Concerns about rising inflation, the volatile situation in Eastern Europe, and a poor outlook for the global economy reversed investor appetite on Wednesday. Following a steep decline in stocks, considered risky bets, the U.S. dollar regained ground. Further, Federal Reserve Chairman Jerome Powell announced that the U.S. central bank will increase interest rates further to face the surge in prices and shaky economic conditions.
Safe Havens Pick Up Pace
Considering such a murky market environment and an unstable geopolitical reality, the dollar regained its historic place as a safe-haven asset. On Wednesday, demand for the greenback increased as stocks took a hit and Treasury yields dropped. This comes following a short-lived appetite for risk which folded back into a demand for the USD’s stability.
Consequently, the U.S. Dollar Currency Index (weighing the USD against other major currencies) increased by 0.4%. In this context, bulls cheered a stronger dollar index holding firm at 103.20, which is expected to last as long as the world struggles with high inflation and a continued conflict in Ukraine.
Major Currencies Drop
Meanwhile, the British pound took a hit and slipped 1.1% against the dollar. The drop occurred after the release of inflation data showed consumer price increase jumped 9%, its highest level in 40 years.
The Australian dollar slipped 0.8% as it is famously considered a proxy for risk appetite.
Perhaps one of the most affected currencies is the EUR, currently trading close to 1.0485.
Finally, cryptocurrencies were not left out of the general slump. The digital coins market was hit hard last week as LUNA crashed, Bitcoin dropped 4% and Ether traded below the $2,000 mark.
*OspreyFX would like to state that traders should research extensively before following any information given hereby. Any assumptions made in this article are provided solely for entertainment purposes and not for traders to guide or alter their positions. Please read our Terms & Conditions and Risk Disclosure for more information.
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