The financial markets experienced unparalleled volatility. The Euro and gold prices exploded, thanks to a US Dollar sell-off of historic proportions. During August, one of the most vital currency pairs EUR/USD spiked to five-week highs above 1.1750. Meanwhile, gold was surging toward an all-time high, barreling towards that key $3,600 level per troy ounce. More disappointing employment figures from the United States have just come out. That would have been nice before last month’s disaster, which saw nonfarm payrolls add just 22,000 jobs, well shy of estimates.
The EUR/USD pair has been the leader in this extreme EUR recovery, trading convincingly to the other side of 1.1700. Analysts have pointed to the increase as a sign that markets are still trying to readjust to a different environment of Fed policy tightening. The Federal Reserve is expected to cut rates as soon as this month, and that has injected increased scrutiny on economic indicators. This is especially true for employment data, which is currently facing extraordinary scrutiny.
The unprecedented pressure on the US Dollar has caused a cascade across all markets. Of all the asset classes, Gold has emerged as the principal beneficiary of such trend, as Gold crosses $3,600 reaching historical highs. As the Greenback continues to decline, investor interest in gold has increased exponentially. For one, many investors view gold as a safe-haven asset during uncertain economic conditions.
The other major GBP/USD currency pair showed similar strength in this period, strengthening past the 1.3550 level. This is a turnaround from two weeks of drops in succession, though GBP/USD has achieved two-week highs. A lower US Dollar has lent support to the British Pound, adding to strength and its recent recovery.
Market analysts are closely monitoring these developments. They emphasize that “all eyes are on the NFP report as Fed rate cut bets intensify.” Traders and investors listen to the employment number with bated breath. As such, these numbers will be highly influential in determining future Federal Reserve policy decisions.