The financial markets are witnessing significant shifts as US bond yields rebound, causing ripples across various asset classes. On Tuesday, the USD experienced a modest uptick, influencing currency pairs and commodity prices in the European session. Simultaneously, gold is attracting buyers for the second consecutive day amid concerns about a global trade war. The market's focus remains on pivotal developments, including the German ZEW economic sentiment index and the anticipated US-Russia talks.
The renewed demand for the US Dollar is largely driven by a risk-off market mood and rising US Treasury bond yields. This trend has capped the potential of the XAU/USD pair despite the support gold receives from bets that the Federal Reserve might cut rates further. The GBP/USD pair is also feeling the pressure, struggling to attract buyers although it remains above the 1.2600 mark in early European trading. Meanwhile, the EUR/USD pair is holding its ground near 1.0450, reflecting a cautious approach among traders.
Economic indicators from the UK present a mixed picture. The ILO Unemployment Change remained steady at 4.4% for the three months leading up to December, surpassing market expectations of 4.5%. This positive development provides some relief amid broader economic uncertainties. However, it has not been sufficient to generate significant momentum for the GBP/USD pair.
Gold continues to draw interest from investors, with its appeal bolstered by ongoing trade tensions that support its status as a safe-haven asset. Despite the limiting factors of rising bond yields and a strengthening USD, gold's non-yielding nature and speculations of future Fed rate cuts fuel its attractiveness.