The EUR/USD currency pair has maintained its position above the 1.1100 mark ahead of the upcoming US inflation data, signaling a potential shift in market sentiment. On Tuesday, starting from the Asian session, EUR/USD opened with a bullish gap, spiking at the 1.1110 mark. This comes after a dismal prior session where the duo lost out on more than 2.5%.
Such volatility can be explained by recent trade news between the United States and China, which had caused the EUR/USD to increase significantly last week. Relatedly, an apparent temporary trade truce—temporary as in 90 days—has developed even as tensions that marked the recent weeks of changing leadership escalated. This truce is a pleasant surprise for the markets, boosting their perceptions enough to spur a modest euro recovery against the dollar.
Most specifically, it’s making China look good—with signs throughout the Chinese economy that are attributed directly to the trade agreement. This has resulted in an attractive environment for the EUR/USD pair. The thaw in trade relations between these two major economies has contributed to a significant euro appreciation. Speculators are responding vigorously to the revealed effects of these further ameliorated trade phenomena.
Traders are looking ahead to Friday’s US Consumer Price Index (CPI) data. We know, there’s an exhilarating buzz of optimism in the markets. This data will provide important information about inflation trends here in the US. It could be the catalyst for the next big bullish move in EUR/USD and gold prices. Some economists and other analysts stress that CPI data should be relied upon exclusively. This kind of information would be hugely important in shaping the future path of the euro.
Gold prices have been hard to ignore during this backdrop. After suffering a 3% plunge on Monday, gold prices have bounced back quite a bit, pushing consolidating above the $3,200 level as of early Tuesday. Sellers are on break these days. They are looking ahead to US inflation figures due later this week, which will probably determine market direction in the days to come. Gold buyers have been most hopeful for these data releases, looking for a potential golden rescue from the recent downturns.