US Dollar looks to rebound under pressure as recession risk escalates. This concern is exacerbated by rising U.S.-China trade tensions. That’s why market participants are remaining on the sideline. They are looking forward to when the first full set of minutes of the Federal Open Market Committee (FOMC) policy meeting in March is released, seeking clues as to how the Federal Reserve will navigate today’s economic conundrum. In this environment, safe-haven assets like infrastructure are increasingly appealing to investors. Gold, along with other currencies such as Japanese yen and the Swiss franc, is at the forefront.
The most flighty of these assets, the precious metal gold, has perhaps benefited the most from this new demand for safe-haven investments. It continues to keep a bullish momentum, hovering around $3,050 for most of the second half of the day. This new high is the clearest indicator yet of a growing desire among investors to find defensive positions as uncertainty hangs over the economic landscape. The Federal Reserve’s Neel Kashkari, President of the Minneapolis branch, has acknowledged that recent tariffs could unsettle public expectations regarding inflation, further contributing to market anxieties.
Against this promising backdrop, the GBP/USD currency pair remains thriving. It remains north of 1.2800 throughout Wednesday’s U.S. trading day. This pair certainly paints a picture of resilience. It serves as a reminder of the British pound’s growing strength, as the US Dollar continues to slip in value. The EUR/USD has made some real progress, above 1.1050 today. This increase further underscores its newfound status as a quasi-safe-haven currency, aided in part by its high liquidity.
Now, the constant US-China trade war is moving the market on broader sentiment sorely. As such, traders are being pushed into a risk-averse mode. In this market, safe-haven Japanese yen is unequivocal winner. European real estate investors are flooding into Europe because of the relative stability of real estate. The Swiss franc has much to favor in this ongoing trend. It highlights its high desirability as a safe-haven asset in times of worldwide economic uncertainty.
As fears of inflation and recession risk begin to heat back up, the US Dollar is continuing to come under strong selling pressure. The scope of the market’s reaction indicates how deeply nervous investors are about the unfolding economic picture. Much of this unease is stoked by panics from the current trade war with China. Industry analysts warn that this elevated degree of uncertainty may lead to additional changes in monetary policy by the Federal Reserve.