Here in the currency markets, it was quite a roller coaster this week. The British Pound (GBP) soared against the US Dollar (USD), and gold prices looked stable during post-market hours. Entering Friday, GBP/USD started off strong above the 1.3450 level, recovering from daily lows as the index of the Greenback continues to fall. Investors are increasingly focusing on upcoming economic data, particularly next week’s US inflation report, which has added to the market’s volatility.
The GBP/USD cross has proved its strength, staying on track to finish the week with significant gains. The Bank of England (BoE) surprised many by coming in hawkish at its meeting on Thursday. This courageous act has arrested the decline of the British Pound. This new development has fueled the hope amongst the traders that this currency will perform extraordinarily well in the near future.
On the other hand, the USD’s recent gains have lost some momentum, playing a role in the GBP/USD move. As shown in the figure above, that shift in sentiment has brought down the EUR/USD exchange rate. After cutting its losses sharply, it is now trading back above 1.1650. Despite EUR/USD being marginally on the defensive, it has still managed to recover above this important level.
Gold prices are another magnet this week, as the yellow metal has been spinning around $3,400. Gold eclipsed all-time highs above $3,410. Now it seems to be in a long consolidation phase, retreating some of their gains, but continuing to show plenty of signs of a healthy market. The United States recently imposed a 20% tax on one-kilo and 100-ounce gold bars. This is viewed as a positive development for gold price, helping to complicate market dynamics.
Investors are keenly aware that upcoming economic indicators, particularly concerning inflation in the United States, will likely influence currency and commodity markets alike. The drastic market reactions ahead of these data releases is causing traders to rethink their positions and strategies.