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Daily market commentary: The US dollar is hedging lower in relation to other major currencies in a move that can be interpreted as a consolidation
The US dollar is hedging lower in relation to other major currencies as the European trading session gets underway, in a move that can be interpreted as a consolidation. Over the previous three sessions, the index that measures the performance of the greenback versus its peers gained more than one percent. These gains happened as investors reacted to the return of lockdowns in China, abandoning risk-related assets such as stocks and seeking the comfort of havens like treasuries and the dollar. With Beijing’s authorities responding to new virus outbreaks by reinstating the dreaded Covid Zero policy, growth prospects for the global economy are likely to decline further, generating risk aversion, and creating scope for further dollar gains.
Market sentiment remains toneless for the second trading day of the week as most investors are still struggling to assess the short- to mid-term outlook for risky assets.
Even as rising covid cases in China and the prospect of a likely delayed reopening from Beijing adds uncertainty to the current macro context, investor risk appetite is also being dragged down by a change of tone from some Fed officials regarding monetary tightening.
Despite the market starting to price-in a potential slowing in rate hikes, some Fed officials have moved to temper these anticipations by reiterating their will to tackle inflation, and that this goal was far from being achieved.
With that in mind, investors are likely to rely on macro data in order to have a better idea on where interest rates will go. The show will go on today as traders will certainly pay close attention to new speeches from Fed officials Bullard and Mester today, alongside the OECD Economic Outlook release as well as the US Richmond Fed Manufacturing Index.
In Europe, Energy stocks are among the most resilient so far and the STOXX-50 index keeps trading inside its short-term range, highlighting the current wait-and-see positions from investors.
Experienced writer and journalist, working in the global online trading sector, Steffy is the Editor of LeapRate. She has previous experience as a copywriter and has been with the company since January 2020. Steffy has a British and American Studies degree from St. Kliment Ochridski University in Sofia.
