The EUR/USD currency pair continues to exhibit resilience, with a bid bias holding strong above the 1.1100 figure. On Tuesday, the duo held on to those small gains. They adeptly handled shifts in the markets fueled by changing tides of new economic information and geopolitical events. The first factor driving this trend is the recent softening of the US Dollar. Market participants are closely processing this month’s CPI print in the United States.
The US Dollar’s retreat is a sign of risk-off market sentiment in the wake of today’s release of the all-important CPI figures. We know investors are still processing the significance of this data. So, the dollar’s weakness has strengthened the euro, causing an increase of activity in the EUR/USD pair. Traders are especially focused on what inflationary pressures might mean for future Fed policy direction.
Alongside these shifts in the currency markets, gold has experienced a surge in value. On Tuesday, gold prices remained flat, hovering around $3,240 per troy ounce. On a positive note, earlier in the day, they even managed to recover above the $3,260 level again. Gold prices have been on a tear lately. This increase is due largely to shifts in the global economy, including a continued flight to safety from investors and global market uncertainties.
Further US-China trade relations overtures make for a sudden truce, defusing what was an escalating trade war. This too has contributed to the positive sentiment in the markets. Diplomatic correspondence between the two countries has touted a focus on mutual respect and dignity, indicating the possibility of thawing diplomatic and political relations. In the wake of this announcement, markets responded favorably, with bullish traders returning to riskier assets with vigor.
Even with everything that’s gone on with the trade truce bringing a really positive optimistic atmosphere into markets, traders are still cautious. The ambiguous specifics of the US-China deal leave much to be desired. Consequently, market participants are on edge and fearful of any sudden, unforeseen changes. Analysts note that any resurgence in tensions could trigger a flight back to safe-haven assets like gold, pushing its prices toward last month’s record highs.