The EUR/USD currency pair suffered heavy losses this week, falling back towards four-week lows around the 1.1200 level. The dollar has increased considerably in value. This notable increase is what’s mainly powering the typical downward trend and attracting a bigger slice of the market’s attention. Market participants are looking ahead to US-China trade negotiations this weekend. At the same time, the landscape of the foreign exchange market itself is rapidly changing.
The EUR/USD rally is just one example of a larger change in risk appetite. After a week of relative stability, the pair were forced to pile on their weekly losses, an impressive comeback by bears. As in previous dollar-driven declines, the strengthening dollar is the culprit. Traders are on elevated alert as they anxiously await the results of an important round of trade discussions between the U.S. and China.
On Thursday, gold prices faced some fresh selling pressure. They fell near the low of their daily trading range, just above $1,300 per troy ounce. The precious metal’s retreat has been closely tied to the strengthening US Dollar. With the dollar climbing in value, demand for gold plummeted, causing its value to crash.
The bad news Elevated yields are once again making fixed-income investments look appealing. Consequently, a lot of investors interest has moved to other assets that don’t have the lack of yield Gold does. The US Dollar’s strength and surging US Treasury yields have pummeled the demand for gold. Consequently, gold prices have fallen sharply.
Market analysts are offering that the new round of US-China trade talks might have an outsized impact on currency and commodity prices. So stay tuned. In turn, a positive outcome risks improving risk sentiment, improving the euro while boosting gold prices. Conversely, a bad result could ramp up the status quo, perhaps something even more damaging. With traders jittery, we expect watchful eyes focused on key economic indicators and geopolitical events.