Dollar Strengthens, Euro Weakens, Technology Sector Boosts Global Markets

In the currency markets, the value of the dollar against a basket of currencies rose for the second consecutive week, as the Fed is not expected to cut interest rates as quickly as anticipated, while the euro is under pressure due to political uncertainty in France.

The dollar index, which shows the value of the U.S. dollar against six major world currencies, increased by 0.3 percent last week, reaching 105.83 points.

At the same time, the value of the dollar against the euro rose by 0.1 percent, causing the euro price to slide to 1.0693 dollars.

The dollar exchange rate also increased against the Japanese currency by 1.5 percent, reaching 159.80 yen, the highest level in nearly two months.

Investor focus last week was on statements from several leaders of the U.S. central bank. Most of them indicated that inflation remains above the target level of 2 percent and that they will not rush to cut interest rates.

Moreover, all recent data shows that the world’s largest economy continues to grow steadily, which could support inflation at elevated levels.

According to recently published estimates, Fed leaders expect only one interest rate cut of 0.25 percentage points this year.

Therefore, it seems that the Fed will keep interest rates elevated longer than central banks in Europe.

Recently, the European Central Bank began a cycle of monetary policy easing, and last week the Swiss National Bank cut interest rates for the second time this year by 0.25 percentage points. Although the Bank of England (BoE) kept rates unchanged at last week’s meeting, it is expected that BoE leaders will also soon reduce the cost of money.

As a result, the U.S. currency strengthened against most European currencies, including the euro, which fell below 1.07 dollars.

The euro is under pressure due to political uncertainty in France, after President Emmanuel Macron recently decided to call for extraordinary parliamentary elections at the end of this month and the beginning of July, following the victory of Marine Le Pen’s far-right party in the European Parliament elections.

“It seems that investors are hesitant to take stronger actions ahead of the elections in France as that is now the main focus in Europe,” says Erik Nelson, a strategist at Wells Fargo.

Focus on the Technology Sector

On Wall Street, the S&P 500 index reached a new record level in the middle of last week, as did the Nasdaq, but later both indices lost some gains as a correction in technology stock prices followed.

Last week, the Dow Jones rose by 1.45 percent to 39,150 points, and the S&P 500 increased by 0.6 percent to 5,464 points. The Nasdaq index remained almost unchanged at 17,689 points.

For some time now, the direction of the world’s largest stock market has primarily depended on the movement of technology company stocks.

By mid-week, the multi-day price increase in the technology sector continued, allowing the S&P 500 to break above the 5,500-point level for the first time in history.

During those days, the brightest star in the market was the stock of chip manufacturer Nvidia.

Thanks to the euphoria surrounding artificial intelligence development, Nvidia’s stock price has soared more than 155 percent since the beginning of the year, pushing the company’s market value above 3.2 trillion dollars.

Thus, this chip manufacturer became the largest company in the world by market capitalization, surpassing Microsoft.

“This is all Nvidia’s game, and the rest of us are just pretending to be here,” says Michael Green, a strategist at Simplify Asset Management.

However, in the latter part of the week, the stock prices of Nvidia and most other tech giants fell, causing both the S&P 500 and Nasdaq indices to slide from their record levels.

While the technology sector declined, stock prices in the energy sector rose, thanks to the increase in oil prices in recent weeks. This contributed to the Dow Jones index’s rise last week.

Investor focus last week was also on statements from several leaders of the U.S. central bank. Most of them indicated that inflation remains above the target level of 2 percent and that they will not rush to cut interest rates.

According to recently published estimates, Fed leaders expect only one interest rate cut of 0.25 percentage points this year, but speculation continues in the market about two rate cuts.

European stock prices also rose last week. The London FTSE index increased by 1.1 percent to 8,237 points, while the Frankfurt DAX rose by 0.9 percent to 18,163 points, and the Paris CAC increased by 1.7 percent to 7,628 points.

Thus, the indices recovered some of the losses from the previous week when they sharply fell after French President Emmanuel Macron decided to call for extraordinary parliamentary elections, following the victory of Marine Le Pen’s far-right party in the European Parliament elections.