The US dollar is now fielding a continual decline amid inflation concerns despite the increase in Treasury yield as foreign currencies begin to outperform the S&0 500 and Nasdaq-100 US Dollar leveraged indexes.
The US dollar continues to dip as investors and traders are happily betting against the green paperback. The ironic decline scenario despite Treasury yields is now being worsened as investors and traders alike are trading bearish on the fiat currency.
The decline that is now being reflected in USD currency pairs has now extended its reach to the stock market as foreign currencies are now outperforming USD leveraged indexes globally.
Foreign ETFs Outperform US dollar Leveraged Commodities
At least 26 foreign exchange-traded funds (ETFs) have outperformed the S&P-500 and Nasdaq-100 this year, according to Trade station data.
Global economy trackers commodity-wise like crude oil and metals have also spiked in value, a significant deviation from 2021’s setup, which saw the commodities lag behind the green paperback.
The exchange of fortunes couldn’t come at a more awkward time as the US Federal Reserve has just begun to tighten its monetary policy in a bid to combat inflation. The Fed is now eliminating stimulus expediently and is hinting at least three instances of interest rate increment before the year’s end.
Chairman Here Powell’s testimony at Congress this week has done nothing to ease concerns of Americans and slow the fiat currency’s decline, with inflation even rising slightly higher than predicted. A sharp dip followed his testimony as the Consumer Purchase index (CPI) was shortly released, revealing Americans’ pessimism about their economy. However, the dip doesn’t come as a surprise to most informed policy makers globally, as the hawkish bearish clock served as a forewarning to the incoming foreign currency boom that affects the US dollar decline.
Europe GDP To Eclipse US’ In 2022 and 2023
The main counterweight of the US dollar index, the European currency indexes, are having a field day in the market as they spearhead the advent of foreign currencies boom globally as the US dollar continues its decline.
Earlier on Tuesday, Goldman Sachs predicted that the European nations’ gross domestic product (GDP) will experience more growth than the growth the US GDP will experience in 2022 and 2023. The prediction cited the European government spending and minimal foreign direct investment (FDI) as a significant catalyst, contrasting the US President Biden stimulus plan’s ineffective stimulus plan.
US-based international news agency CNBC also reported the opposition of European leaders to the rampant economic shutdowns earlier this week.
Foreign ETFs Benefit From Declining US Dollar
Whenever the US dollar fields bearish price action, several stocks and exchange-traded funds (ETFs) benefit from the decline. Global economy tracking commodities like crude oil and rare metals also rise because they are priced in US dollars; the weaker the dollar becomes, the higher they are worth dollar-wise.
Some ETFs track global stocks in foreign currencies like the euro, sterling, franc, and Australian dollar, these sets of ETFs similarly gain price value dollar-wise when their leveraged currencies appreciate against the US dollar.