When the foreign exchange market opened in June, it opened with a bang for the euro and for the British pound. This increase was driven by a combination of a softer US dollar and an increase in geopolitical tensions. The EUR/USD pair climbed back above the 1.1400 handle, giving the pair a tremendously bullish kick-off to the month. At the same time, the GBP/USD rushed higher, moving back above the key 1.3500 level.
What really allowed the euro to rise against the dollar was the dollar’s decline itself. Analysts point to a risk-averse market atmosphere as a key driver of this trend. Investors have been ever more jittery about economic uncertainties stemming from the intensifying US-China trade war. There is growing concern that the two economic super powers will not be able to strike a bilateral trade deal. Consequently, market participants are looking for more secure assets, this is pushing gold and other currencies into rally mode.
Many market observers are looking ahead to the expected May ISM Manufacturing PMI data with eager anticipation. This data is en route to providing important glimpses into how the US economy as a whole is faring. Expect this data release to inform Federal traders’ strategies and market sentiment in the days ahead.
On the first trading day of June, gold had a massive $25 up day, above $1,350. Consultants observed that the increase in gold prices is an indication of increased investor nervousness during the ongoing war between Russia and Ukraine. Global geopolitical strife and concerns over US-China trade negotiations under the Biden administration have ignited a wave of uncertainty across the market. Consequently, investors are flocking to gold as a safe haven asset, increasing its demand.
As the GBP/USD moved into a bullish trend, the selling pressure surrounding the US dollar was a significant factor in the pair’s rise. The pound’s ascent above the 1.3500 level indicates strengthening investor confidence in the currency, particularly as key US data is set for release. This overall atmosphere has created the perfect recipe for a powerful performance of the pound in the foreign exchange market. Fear over the US-China trade negotiations has been largely responsible for these positive conditions.
Investors will undoubtedly be watching trade tensions, as well as key economic indicators, in the next few weeks with bated breath. Traders will again find themselves sailing a wide sea of perils and promise. This complex interplay between economic, financial, and geopolitical factors is destined to drive currency markets.