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US dollar growth hampered by fears of a recession

According to analysts and financial strategists, the current growth in the exchange value of the US dollar (USD) is very strongly influenced by investor sentiment, which suffers from fears of a potentially stronger recession in the United States (US). According to these experts, it is this factor that significantly slows down the growth of the USD exchange value against other world currencies and especially against the single European currency, the euro (EUR), which has already broken out of the parity zone.

On 8  December 2022, at 7:45 am CET, according to the US Dollar Currency Index (DXY), which compares the exchange value of the USD with the other six major of world currencies, we saw the USD at a price level of 105.16 with a daily growth of +0.06%. According to the data of technical analysis, from the beginning of this year DXY index showed a growth of +9.52 % and in the overall annual comparison, it increased by +9.57% over the last 52 weeks. In this annual period, the exchange value of the USD showed unusually high volatility, when on 14 January 2022 we saw the USD at a price level of 94.63, and a few months later, on 28 September 2022, it was 114.78.

On the other hand, the EUR is currently using investor sentiment to its advantage. According to analysts, investors having concerns regarding recession of the US economy strengthens the EUR exchange value. Until recently the euro hit parity with the US dollar. At the time mentioned, the global currency pair EUR/USD traded on the international foreign exchange – Forex market at US$ 1.0518 per EUR with a daily strengthening of the EUR by +0.12% against the USD. Other currencies such as the Australian dollar (AUD) or the British pound (GBP) are currently also strengthening. For example,  the currency pair AUD/USD traded at US$ 0.673 per AUD with a +0.13% daily appreciation of the AUD against the USD and the GBP/USD traded at US$ 1.2204 per GBP with a +0.04% daily appreciation of the GBP against USD.

According to the financial strategists, the US dollar remains weak on early morning of 8 December when it fell overnight against its main competitors for the first time this week, due to investors’ fear regarding possible economic recession in the US. Investors and traders are now looking forward to next week, when the meeting of the US Federal Reserve System (Fed) will take place on the 13 and 14 December with regard to the pace of interest rate increases. It is currently in the range of 3.75% to 4.00% per year with the prospect of continued growth. According to Fed chief Mr. Jerome Powell’s announcement, interest rate increases should continue, but the pace should slow down. According to analysts, it may stop the growth of the USD exchange rate due to high inflation and fears of a recession.

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