The US Dollar is again rising during this morning’s Asian session after a mixed performance on Friday. Three factors mainly influence the US Dollar; the potential gas crisis in Europe, the latest US employment figures, and the inflation rate, which is scheduled to be confirmed this Wednesday.
When looking at the US Dollar Index, the price has gained momentum and is approaching the latest price high. On Friday, the price had initially witnessed an increase but then declined towards the end of the day.
The EUR/USD pair remains very close to parity, as it did the week before. A similar picture can be seen on the GBP/USD but the USD/JPY remains in a sideways trend, as the price has been unable to break through the resistance levels so far. However, this morning the USD/JPY has gained slight momentum, so that traders will be monitoring any potential breakout.
As mentioned above, one of the main drivers of the US Dollar this morning is the latest European developments which appear to trigger a risk off market. Europe’s gas pipeline, which delivers gas from Russia to Europe, is currently closed for maintenance, but some politicians have indicated that Russia may halt gas exports to Europe altogether.
The French Finance Minister, Mr. Le Maire, warned over the weekend that there is a strong chance that Moscow will halt gas supplies to Europe. This is a big worry for businessmen and traders alike, as the move will likely cause further disruption and higher inflation. This has resulted in a very low-risk appetite, witnessed via the European and US stock markets, which are all down today.
In addition to the above development causing a demand for the safe-haven currency, traders also monitor the US Dollar due to its economic outlook. The Federal Reserve has recently become more and more hawkish due to the rise in inflation. Last week both FOMC members Weller and Bullard advised that they would support a 75 basis point rate hike.
The chairman of the Federal Reserve advised that the regulator would analyze the latest inflation figures. The Consumer Price Index is predicted to land at a significantly higher rate of 1.1%, which is noticeably higher than the previous month. The Friday employment figures were also positive, indicating that demand and inflation are likely to remain high.
On Friday, the US’s Unemployment Rate remained at 3.6%, while the nonfarm payrolls increased by 372,000, which was well above the projected 268,000. This is also significant for the regulator and market as it allows investors to hope for continued tightening national monetary policy. According to the CME FedWatch indicator, more than 92% of traders are confident that the Fed will continue to increase interest rates at the next meeting, as well as in the adjustment of the value by 75 basis points instead of 50 at the end of this month.
Traders over the next two days will mainly be monitoring the developments regarding the European Gas Pipelines as well as the CPI figure, which is scheduled to be released this Wednesday.