The US dollar recently came close to its 14-month high against the euro after energy prices surged. The surge came amid market worries about inflation while asking the Fed to normalize the policy quickly.
The currency steadied around 1.1558 dollars per euro after establishing a grip at 1.1529 dollars. This took place on Wednesday and was the first instance since July 2020 that the dollar came so close to the euro.
The USD index (used to assess the dollar’s value against six currencies) barely fluctuated at 94.188, after a 0.5% surge in the latest two sessions. It hit a one-year high of 94.504 only recently.
The yen stabilized near 111.375 per dollar near its past week range’s middle. Meanwhile, crude oil reached a seven-year high before dropping its lucid gains. In addition, natural gas broke records in Europe while coal also hit an all-time high.
Chris Weston, Head of Research at Pepperstone, Melbourne, commented on the development. According to him, every conversation on the trading floors, broad markets, and social media has been about natural gas, so much so that it was deafening.
Chris added, trader worries about stagflation risks peaked as they questioned how the Fed would deal with the situation steered by a supply shock.
Investors also showed distress regarding the US debt ceiling meetings. In December, the market paid no heed to Mitch McConnell (US Senate Republican) about allowing an extension on the debt ceiling. If executed, the move will become a historical default, causing an immense economic toll.
The Fed has primarily stated that inflationary pressure, if any, will only be temporary. Moreover, the central bank will reduce its monthly bond purchase around November before addressing the increased interest rates.
Besides, the Federal Reserve is also focusing on employment. The much-anticipated non-farm payrolls report this week will offer additional information regarding Fed’s upcoming decisions.
Experts perceive gradual improvement, especially in the labor sector. The consensus forecast states that the market may have added more than 473,000 jobs in September alone. US private payrolls increased in September ever since the pandemic somewhat subsided.
According to the report by ADP National Employment, US citizens traveled and engaged in high-contact activities in September. The week has already startled the financial market, with crucial reports releasing shortly.