On Wednesday, GBP/USD built on its remarkable six-day winning streak. Indeed, it held above 1.3250 throughout the European session, recording its best level since October. The recent trajectory of the currency pair comes from a complex set of factors across international markets. Falling unemployment and inflation rates along with persistent geopolitical tensions are major factors in this interplay.
Across the pond in the UK, new figures showed that the annual Consumer Price Index (CPI) inflation fell back to 2.6% in March. This decline represents a decrease from 2.8% in February. While inflation rates fell significantly, the poster child for the strong pound continued to be the government’s fiscal conservatism. Not only did it recover, but it even remained quite strong against the US Dollar. Market analysts noted that the Pound’s resulting strength could be due to broader shifts in foreign exchange markets. They argue that it’s more the result of non-domestic inflation drivers.
At the same time, the Euro was showing significant strength against the US Dollar. EUR/USD remained very well supported above 1.1350 during European trading hours Wednesday. This bullish development was kick-started by a new wave of selling in the US Dollar. Investors reacted to renewed fears that trade talks between the European Union and United States were nearing collapse. The failure to reach a breakthrough in these negotiations is part of the reason for the ongoing slide in the Dollar’s value.
Of course the US Dollar is already on a long term decline. This steep downturn is largely fueled by fears of an impending recession on the US horizon paired with escalation from the US-China trade war. Such debt burdens have reawakened worries among investors and led to a sharp depreciation of the Dollar. As such, traders are looking for other safe-haven assets.
Gold prices did very well in this environment. On Wednesday, they were within striking distance of record highs of more than $3,300. Gold has historically been known as a safe haven asset. Its recent spike has been driven by a general rise in uncertainty on global markets, combined with market anticipation of Federal Reserve Chairman Jerome Powell’s big speech this Friday. When uncertainty grips the markets, investors frequently seek gold as a safe haven to maintain their wealth.
At the same time, in the fast-moving crypto market, Ripple was undergoing a correction with other top digital assets like Bitcoin and Ethereum. Ripple rose to just $2.08 at Wednesday press time. The recent ups and downs in crypto prices are emblematic of worldwide market conditions driven by the regulatory clamping down and the mood of investors towards riskier assets.