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USD Forex Market Strong as Risk Aversion Continues

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  • USD Safe Haven in Full Flight
  • Euro and Others Struggle to Move
  • Stocks Up Slightly Ahead of Possible Rate Hike

The forex market is seeing another repeat of the struggles had by the Euro and any other currency that is not the US Dollar. This is due in a large part today to the growing geopolitical concerns as Russia drafts in more reserve military forces to continue combat in Ukraine. This sparked a strong push from the USD in its role as a global safe haven currency. Meanwhile, stocks gained slightly in the pre-market as many look to the Fed and expect a rate hike later today.

Safe Haven Demand Pushes Dollar Higher

The ongoing turmoil in Ukraine has had a lasting impact on the US Dollar and kept the currency elevated. This, among other factors, has seen many of those forex trading flock to the safety of the USD. It is well known to be one of the main global safe havens in times of difficulty, and the current period certainly qualifies. Not only are there lasting inflation issues and uncertainty over the economy in general, but there are also the continuing issues in Eastern Europe. 

These issues, and the fact that Vladamir Putin has announced the drafting of up to 300,000 reservists to continue the war in Ukraine. Those in the West have quickly condemned these actions and a UN meeting is scheduled for later in New York where global leaders will discuss their options. Currently, the US Dollar Index is trading at a multi-decade high near 111.00 points. 

Euro Stagnant Below Dollar

The Euro is again stuck below parity against the Dollar with forex brokers. Much of this is to do with the news today that Russia will draft a huge number of reserve forces. This means the ongoing turmoil in Europe is showing no sign of ending any time soon. While this has kept the Euro under pressure, other factors are also involved.

In the US, there is caution with the US Federal Reserve set to raise interest rates again later today. The hope is that this move will temper hot inflation that has carried through to now despite a more hawkish stance. The expected increase in rates is 75 basis points. Anything else would certainly mean a sudden market move.

Early Trading Creeps Higher

Stock futures have risen slightly going into the midweek trade. This comes as there is a general expectation on the street that the Fed will move to impose a third consecutive 75 basis point rate increase. The move to tame inflation which continues to rise has dampened prices in general on Wall Street, but some level of predictability could improve sentiment. 

The Dow Jones and S&P 500 both added about 0.2% prior to the opening bell, while the Nasdaq traded sideways. All there major indices shed around 1% on Tuesday as Treasury Yields peaked. These have since retreated slightly overnight. 

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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