May 14, 2022
  • May 14, 2022

The Forex market remains challenged by the outlook

By on May 7, 2022 0
  • The USD index hits a new high
  • Euro shows resilience under pressure
  • Wall Street gains fade to end the week

The dollar forex market closed another week higher with the USD index hitting a new high on Friday. The measure of the dollar’s strength against a number of other major currencies peaked above 104.00 on Friday, its highest since 2002. This came despite NFP jobs data being better than expected in terms of job growth and left currencies, including the euro, under increasing pressure. A more hawkish approach from the ECB helped the euro fight back a bit. Meanwhile, stocks erased their previous days’ gains to end another week in negative territory for Wall Street.

Another bright spot for dollar strength

The US Dollar Index over the past few weeks has continued to hit new highs almost daily. Those who trade forex will have noted that another new level was reached in trading on Friday. The index rose above 104.00, its highest level in over 20 years. This level demonstrates not only the strength of the dollar itself, but also the lack of opposition it has faced from other major currencies with the euro and the pound in particular on the back foot.

This surprisingly comes on a day when the number of NFP jobs exceeded expectations to show a very healthy level of growth in the number of jobs gained. Job growth remained strong in April with 428,000 new nonfarm payrolls, more than the 400,000 analysts had expected.

Euro attempts to mount a comeback

Forex brokers and traders are monitoring the progress of the Euro. It remains at extremely low levels against the safe haven dollar, although it again showed some resilience under pressure on Friday. It ended the day at 1.055 against the USD after being lower at times during the day. Some of the euro’s weakness, similar to that of the pound, is thought to stem from the divergence in monetary policy between the Fed in the US and its counterparts in Europe and the UK.

A more hawkish tone from the Bank of England on Thursday set the norm as it warned the UK could slide into recession. This appears to have prompted the ECB to adopt a more hawkish stance with the decision to align itself more closely with the Euro-strengthening Federal Reserve.

Wall Street returns gains

Wall Street stocks fell again on Friday as the Dow Jones closed its sixth consecutive week of losses. The other major indices also followed the same course with the Nasdaq which fell almost 1.5% despite a largely positive week for the market before Friday.

This move has become common in the market over the current period, with gains often quickly being returned in future trading sessions. Underlying concerns about inflation and interest rates have clearly not dissipated despite Fed Chairman Powell confirming that rate hikes of more than 50 basis points are not currently on the cards. .