Stock Markets Stop the Bleeding

Following Monday’s record-breaking fall by the U.S. stock market, which triggered a broader global sell-off, yesterday saw the market recover considerably. The benchmark Dow Jones Industrial Index closed yesterday up 567 points, a rise of 2.33%, while the broader S&P 500 Index closed up a little less firmly after rising by a shade over 46 points, to end the day up 1.74%. Despite the recovery, the S&P 500 remains more than 6% below its all-time high which it reached last month. Still, it was the largest upwards movement in a day for about two years, and while more volatile and choppy trading is likely, market bulls and investors are taking encouragement from the rise out of the -10% market correction zone.

Despite the heavy volatility in equities, Forex markets have remained active yet orderly, without any notable wild price swings. The U.S. Dollar remains strong and has continued to advance from its multi-year low which it reached only a few days ago. Fundamental analysts see the greenback’s new strength as a product of a greatly increased prospect of a more normalized, higher-rate monetary policy from the Federal Reserve. Among other major global currencies, the British Pound has stood out as particularly weak, as the British government has clarified that it intends a full withdrawal from the European Customs Union. Splits within the governing Conservative Party between Leavers and Remainers appear to be deepening, while leaked European Union documents suggest that the E.U. will demand the power to unilaterally sanction Britain during the two-year transition period without having to go to court, all of which is causing increasingly negative sentiment on the Pound. Tomorrow, the Bank of England will present its policy report and announce its official bank rate, which is expected to remain unchanged at 0.50%.

Turning to other currencies, the Reserve Bank of New Zealand will be giving its monthly policy input later, which is expected to give more direction to the meandering New Zealand Dollar, which is still the highest-yielding currency of all the majors.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.