The US dollar index (DXY) continued it’s rally that has been going on since the release of NFP data last week. Based on that release, the USD reached a high record in almost two years.
When this news was written at the beginning of the European session this Wednesday (6/April), DXY was still in the range of 99.60s. Meanwhile, the EUR/USD pair is getting closer to its one-month low record.
That is due to the market concerns about the impact of the protracted Russian-Ukrainian war. That is why; the market situation is now not that stable and still fluctuating due to many things.
The Hawkish Comment from a Dovish Figure
The Federal Reserve Governor, Lael Brainard, said that he expected a combination of interest rate hikes and a downsizing rapid balance in the USA may creaye the monetary policy there is more neutralm
The Most possible time is by the end of the year, with further monetary tightening is implemented as needed. Brainard is well known as one of the most dovish figures in the Fed.
That is why; his hawkish statements were able to amplify the rally in bond yields and the U.S. dollar at the same time. The America’s Treasury two year bond yields are currently at their highest level since January 2019.
The 5Y yields are climbing to their highest since December 2018, while the 10Y yields are rising to it’s high level since March 2019. The USD also strengthened, especially against the yen.
The Yen itself was weighed down by BoJ policy and the euro, which was swayed by the uncertainty of war. That comment was creating so many opinions in the market.
Will Europe Block the Gas Import from the Russia
Brainard's comments are the biggest cause of the rise in yields and the stronger dollar which was gotten. It was said by Ray Attrill as a head of global FX strategy at National Bank of Australia.
Further more he said that they talk about the USD, it's hard to separate it from the euro-dollar exchange rate. that was due to the large weighting (euro) in the index (DXY).
Besides that, the euro is hurt by recent talk of expanding sanctions (over Russia). That factor adds the bad news for the Eurozone economy. There is a news about the European Union.
Their latest proposal revealed a plan to block the coal purchase from Russia and prohibit the boats from that country in the European union ports. It is done in retaliation for the alleged killing of civilians in Bucha by the Russian forces.
Various Sanctions are Given to Russia
The plan still needs an approval from all 27 EU member states to implement that. However, the news of the proposal itself has triggered a market response.
Britain also called on G7 and NATO member states to stop importing the oil and gas from Russia gradually. The new sanctions could further worsen that country’s economic condition.
However, those also have the potential to backfire on the European Union, which is experiencing an energy crisis. It is known that some EU countries depend on the Russian energy supplies.
Those are particularly Germany and Austria. They continue to seek to limit the scope of sanctions on Russia on the non-energy sector. That must be not threatening themselves.
The Germany’s Minister Said More Pressures for Putin are Needed
The financial minister of German, Christian Lindner, said to CNBC on Monday that they have to put more pressures on Putin. Furthermore, they may be isolating that country as well.
The decision to cut off the whole economic relationship with Russia can be taken as we. However, recently is impossible for German to stop the gas stock from that country.
