EUR/USD started June on a very bullish note, with the pair pushing comfortably above the 1.1400 level as the US currency showed extreme weakness. This rising tide represents a fundamental change in the dynamics of the market. It is largely propelled by increasing hostility between US and China on trade relationship and a low-risk tolerance environment have impacted investor’s actions.
Indeed, the EUR/USD pair jumped on the first trading day of June. That increased demand was compounded by a significant dollar depreciation. Analysts are pointing to the dollar’s recent depreciation as a reflection of increasing concerns about a collapsing U.S.-China trade deal. This state of affairs adds a further layer of uncertainty to the admittedly tenuous economic picture for both countries. These worries have increased the pressure on the dollar, giving the euro more leeway to rise further.
In tandem, GBP/USD had an impressive day, with the pair closing well above 1.3500. As the British pound became strong, so too did the euro. This increase has been further driven by the present weakness of the US dollar, which has deepened amidst continued uncertainties in US-China trade talks. Combined with selling pressure on the dollar, that’s created quite a rally in GBP/USD recently. Whatever the cause, market participants have run to safer assets amid the recent geopolitical tensions.
The market is now looking ahead to the flash US ISM Manufacturing PMI for May. We look forward to this new report providing critical information to help us all understand the health of our US economy. Investors are keenly awaiting this release, as it may influence future monetary policy decisions and overall market sentiment.
Indeed, prices for the yellow precious metal skyrocketed on the first trading day of June. They rose well beyond $3,350 per ounce, on top of changes in currency. Advancing gold prices reflect a risk-averse atmosphere in the market, with investors flocking to safe-haven assets. Investors are flocking to safe-haven assets as global conflicts, including the recent escalation of the Russia-Ukraine conflict, intensify. The increased geopolitical risk and ongoing uncertainty over US-China trade relations have pushed many into the arms of gold.
As global tensions escalate further, so does pessimism around US and China’s prospects of a trade deal. Accordingly, markets are on high, high alert. The long-term economic stability, prosperity and currency valuation implications of these developments could be profound.