The foreign exchange market is very volatile at the moment. The EUR/USD pair has remained on the back foot, treading water in the low-1.1300s. At the same time GBP/USD has continued to feel selling pressure, with the pair back down towards 1.3470. These changes are a manifestation of frustrating investor uncertainty with recent economic data and upcoming monetary policy meetings.
The EUR/USD pair is having a hard time keeping its head above the low-1.1300s, a testament to trader’s bearish outlook. The Euro is under intense selling pressure at the moment. At the same time, the Greenback has had a small resurgence, showing that investors continue to prefer US assets in such uncertain market conditions. Investors are understandably skittish over these movements. Specifically, they are assessing the lower-than-expected US Personal Consumption Expenditures (PCE) readings that might affect the US Federal Reserve’s future actions.
The GBP/USD has recently seen a huge acceleration in selling pressure. Consequently, the currency pair has fallen to the 1.3480-1.3470 range. As I write this, pundits are writing things like “the British Pound under siege.” This fight encapsulates the larger economic hardships and trade disruptions facing the United Kingdom. Traders are quickly adapting to the changing market landscape. At the same time, the British currency is under pressure from more dovish-than-expected inflation figures out of the US.
Gold prices have responded accordingly to these economic indicators. As a result, they are defensive flying right now at $1,830 per troy ounce. The golden metal’s conditional offered bias is unchanged. It is truly hard-pressed to answer the latest US inflation numbers, which came in much softer than expected for April. Traders are on the defensive in the marketplace. Even with heightened trade uncertainty and US yields moving lower, this sentiment is weighing on gold’s potential downside and propping up gold’s downside potential.
As market participants await the next European Central Bank (ECB) meeting, there is caution all around. Investors are preparing for a spell of vigilance in the cash market. They’re monitoring carefully any policy shifts that might affect cross currency pair movements. This cocktail of trade uncertainty and differing interest rate expectations is still influencing investor decisions in all asset classes.