Financial Analyst/Content Writer, RADEX MARKETS
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
ХУВьЦАА
The latest drop in the euro has dragged the common currency down to a 16-month low against the US dollar. Tuesday saw the euro drop to just $1.131 before recovering some of the losses, but the pair remains in a desperately unenviable position. Falling consumer confidence, low employment expectations and stagnant growth are all contributing to the pessimistic outlook for the European continent. To make matters worse, inflation is on the rise in Europe just as it is throughout the rest of the world. The European Central Bank would typically raise interest rates to combat such pressures, but unfortunately for the ECB, growth in the Eurozone has been anaemic this year, with baseline projections aiming for a measly 0.9% GDP gain in 2026. The central bank is in a tight spot; raise rates and risk destroying what little growth remains, or do nothing and watch inflation outpace growth anyway, rolling out the red carpet for stagflation. Markets have recognised the problem, and whether the ECB implements another token rate hike or not, interest rates on the euro will not be able to keep pace with those on the dollar, or the pound for that matter. Weakness in the euro temporarily pushed the DXY up to 101.6 points yesterday, a 2-month high for the index.
For all the talk of relative strength between currencies, no one is in any position to gloat at the moment, with bond markets around the world experiencing a historic, coordinated meltdown. Yields on the 10-year US Treasury note pushed to 5.24% yesterday, the highest level since 2007. In the UK, 10-year gilt yields spiked to 5.40%, another level not seen since 2007. Japanese 10-year bonds are seeing yields last observed in the late 1990s. The same story is playing out playing out across Europe.
A slew of US economic data is scheduled to hit financial markets later today, most prominent of all the latest PCE price index. Any large, unexpected change in inflation could rapidly impact bond yields and interest rate expectations down the line.
Turning to one of the more exotic currency pairs, the Iranian rial crashed to a record low of 2.5 million to a single US dollar yesterday on the open market. The figure is far removed from the increasingly meaningless interbank rate of 1.7 million, which is functionally useless in light of the austere economic sanctions imposed on the Iranian regime. Such measures have now triggered a full-on economic collapse within the isolated country, as day-to-day conditions continue to deteriorate. Inflation stands at over 80% and has done since May, with food prices appreciating much faster still. Peace talks have achieved absolutely nothing in recent weeks, and any form of reconciliation appears further away than ever. Brent Crude fell marginally to $103 per barrel on Tuesday, in stark contrast to American WTI contracts, which edged down to just $89. The spread between the two benchmarks has widened considerably following remarks from President Trump that the White House is considering a diesel export ban, forcing oil traders to ruminate on the prospect of a wider export ban, which would further trap petroleum supplies within US borders.
About the Author
Lawrence J. came from a strong technical and engineering background before pivoting into a more financial role later on in his career. Always interested in international finance, Lawrence is experienced in both traditional markets as well as the emerging crypto markets. He now serves as the financial writer for RADEX MARKETS.
Reviewed by RADEX MARKETS
Risk Warning: Trading derivatives and leveraged products carries a high level of risk, including the risk of losing substantially more than your initial investment.
Дериватив болон хөшүүрэгтэй бүтээгдэхүүнээр арилжаа хийх нь өндөр эрсдэлтэй бөгөөд таны анхны хөрөнгө оруулалтаас давсан алдагдал хүлээх эрсдэлтэй. Арилжаа хийхээсээ өмнө манай Нөхцөл, болзол (T&C) болон Бүтээгдэхүүний мэдээллийн баримт бичиг (PDS)-ийг уншина уу.
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