USD Forex Market Strength Pushes Euro Below Parity

• Multi-Year Low for Euro
• US Dollar Settles Slightly Later in Day
• Rate Hike Fears Hurt Stocks

The Euro forex market has hit a multi-year low today against the Dollar as it lost parity for the first time in the same period. Though the currency is now improving above that level, the move demonstrates that USD strength in this period is far from over with traders still firmly supporting the safe haven currency. For now, the Dollar has settled as rate hike expectations may be slightly more positive than expected. Meanwhile, stocks have been hit by the same rate hike fears during today. 

New Lows for Euro Against Dollar

Those forex trading the Euro have not had much in the way of positive results in recent weeks and months. Still, few would anticipate that the Euro would drop below parity against the dollar. This did happen today as the common currency traded as low as 0.995 during the earlier part of the session. It marks a new multi-year low for the pair.

The move downward was precipitated by fear over US interest rate hikes from Euro traders. This strengthened the Dollar against all of its major currency rivals with some expecting as much as a 100 basis point rate hike to come. The currency has been further weakened by the gas crisis in Europe concerning the lack of Russian supply, and the resignation of Italian Prime Minister Mario Draghi.

Dollar Drops Back to Level Ground

Despite a strong start to the day from the Dollar with lingering fears of a recession and further fueled by the anticipation of rate hikes to come, some expecting an increase of as much as 100bps, the currency has dropped off slightly in the second half of the day. This has allowed some breathing room for the heavily pressurized major currencies trading against the greenback. Fears related to a steeper rate hike have also started to subside. 

An interest rate hike of 75 basis points looks more likely as this would bring rates back to neutral. This was noted by Federal Reserve Governor Christopher Waller and seemed to bring some increased stability to the currency. Likewise, the GBP lifted from a 28-month low following these comments from the Fed. 

Stocks Lose Ground Again

Stock market losses on Thursday were being led by banks as the probability of a recession continued to come into closer view. Most of the big financial names slipped including a 3.5% drop from JPMorgan Chase with their CEO warning that the economy could suffer from the current inflation issues as well as the geopolitical situation. 

Overall, the Dow Jones slipped almost 0.5% with similar losses from the S&P 500. The Nasdaq broke the mold with a slim improvement but all three of the major indices were on track for a weekly loss at the time of writing. There currently seems like little on the horizon which could have a positive impact.