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Traders shifted to risk aversion boosting US dollar

US dollar is gaining as risk aversion dominates the market on Tuesday. Geopolitical issues escalate and weigh on stocks.

The confrontation between the United States and Russia worsened during the last twenty-four hours. With Joe Biden’s visit to Ukraine, geopolitical concerns remained the market’s primary focus. The most recent information about this issue was provided by Antony Blinken.

Blinken stated that the United States has reason to believe that China is considering giving military help to Russia. Russia replied by abandoning its nuclear weapons accord with the United States and promising to continue its military operations in Ukraine.

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The annual rate of inflation in Canada decreased from 6.3% in December to 5.9% in January. Additionally, the Bank of Canada’s Core CPI, rose by 5% annually from 5.4% in December.

Canada CPI

Canadian core CPI chart, source: Trading economics

After returning from a long weekend, Wall Street stocks followed the bearish trend set by their counterparts overseas. The S&P 500 declined on Tuesday due to a decline in retailers and rising Treasury yields. This placed pressure on the market’s growth sectors, notably technology. Concerns that the Federal Reserve may need to raise interest rates further to combat inflation are on the rise again.

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The S&P 500 plummeted 1.8%, the Dow Jones dropped 1.9%, the Nasdaq fell 2.2%. The 10-year Treasury yield flirted with the 4% mark,last seen November 10th . Investors’ estimates for a Fed rate reduction this year diminished and worries grew that the Fed’s peak rate level may be higher than anticipated. Apple, Alphabet, and Microsoft were all down around 2% as a result of the rising interest rates.

Risk aversion has led to the triumph of the US dollar

The US dollar Index, which fell marginally on Monday, returns with minor gains on Tuesday at approximately 104.12 with a 0.33% gain. Olli Rehn, a member of the Governing Council of the European Central Bank, stated that ECB could continue raising rates beyond March. 

EUR/USD trades at 1.0650, close to an early low of 1.0636.GBP/USD stays relatively quiet early Tuesday and continues to fluctuate in a narrow channel above 1.2000 at 1.2110, with optimistic local data supporting the Pound.

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Brent crude finished at $83.05 a barrel, down $1.02, or 1.2%, from its opening price. The March contract for WTI ended at $76.16 a barrel, down 18 cents, or 0.2%. 

In response to risk aversion, the gold price declines during the North American trading day, while the US dollar surges. Gold futures for April delivery ended down 0.3%, while silver for March gained 0.72%.

Tomáš is a financial reporter with US markets as his main field. Tomáš is an aspiring author and entrepreneur aspiring to help people get better in financial knowledge.


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