On Monday, the British Pound (GBP) exploded higher vs the US Dollar (USD). On the currency front, it hit remarkable multi-day highs, shooting well above the 1.3500 mark. This climb is a comeback from recent declines, seen in the bullish resurgence of GBP/USD that recently scored six-day highs. A change in market perception has favored the GBP. A broader pullback in US yields has been central to this positive turn.
The Euro (EUR) has since appreciated sharply against the USD. The EUR/USD currency pair have appreciated beyond the 1.1700 level, posting fresh three day highs. The Euro’s “Miracle” comeback Meanwhile, the Euro’s miraculous comeback continues apace. Yet this sharp increase mirrors a wider trend of reclaimed faith in the European currency, which goes along with the positive market sentiment last Monday.
The aggressive USD weakening has been the largest supporting factor for both GBP and EUR. Market participants are manifestly undeterred, even more willing to reach for risk. Consequently, the demand for the USD has dropped, creating a self-fulfilling prophecy that further weakens support for the currency. That change in sentiment has been immensely supportive for the Pound and Euro. Moreover, it has continued to build a very strong floor underneath gold prices.
Gold started the week on a high, with prices going above the key $3,400 per troy ounce level for the first time this year. Gold continued to skyrocket to five-week highs, recently blasting through this important level on the downside. This climb in the index was propelled by the USD’s broad-based weakness. Falling US yields have made gold a more attractive investment alternative, luring price sensitive buyers back to the market.
As traders remain keenly focused on the ongoing macroeconomic landscape and looking for signs of new direction in monetary policy. Consequently, more positive sentiment about risk has helped GBP/USD resume its bullish trajectory. This has made investors far more interested in looking for options away from the USD, as evidenced by huge rallies for both currencies and commodities.