As recently as Tuesday, the currency markets experienced huge swings. The GBP/USD exchange rate traded close to 1.3400 after a sudden lift to a near 2-year high at approximately 1.3450 earlier in the course of the day. This trend is indicative of the continued tumult in the foreign exchange market as investors continue to wait for pivotal US economic news.
At its highest point, GBP/USD climbed to levels last seen over a year and half ago. This increase portends positive news for the British Pound specifically against the US Dollar. Just a month after this big run, the pair did a 180 trade back down, reversing course and pulling back into the 1.3400 region. Market analysts consider this reversal to be a reflection of fear and caution over this Friday’s expected employment data from the US. This economic data has the potential to rock currency markets.
Correlatively with the moves in GBPUSD, gold prices fell off the table as well, trading down below $3,300/oz. Today’s drop follows gold’s inability to build on the modest gains scored on the first day of the week, Monday. The precious metal has declined in value as investors demonstrate an increasing appetite for risk. Signs of improving relations between the U.S. and China are changing market sentiment in favor of riskier assets and away from classical safe-haven assets such as gold.
Secondly, the easing of US-China trade tensions has contributed to a more positive risk mood. Due to this excuse, trillions in capital are being reallocated by investors. Analysts are pleased to point out the fact this shift pushes capital out of safe-haven assets, thereby exacerbating the phenomenon killing demand for gold. Consequently, gold’s recent performance has failed to demonstrate the safe haven stability many market participants expected.
At the same time, the EUR/USD currency pair is sticking with underperformance, keeping losses under the 1.1400 level. As the Euro struggles to gain footing against its US Dollar counterpart, it will do so despite the recent surprising strength of the US Dollar. Given the market conditions, traders are likely to remain on the bearish side as they wait to see how global events and economic data play out.
Traders are anxiously anticipating this week’s US job numbers. They are likely to want to see evidence of continued strength in the labor market, and a lot of folks are keeping watch of signs of a shift in currency valuations. The importance of this data cannot be overstated, as it can drive major monetary policy decisions and widely impact investor confidence.