Been trading EUR/USD and GBP/USD for months and the dollar just keeps climbing.
Interest rates seem obvious but there’s gotta be more to it. What’s everyone else seeing in the fundamentals that’s driving this?
China’s economy slowing down is another factor nobody mentioned. Less demand for commodities means more dollar strength.
Plus the dollar rally creates its own momentum when specs start piling in.
Fed’s been way more aggressive than other central banks this cycle. ECB and BOE are still playing catch up with rate hikes.
The real kicker is economic data. US job numbers keep beating expectations while Europe’s dealing with energy costs and recession fears. Money flows where growth looks strongest.
Also seeing a lot of safe haven demand. When markets get shaky, everyone piles into dollars. Been trading this trend since early this year and the momentum just keeps building.
Dollar strength usually runs in multi year cycles too. We might be in the early stages of another one.
Rate differentials play a big role, but institutional behavior is key. Corporations are holding cash in dollars for real yield after a long period of low rates. Europe’s energy crisis has forced companies to spend cash reserves, while US firms are enjoying solid profits. This increases demand for dollars in international transactions. The dollar index breaking above 110 has also sparked technical buying. Momentum traders jump in after key levels are breached. As long as the Fed stays firm and US data remains strong, the dollar’s strength isn’t over.
Energy costs are hitting Europe way harder than the US market right now. European companies are dealing with massive input costs while American businesses have cheaper energy access.
The geopolitical situation also keeps pushing investors toward dollar assets when uncertainty rises. Even when other currencies try to rally, that safe haven demand pulls money back to USD.
I’ve noticed the dollar tends to stay strong longer than most traders expect once these trends get established.
Dollar strength is due to Fed’s hawkish stance.