the GBP which has fought a losing battle all week.
Sterling is now trading lower toward 1.36 with COVID still a major concern as case numbers rise. The drop in UK retail sales of 2.5% is further evidence that the major reopening has not provided as strong an economic boost as would have been hoped. The Euro meanwhile is also sluggish, trading below 1.17 at an extremely low point relative to where it has been just recently. A rise in COVID-19 cases in Germany has not helped here.
Tapering Fears Continue in Spotlight
The topic of Fed tapering has continued to grab the headlines throughout the week. This has remained a key driver, no doubt influencing those who are forex trading the Dollar and others. There seems to be an acceptance generally among both trader, and forex brokers, that Fed tightening is coming soon rather than later.
This was alluded to in the Wednesday Fed minutes release, with the idea being effectively given the go-ahead though nothing has yet been announced. Such an announcement could well come next week at the Jackon Hole Symposium where Fed Chief Jerome Powell is set to speak. This will be an address that is watched very closely on all sides.
Wall Street Tries to Finish Tough Week Positively
There is little doubt it has been a challenging week on Wall Street too. The forex market sentiment is not exclusive only to this market. There is a general risk-off mood floating around. This is likely due to a confluence of factors including a resurgence in COVID-19 numbers, inflation concern, and tapering possibilities.
The S&P 500 yesterday broke a two-day losing streak, with one of those days being its worst in a month, to finish 0.1% higher. The same was true of the NASDAQ which finished higher, though trading in the after-hours has been negative across the board as we move to Friday.