During Wednesday’s early trading, the key currency pair GBP/USD stays pressure ridden while trading near 1.3350. In fact, the pair is beginning to retrace some of last week’s advances. This decline is compounded by a massive increase in demand for the US Dollar as the Federal Reserve shuffles dollars around in anticipation of its own forthcoming policy announcements.
Given the cautious outlook, the market traders have been quick to respond to changes in the fortunes of the dollar. Even though the pair posts minor losses, it highlights evidence of a larger trend towards currency consolidation ahead of big new economy arrival.
“GBP/USD stays pressured near 1.3350 amid US Dollar demand ahead of Fed” – www.fxstreet.com
At the same time, gold prices have faced significant selling pressure since briefly topping two-week highs of $3,435 on Monday. The precious metal’s rapid correction signals a shift in market dynamics, influenced by renewed optimism concerning the forthcoming US-China trade talks and profit-taking actions ahead of the Federal Reserve’s policy announcements.
Traders are keeping a weary eye on developments with expectations heavy on traders’ shoulders with possible results coming from the trade talks. This wave of optimism has been felt in the gold markets – with volatility surrounding gold prices. Consequently, many investors are pulling back as they recalibrate their expectations for a very different market.
“Gold corrects from two-week highs, Fed decision eyed” – www.fxstreet.com
Investors are clamoring for shots of clarity, perhaps even of determinism, on the direction of monetary policy. The uncertainty created by the Federal Reserve’s moves only complicates the fiscal landscape. The entire market—equity, bond or otherwise—has been hanging on every Fed announcement. As a consequence, demand for the US Dollar has spiked, weighing down on both GBP/USD and gold prices.
As market participants continue to sort through these developments, they’re still trying to determine what the impacts will be on their trading strategies. The intersection of trade talks and Federal Reserve deliberations will be key in setting expectations for all asset classes.