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Weaker Dollar Provides Euro Opportunity to Gain

by Serge Shlykov

The euro has been outperforming the dollar in recent weeks and this could provide some opportunities for investors who want to diversify their portfolios. However, it’s important to understand how markets work-and what might be driving these changes before buying into a currency that may not hold value over time.

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The “what are the disadvantages of a weak dollar?” is an opportunity for countries to gain. The weaker dollar provides more Euro opportunities for countries that have been struggling with the Euro.


  • The euro gains ground ahead of Lagarde’s speech.
  • The US Inflation Report and Powell’s Speech are both awaited.
  • After a gloomy Monday, stocks are looking for a boost.

For quite some time, the US Dollar has been the dominant image of strength in the foreign market. This has harmed the Euro and the Pound, both of which have failed to acquire momentum. That has begun to alter this week. During this time of mild Dollar weakness, both currencies have gained. The Euro is now firmly over 1.135, while the Pound has broken beyond 1.36. This comes ahead of the US inflation data later this week, as well as the stock market looking for direction as Treasury yields fall down. 

The Euro finds a window of opportunity to consolidate its position.

For the last few months, the Euro has been under pressure from the Dollar and others. However, in recent weeks, the currency looks to have reached its low point and begun to recover. This was aided by an unexpected improvement in investor mood inside the bloc the day before yesterday. 

The Euro has risen beyond 1.135 as a result of this, as well as some atypical weakness in the US Dollar yesterday. The minor decline in Treasury rates, which fell below the two-year peak they had reached, may have contributed to the dollar’s depreciation. Those forex traders who trade the GBP saw the pound climb as well, albeit the upside may be limited as the UK continues to cope with Brexit-related trade concerns. 

Important Inflation Data Should Be Approached With Caution

Forex traders have seen a movement in Dollar trading ahead of the publication of the monthly CPI data as well as any policy remarks made by Federal Reserve Chairman Powell when he speaks. These data have been more prominent during the epidemic, as inflationary pressure persists despite the Fed’s shift to a more hawkish stance. The US Dollar may have been influenced by last Friday’s disappointing NFP statistics.  

The dip in US Treasury rates is also contributing to the Dollar’s weakness as traders anticipate the CPI statistics. The 10-year note, which is a key benchmark for many investors, fell yesterday from a two-year high at 1.76 percent, where it is expected to open the day. 

After a sluggish start, stocks are expected to improve.

Wall Street made a slow start to the week as both the Dow Jones and S&P 500 posted overall losses for the day. The Dow lost more than 160 points to finish 0.4% lower, while the S&P dropped back 0.1%. The NASDAQ meanwhile rallied back from a losing position to close higher having been down more than 2.5% at certain points in the day. 

European markets are expected to begin higher, followed by a better start in the United States, with futures already heading higher. As we enter another key season of these releases, a lot will be riding on profits, with an eye on the inflation statistics due out tomorrow.

The “how does a weak dollar affect the stock market” is a question that many people want to know. The answer, in short, is that it provides an opportunity for investors to gain.

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Related Tags

  • who is hurt by a weaker dollar?
  • pros and cons of a weak dollar
  • what is the effect of a weak euro on european exporters?
  • euro weakening against dollar
  • why euro is falling 2022

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