Markets afraid, U.S. Dollar hits best in about a month
The U.S. Dollar is closing the week on a rally across all peers, currently close to reaching its highest level overall since the first weeks of April per the Bloomberg Dollar Spot Index
A global selloff of bonds based on fears about whether oil supplies from the Middle East will normalize has fueled a retreat from optimism that had been experienced earlier in the week. The Buck’s steady upward run this week is about to be the longest streak of strengthening since March. Risk-market appetite has dropped with Nasdaq 100 futures dwindling by 1.4% while S&P 500 Index fell 0.9%.
Inflationary pressures are causing chaos for suppliers who after over a year of experiencing adjustments to higher costs have now been forced to pass them on to consumers, unable to absorb the impact entirely from trade policies and geopolitical turmoil. Regardless of slow economic momentum across all regions, central banks and their decisionmakers are not going to be able to be stimulus-driven and perhaps be forced to combat price increases in the same way during the worst of the pandemic recovery by hiking interest rates. Any developments over the weekend indicating that the Strait of Hormuz will open or that a deal is indeed in the works would certainly change sentiment and change the tide for the Buck. For now, there is a sense that the week has been plagued by too much uncertainty.
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EUR ⇓
The Euro dropped down to its weakest value against the Buck since the first week of April, falling along with other Majors peers with a bond selloff highlighting worries that energy markets will create struggle for a long time. The lack of good news and no deal yet that opens up Iran for trade is fomenting a bit of risk-aversion and forcing a jump towards the safety of the U.S. Dollar. Next week, we will get more concrete and direct data points giving us the real picture in the euro-zone with the release of Consumer Price Index figures from last month and the Purchasing Managers Indices.
AUD ⇓
The Australian Dollar, along with neighboring “Kiwi” from New Zealand, are the biggest losers this morning, sliding by over 1.0% with fears overtaking markets. As comments about the Strait of Hormuz and no progress towards a deal this week concern nations in the Pacific Rim, currencies from South Asia and Oceania have the most room to tumble. Things could turn around quickly, but thus far it is a Friday chopping away gains across markets.