The US dollar is gaining ground on other major currencies during early Tuesday trading. Recession fears have been exacerbated by the release of disappointing economic data in China, to which the PBOC reacted by unexpectedly cutting interest rates. Against this background, and with the energy crisis in Europe not showing any signs of easing up, the US dollar continues to strengthen, as investors seek the safety of the American currency amidst widespread uncertainty. This dynamic is compounded by the prospect of the Federal Reserve continuing to aggressively pursue monetary tightening, as its push to control inflation remains central to the bank’s strategy, further enhancing the dollar’s appeal.
Ricardo Evangelista – Senior Analyst, ActivTrades
Indices climbed higher in Europe on Tuesday, despite a “risk-off” trading session in Asia, where market sentiment has been weighed down by economic worries.
After inflation, economic risks are now coming under the spotlight for investors following the latest slew of poor economic data from the two biggest economies in the world this week.
In addition, hopes of a less aggressive monetary tightening following the recent decrease in US price pressure have been quashed after some Fed officials warned the current policy will continue further.
This adds pressure to market sentiment, as more and more investors fear that such hawkish policies being implemented while economies are already showing signs of slowing will significantly increase the likelihood of a recession.
This expectation may lead investors to reduce their exposure to riskier assets in the short- to mid-term, while more clues on the Fed’s next move may be provided tomorrow with the publication of the FOMC minutes of the last meeting.
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.