German export drops and European worries
There is still much uncertainty in global markets, with jitters in Europe having an effect on the US dollar.
A recent 5.8 per cent drop in German exports coupled with a downward revision of growth forecasts for the country has had a negative knock-on effect on the dollar, owing to the potential for a weak US export market.
Although the dollar has largely retraced earlier losses, investors are still dovish, with the federal reserve bank keeping interest rates low. The recent meeting of the fed also raised concerns about how a strong dollar may further affect US exports.
Similar worries over the potential slowdown of the European economy were echoed in the UK, with Chancellor of the Exchequer George Osborne voicing real concerns over a possible Eurozone financial crisis. For this reason, the UK base rate of interest has been kept at 0.5 per cent.
Risk-aversion has helped the dollar stay strong whilst the Euro slides, and the Central European bank has also pledged to keep interest rates low. The focus for the Eurozone is on increasing the potential for growth to improve market stability. Such caution has seen the Euro rally slightly over the last few days.
The current situation has caused much uncertainty on the online forex trading market. With no clear trends emerging traders are also being cautious, with trading moving away from the risky Central European markets towards the periphery. The interconnected nature of the US and the European markets means that there will be no clear winners in the event of a Eurozone crisis.
