The EUR/USD currency cross is looking extremely overbought since multi-year highs above 1.1400. By the end of the week it was even a bit better, settling down around 1.1360. This news comes at a fascinating time, as the Greenback, or United States dollar, is under attack. This is amplified today with economic uncertainty and geopolitical tensions weighing on it. Analysts have listed a number of reasons behind the Greenback’s fall. They point to mixed economic data, worries about stagflation, and anxiety from the administration’s continuing trade war with China.
This past week, the EUR/USD had quite the roller coaster ride. At one point earlier in the month, it even rose to a new high above 1.1400. A torrent of economic data pointed to a U.S. economy on the ropes. So, traders built robust settlement just under 1.1360. The precipitous fall of the U.S. dollar has raised alarm bells for investors. They’re concerned, very, very concerned about how this will affect the rest of the economy.
The Greenback is losing ground fast. This drop was a result of some disappointing data releases, not least of which was the U.S. Producer Price Index (PPI), which fell short of expectations. This mushy data, in combination with rising recession worries, has been a shot in the arm to the dollar’s arch nemesis, growing fears in the U.S. dollar. As investors consider their strategy, many are flocking to more secure assets amidst mounting economic pressures.
Fears of stagflation are now reported to be both rampant and rising among analysts and investors—almost by the day. The six-quarters definition refers to an extended period of time marked by stagnant economic growth, increasing unemployment, and high inflation. As all of these fears add up, they deepen the troubles plaguing the Greenback and heighten its fall.
The continued trade war between the US and China makes this even worse. The U.S.-China trade war has already had dramatic, if unintentional, effects on global supply chains and trade patterns. It has, meanwhile, blotted out all global economic growth. With negotiations still at an impasse and tariffs still weighing on bilateral trade, uncertainty continues to hang over the market. This backdrop has constrained profits in the currency markets, with investors on edge as tensions continue to rise.
The U.S. dollar is having a tough time on the global market. At the same time, the GBP/USD currency pair has been volatile and has given back some of its increased level on the day. After making new highs above 1.3150, the pair was backpedaling against changing market dynamics. The British pound is under pressures which reflect the predicament of the U.S. dollar. Uncertainties in both economies are roiling investor sentiment.
As the week went on, it was evident what the larger implications of these developments were. The Greenback’s persistent fall reveals just how tied together our global economies truly are. Just as U.S. domestic problems can send shockwaves through international markets, the reverse is true. Investors are closely monitoring economic indicators and geopolitical events that may further impact currency fluctuations in the weeks ahead.
Market analysts are predicting that the Greenbacks prospects are suddenly dour. They’re hoping for a miracle. At best, an economic data turnaround can save you, or a de-escalation of trade tensions. Fears of recession and worries over stagflation are all the rage. This can-kicking trade negotiating strategy will only add to downward pressure on the U.S. dollar.