In early European trade Monday, the U.S. dollar stayed steady, barely below a 20-year high; meantime, traders sought a safe haven amid fears about slowing global growth and growing geopolitical tensions.
The Dollar Index monitors the dollar against six other currencies; it was mostly steay at 104.597 at 4:15 a.m. E.T. (0715 GMT). After briefly crossing the 105 barriers on Friday, it is the highest since December 2002. Concerns over the U.S. Federal Reserve’s capacity to control high inflation without producing a recession, concerns about slowing development because of the Ukraine conflict, and the economic impact of China’s COVID-19 epidemic have all pushed investors to the safe-haven greenback. Goldman Sachs raised worries about U.S. growth this year by lowering its predictions to reflect the financial market turmoil caused by the Federal Reserve’s tightening of monetary policy.
The bank now forecasts 2.4 percent growth this year and 1.6 percent growth in 2023; down from 2.6 percent and 2.2 percent previously. Disappointing statistics from China added to concerns about a global recession. Retail sales declined 11.1 percent year over year in April; almost twice as much as was projected; meanwhile, industrial output fell 2.9 percent instead of increasing slightly, indicating the severe economic impact of COVID lockdowns. Following steps by Finland and Sweden to join the North Atlantic Treaty Organization over the weekend, persistent geopolitical concerns surrounding the crisis in Ukraine are contributing to the demand for the dollar.
Moscow has often warned of the dangers of such a move, notably by Finland, which shares a long border with Russia, so that tensions will rise.
USD/JPY lost 0.2 percent to 128.94, recovering from last week’s low of 131.35. EUR/USD dipped 0.1 percent to 1.0406, slightly above the 1.0354 level it struck on Thursday, its lowest since early 2017.
GBP/USD dipped 0.1 percent to 1.2243 after falling as low as 1.2156 last week; it was weighed down by weaker-than-expected first-quarter GDP data. On Wednesday, the U.K. will announce inflation figures showing that consumer prices increased by 9.1% year over year in April, marking the highest annual increase since 1980 and the sharpest pace of inflation since 1982.
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