Forex market under pressure as U.S. recession fears intensify
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Global currency markets faced heightened volatility on Tuesday, as escalating fears of an economic downturn in the United States weighed heavily on investor sentiment. Concerns deepened following remarks from former President Donald Trump, who described the US economy as entering a "period of transition," raising alarms about potential recessionary impacts from aggressive tariff policies.
Equity markets responded negatively, with major U.S. indices registering significant declines; the Nasdaq Composite dropped 3.8%, the S&P 500 lost 2.7%, and the Dow Jones Industrial Average fell notably. However, early Tuesday trading shows a slight recovery in US equity futures, indicating cautious optimism among traders.
The US Dollar (USD) faced broad-based weakness over the past week, particularly against the Euro (EUR). Despite some support from a sharp drop in US Treasury yields—with the benchmark 10-year yield remaining below 4.2%—the USD Index edged below the 104.00 mark after Monday's 2% yield decline.
EUR/USD closed flat on Monday after struggling to maintain the previous week's gains. Meanwhile, USD/JPY continues to reflect caution, trading marginally lower near 147.00 following Japan's slower fourth-quarter growth data (2.0% versus 2.8% previously). Japanese policymakers expressed moderate optimism but acknowledged significant external risks.
Investor sentiment remains cautious amid ongoing concerns about economic growth, exacerbated by pending US CPI data releases and the upcoming Federal Reserve’s FOMC meeting. Additionally, potential developments related to trade tensions and fiscal policy debates in key economies are expected to influence forex volatility in the near term. Traders should closely monitor these factors for further indications of market direction.
Equity markets responded negatively, with major U.S. indices registering significant declines; the Nasdaq Composite dropped 3.8%, the S&P 500 lost 2.7%, and the Dow Jones Industrial Average fell notably. However, early Tuesday trading shows a slight recovery in US equity futures, indicating cautious optimism among traders.
The US Dollar (USD) faced broad-based weakness over the past week, particularly against the Euro (EUR). Despite some support from a sharp drop in US Treasury yields—with the benchmark 10-year yield remaining below 4.2%—the USD Index edged below the 104.00 mark after Monday's 2% yield decline.
EUR/USD closed flat on Monday after struggling to maintain the previous week's gains. Meanwhile, USD/JPY continues to reflect caution, trading marginally lower near 147.00 following Japan's slower fourth-quarter growth data (2.0% versus 2.8% previously). Japanese policymakers expressed moderate optimism but acknowledged significant external risks.
Investor sentiment remains cautious amid ongoing concerns about economic growth, exacerbated by pending US CPI data releases and the upcoming Federal Reserve’s FOMC meeting. Additionally, potential developments related to trade tensions and fiscal policy debates in key economies are expected to influence forex volatility in the near term. Traders should closely monitor these factors for further indications of market direction.