EUR/USD - Growth returns for the Dollar
The EUR/USD continues to see strong declines for a third consecutive day. The US Dollar has managed to regain within 3 days the value lost over a 10-day period. We can see from this the strength of the downward trend. The price of the EUR/USD has declined by 0.53% today so far and by 1.92% over the past 3 trading days.
The value of the Euro is declining not only against the US Dollar but has declined against most competitors over the past 24 hours. The US Dollar index has also increased in value this week. Currently, the price of the exchange rate has declined below previous support levels and has also managed to form 3 impulse price swings in favor of the US Dollar.
The US Dollar is strongly influenced by the monetary picture as well as the risk appetite within the market. The US Dollar is known to be a haven asset, meaning traders look to the asset in times of uncertainty. We can see that the price of Bitcoin has declined by 5.26% and the SNP500 has also declined by 1.53% before today’s market has even opened. We can see that risk-based assets have taken a large hit as traders look to less risky assets.
The low-risk appetite and “risk-off” market sentiment has resulted in the demand for the US Dollar increasing. In addition to this, the Dollar is also being influenced by hawkish comments made by banking officials. The Federal Reserve has become more hawkish over the past couple of days indicating that a 75 basis point instead of a 50 basis point is possible.
In the first quarter of this year, the economy within the US declined by 1.6% which is slightly higher than expected. However, as this has not resulted in a decline in inflation nor in the employment sectors, it is predicted that the Fed will continue rate hikes.
The Euro was pressured by comments made by the Central Bank and the lower inflation figures which was confirmed yesterday for Germany. The German Consumer Price Index was predicted to increase by 0.4% but was confirmed as 0.1% which is the lowest in 9 months. This also shows that the level of demand in the Eurozone may not be as high as expected.
The European Central Bank advised that its actions would need to simultaneously take into account two problems at once. The first is the level of inflation and the second is the risk of recession. Experts suggested that the expected rate hike would be short-term, after which the department will take a break to assess the economic situation. Overall the market was assured by the lack of confidence the Regulator had in the European Economy.
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