The dollar eases as global growth concerns weigh on markets

It is a mixed day on European stock markets Tuesday, as investors weigh the potential impact of the recent surge in COVID cases in China, the second largest economy in the world, on global growth. Meanwhile, they are waiting for Wednesday’s PMIs which are likely set to confirm contraction in other regions as well.

In light of this, there are concerns that a return to widespread mobility restrictions could occur in the future in the country. As a result, this might have an adverse effect on the region's main growth driver as well as a major export market for companies from the region.

Additionally, the European Central Bank has raised interest rates aggressively to combat inflation, which has weighed on economic expansion.

Later in the session, we will have the latest consumer confidence figures for the Eurozone, which are expected to show a slight improvement over October's figures, indicating a slight rise in November. Further, the Organization for Economic Cooperation and Development is expected to release its latest economic outlook on Tuesday afternoon.

A Paris-based policy forum was especially pessimistic about the outlook for Europe in September, and it is difficult to see how the situation has improved since then.

The US dollar slid ahead of the data announcement

As investors get nervous ahead of Wednesday's Durable Goods Orders data for the US, the US dollar index (DXY) is currently trading below its crucial support level of 107.60 as the market is anticipating a weaker performance. It appears that the volatility of the S&P500 futures is contracting amid a generally quiet mood on the stock market. Meanwhile, there is once again downward pressure on the returns on US government bonds.

After a recovery move, US 10-year yields have fallen below 3.82% after a recovery move, as policymakers at the Federal Reserve (Fed) reiterated their belief that interest rates will be gradually increased.

The euro and pound found support from a lower dollar

After resurfacing from the critical support of 1.0225 during the Tokyo session, the EUR/USD pair is currently displaying back-and-forth movements around 1.0250.

In the wake of a dismal forecast for the UK economy, the British Pound was under pressure. In this regard, it is worth mentioning that the UK Office for Budget Responsibility (OBR) now projects that the GDP in the UK will shrink by 1.4% next year as opposed to the 1.8% that was forecast in March. While that is true, the expectation that the Bank of England will continue to increase interest rates in order to combat stubbornly high inflation helped the Sterling to hold on to some of its gains and to limit any further losses in the GBP/USD pair, for now at least.

There was some positive movement during the Asian session on Tuesday as spot prices managed to rebound a few pips and regain some positive momentum from the 1.1770-1.1780 area. The slight recovery in risk sentiment has resulted in some USD selling and has offered some support to the GBP/USD pair.

According to the UK government, the public sector net borrowing for October was smaller than expected. The announcement came as a pleasant surprise following the announcement of tax hikes and spending cuts made by Chancellor Jeremy Hunt the week before to strengthen the balance sheet of the country.