Why is the euro weakening today and why investor confidence in further weakening is growing
Investor confidence in the euro weakening against the dollar continues to grow. The number of net positions for sale of the European currency is at its highest since the pandemic COVID-19, writes the Financial Times.
Pressure on the euro is given by traders’ concerns that rising energy prices will lead to a recession in the economy of the region, as well as the overall strengthening of the U.S. dollar, which is supported by the aggressive tightening of monetary policy by the Federal Reserve (FRS).
Why is the euro weakening today?
According to the Commodity Futures Trading Commission (CFTC), the number of net open positions to sell the euro during the week to 23 August totaled 44.1 thousand, compared to 42.8 thousand the week before. This is the highest since the first week of March 2020, when the number of open “short” positions in the euro reached 86.7 thousand.
The Euro is weakening against the dollar. It has fallen more than 14% since the beginning of this year and last week renewed a 20-year low amid a jump in gas prices.
“The euro exchange rate is now entirely driven by the European energy crisis,” said TD Securities currency analyst Mark McCormick. – “The key driver of euro value over the next couple of weeks will be news regarding the Nord Stream pipeline as well as gas prices.”
The increase in short positions in the euro is also because the dollar is considered a “safe haven in a storm” as well as the absence of a gas crisis in the U.S., says David Adams, who is in charge of foreign exchange strategy at Morgan Stanley (NYSE:MS).
Rising gas prices have forced investors to revise their forecasts on how long high inflation in the eurozone will last and how badly the European economy will suffer, the FT notes. European Central Bank (ECB) Executive Committee member Isabelle Schnabel and Bank of France governor Francois Villrois de Galo warned last week at an economic symposium in Jackson Hole that ECB monetary policy will have to remain tight for an extended time.
According to Adams, a risk factor for investors betting on further euro weakness is the possibility of a reversal of the “flow of money” that is now moving from Europe to the U.S. and elsewhere in the next 6-12 months as the ECB raises key interest rates, making European assets more attractive.
Earlier we reported that the dollar was strengthening against other currencies in anticipation of the Fed chief’s speech.
Wall Street futures rise after the U.S. Fed meeting
U.S. stock index futures are rising Thursday, trading data showed. Markets are assessing the outcome of the U.S. Federal Reserve (Fed) meeting.
The Dow Jones Industrial Average (DJIA) futures rose 0.22% to 32,329 points, the NASDAQ high-tech index rose 0.96% to 12,828.5 points and the S&P 500 broad market index rose 0.48% to 3,989.75 points.
The Fed on Wednesday expectedly raised its benchmark rate by 25 basis points to 4.75-5% per year. The regulator noted that it does not expect the rate reduction this year, but allows it next year. U.S. exchanges were down 1.6% in Wednesday trading.
According to the CME Group, 55.8% of analysts now expect the Fed’s discount rate to remain unchanged in May, while 44.2% expect it to rise another 25 basis points. Thus, markets concede that the Fed may interrupt the cycle of hikes that began last March.
At the same time, shares of cryptocurrency exchange Coinbase were down 10.6% in pre-bid trading. The exchange this week received notice from U.S. authorities of an impending charge of violating laws.
Later in the trading, statistics on initial jobless claims in the U.S. for the week through March 18 will be released. Analysts forecast that the figure would increase by 5 thousand to 197 thousand applications.
Earlier we reported that the US budget deficit was $262bn in February.
ITB (International Trading Brachium) Broker Announced Its YouTube channel
(Mahe, Seychelles-March 08, 2023) – ITB BROKER, LLC, an international forex broker, has announced that with our community growing, we believe that this will be the most effective medium to communicate with and so, we’re proud to announce the launch of ITB YouTube channel .
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- Throughout our community building initiative, we strongly believe in video as our means of communication. Video has played a pivotal role in describing our futuristic services to our audience and in communicating our disruptive vision to potential traders or investors.
- Over the next few weeks, we will be launching interesting videos on upcoming ITB features, bonuses, partnership or IB announcements and financial market expert interviews.
- YouTube is a great place to pick up forex trading tips and learn how to use them in the real world.
There are a number of YouTubers that make great educational videos, perfect for beginners or those considering taking up forex trading. ITB group with over 10 years of financial experience provides you with useful tips and hints of forex trading via its YouTube channel.
ITB Broker or ITBFX is a leading provider of online foreign exchange (FX) trading, CFD trading, and related services.
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U.S. budget deficit totaled $262 billion in February
According to a report from the U.S. Treasury Department, the U.S. budget deficit in February was $262,434 billion compared to a $38.8 billion deficit in January. The Dow 30 also had problems.
Analysts at DailyFX suggested that the nation’s budget deficit for February was expected to be $256 billion. A year earlier, in February, the U.S. posted a budget deficit of $216,590 billion.
According to the GAO report, U.S. government spending rose 3.5 percent year over year last month to $524.548 billion, while revenue, in contrast, declined 9.5 percent to $262,114 billion.
Earlier, the U.S. edition of the Washington Post published an editorial stating that the new draft budget proposed by the Biden administration undermines U.S. national security and its ability to invest in the future, because it suggests a further growth of the U.S. national debt.
The WP editorial board noted that the new draft budget assumes a $2 trillion budget deficit, including due to the high cost of providing health insurance to the elderly of the baby boomer generation.
Earlier we reported that the EU has agreed to reduce energy consumption by 11.7% by 2030.
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