The EUR/USD currency pair opened the month of June on a positive trend, trading close to or above the 1.1400 threshold. This increase is representative of a larger pattern. While the US Dollar weakens, the Euro continues to find momentum and trade higher. The growing US-China trade tensions, for their part, are distracting the market. Investors are now keenly awaiting next Wednesday’s US ISM Manufacturing PMI data for May, which could prove an important catalyst to currency valuations.
Against this backdrop of an ever-strengthening Euro, the GBP/USD currency pair was able to post large gains of their own, trading above 1.3500 decisively higher. A recent surge in bearish pressure on the US Dollar is largely behind this rally. Consequently, the Euro and British Pound have appreciated with respect to the Dollar’s drop. As a result, worries are growing that the US and China would be unable to come to an acceptable trade deal. This lack of clarity in turn is driving a risk averse mood among investors.
Gold, too, has been on a historic rising run, rallying last week on the first trading day of June. The precious metal rose above $3,350, influenced by increased concerns over the global trade picture and an escalation of the Russia-Ukraine war. The current risk-averse mood among investors has increased demand for Gold, reinforcing its status as a safe-haven asset.
Many investors are feeling fearful due to the continuing hostility between the US and China in relation to trade deals. As traders continue to be on guard, all eyes are on the US PMI data on Friday in particular. Analysts are warning that any sort of negative surprise in this report could drive the US Dollar even lower. This would open the door to additional upside in both EUR/USD and GBP/USD.
For now, the market watches nervously as these developments unfold. It is the interaction between geopolitical tensions and economic data that will probably set the tone for currency moves in the few weeks ahead. Traders are walking a tightrope under a renewed US-China trade war. To further complicate their decision-making, the ongoing conflict in Ukraine makes this a much more tense international landscape.