US Dollar Rises to a 16-Month High Against the Euro
US dollar rose broadly across the forex market. The greenback hit a 16-month high against the euro after hot inflation numbers.
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Principal Points
- US dollar rises to a 16-month high against the European currency, EUR/USD below 1.15
- GBP/USD slips to a low last seen in December 2020 as it dips to 1.3350
What’s Moving in the Markets?
The US dollar has taken the spotlight this week in the forex markets. More specifically, a strong US dollar has pressured most other major currencies around the globe.
To illustrate, the EUR/USD has reached a 16-month low as a dominating greenback has pushed the pair to a level of 1.1440. This exchange rate was last seen in July 2020. In the long-term, the EUR/USD has been in a steady decline since May this year.
More recently, since the October inflation report, the pair accelerated its downturn momentum. In more detail, over the past three days, the EUR/USD has lost over 150 pips, or 1.3%, of its valuation.
In addition, the GBP/USD pair is also looking to the downside. This said, the sterling has dropped to 1.3350 against the dollar, its weakest in 10 months. Similarly to the EUR/USD, the GBP/USD is also in its third straight day of losses.
It’s worth noting that these lows could present bountiful opportunities for swing traders focused on moves lasting several days or weeks.
What’s the Big Picture for Traders?
The gains in the US dollar come amid several important factors unfolding in the financial markets. First, the inflation report for October showed prices have accelerated by 6.2% on an annualized basis. In other words, this was the fastest price growth in over 30 years.
To this end, traders piled into the US dollar as they bet on tighter monetary policy from the Federal Reserve. This would mean that due to the high inflation, the US central bank may raise interest rates sooner than expected.
On the inflation front, the latest price increase challenged the Fed’s view that higher prices were “transitory”. With this in mind, Fed officials could be prompted to lean against the economy by raising the rates as soon as mid-2022.
What to Watch in the Markets?
Ahead of the opening bell of the regular session on Friday, traders keep an eye on futures. This said, futures contracts tied to the major averages point to a higher open today. Further, Dow futures, S&P500 futures, and Nasdaq futures were higher by 0.1% or more.
In cryptocurrency markets, the price of bitcoin is in focus ahead of the most significant Bitcoin network upgrade in four years.
More specifically, an upgrade called Taproot will be rolled out over the weekend. It will greatly enhance the operations on the Bitcoin blockchain. For example, it will reduce transaction fees and improve the way smart contracts work. It will also provide a higher level of privacy.
Keep in mind that due to the importance of the upgrade, increased volatility and price swings could occur as the time of release approaches.