In June, the foreign exchange market underwent an earthquake. The Euro and the British Pound, two currencies which complain about the strength of the US Dollar every time they gain strength, rocketed higher against the US Dollar. The EUR/USD pair traded strong above 1.1400, suggesting a bullish start to the Euro. A weaker US Dollar helped with some upward momentum. Simultaneously, investor risk aversion spiked alongside global trade tensions.
Market analysts observed that the US Dollar’s decline allowed the EUR/USD to push higher, taking advantage of an overall downturn in the greenback’s value. Concerns regarding US-China trade talks escalated. In response, market actors recalibrated their expectations, and demand for the Euro skyrocketed. Renewed trade tensions between these two economic giants are adding to the Dollar’s woes. This pivot is sharpening the market’s focus on this week’s slate of data.
Gold prices jumped on the first trading day of June, pushing above the $1,350/oz. The precious metal is rallying. Unfortunately, this boom is marred by a risk-averse environment engendered by persistent geopolitical turmoil, notably the increasingly dire crisis between Russia and Ukraine. Investors classically flock to gold as a safe haven in uncertain times, increasing the metal’s demand.
The market has been clamoring for this first look at May ISM Manufacturing PMI data. It will be big as it is expected to provide the best single piece of insight into the overall health of the US economy. Market watchers believe poor performance could send US Dollar down even further. This would have the effect of boosting both the Euro and Pound.
The GBP/USD currency pair was dramatic, finally breaking the psychological barrier of 1.3500. In fact, this concurrent bullish momentum for the British Pound was largely driven by selling pressure surrounding the US Dollar. Today, worries over a breaking-down US-China trade deal reached fever pitch. As a response, investors rushed to more stable alternatives, such as the Euro and Pound, which in turn made them even more appealing in the global market.
As the week moves forward, bullish traders will probably be paying attention intently for any signs of improving US-China trade relations. Until there is more clarity, the ongoing uncertainty is sure to affect currency trading strategies. This is particularly true with major US data releases coming up fast. The potential for volatility on that front is high, with analysts predicting that a haven of more subdued economic conditions might amplify that trend.