By Peter Nurse
Investing.com - The U.S. dollar held firm in early European trade Monday, just off a 20-year high as traders sought out this safe haven amid concerns of slowing global growth and rising geopolitical tensions.
At 4:15 AM ET (0715 GMT), the Dollar Index , which tracks the greenback against a basket of six other currencies, traded largely flat at 104.597, having briefly crossed the 105 level on Friday, its highest since December 2002.
Investors have sought out the safe-haven greenback due to concerns about the U.S. Federal Reserve's ability to tame high inflation without causing a recession, worries about slowing growth arising from the war in Ukraine as well as the economic impact of China's lockdowns to curb its latest COVID-19 outbreak.
Goldman Sachs added to concerns about U.S. growth for this year, with the investment bank cutting its forecasts to reflect the shake-out in financial markets amid the Federal Reserve’s tightening of monetary policy.
The bank now expects the economy to grow 2.4% this year and 1.6% in 2023, down from 2.6% and 2.2% previously.
Adding to worries of a global slowdown were disappointing data out of China. April retail sales plunged 11.1% on the year, almost twice the drop forecast, while industrial output fell 2.9% instead of the slight increase expected, illustrating the deep damage COVID lockdowns were doing to the world's second largest economy.
Persistent geopolitical tensions surrounding the war in Ukraine are also adding to demand for the dollar, following moves over the weekend by Finland and Sweden toward joining the North Atlantic Treaty Organization.
Moscow has consistently warned about potential consequences of such a move, particularly by Finland which has a long border with Russia, and thus this is likely to amplify tensions.
“The market’s concerns around the combination of Fed tightening and expected global slowdown continue to argue in favor of volatility and instability in risk assets,” said analysts at ING, in a note. “Ultimately, this should keep many investors interested in buying the dollar dips.”
The UK is to release inflation data on Wednesday that is expected to show consumer prices leaped to 9.1% on a year-over-year basis in April, in what would be the largest jump in annual inflation since 1980 and the fastest rate of inflation since 1982.
Add Chart to Comment
We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:
- Enrich the conversation
- Stay focused and on track. Only post material that’s relevant to the topic being discussed.
- Be respectful. Even negative opinions can be framed positively and diplomatically.
- Use standard writing style. Include punctuation and upper and lower cases.
- NOTE: Spam and/or promotional messages and links within a comment will be removed
- Avoid profanity, slander or personal attacks directed at an author or another user.
- Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
- Only English comments will be allowed.
Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.