As usual, let’s start with a quick recap of the Thursday foreign exchange market. The Euro and the British Pound strengthened against the greenback. The EUR/USD pair rallied of the daily explosive rally, now very near the 1.1100 area. This increase is a direct result of the European Union’s recent agreement to suspend retaliatory measures against US tariffs for 90 days. At the same time GBP/USD was reaping the rewards of this de-escalation in trade tensions, trading comfortably above 1.2900.
Moving through the day, the EUR/USD continued to move higher, breaking above the key level of 1.1100. This increase reflects the market’s positive sentiment toward the Euro following the EU’s announcement. The temporary halt in tariff countermeasures is perceived as a step toward resolving ongoing trade disputes between the two economic powers.
The British Pound’s appreciation is supported by an increased risk appetite among investors. This feeling was compounded by former President Trump’s choice to suspend tariff enforcement. As the news sent global markets surging, GBP/USD was once again well above 1.2900.
All market attention has now turned towards the United States’ upcoming inflation data, especially for March. Analysts forecast that core Consumer Price Index (CPI) inflation will continue to cool, coming in at 3% year-on-year on the same month last year. Moreover, overall inflation is projected to increase at an annual rate of 2.6% for March. The upcoming data is particularly significant as it may guide the Federal Reserve’s decisions on monetary policy.
Traders are in a risk-off mood as they look toward Thursday’s CPI release. The US Dollar is coming under increasing pressure due to the drastic impact on global and domestic market dynamics. Fears are escalating on all sides that we’re heading into a full-blown Chinese-American trade war. Consequently, the Dollar’s negative position is a testament to these increasing fears. As a result, US bond yields have started to fall, a second sign of rising investor worries about the sustainability of economic growth.
This broad-based US Dollar selling pressure provided an essential back drop to the current and significant rally in gold prices. XAU/USD has continued to follow through on stellar gains from Wednesday, now trading back over $3,110. Safe haven The gold market traditionally performs well in times of societal unrest. Today, we are in a very different and very positive climate that is conducive to precious metals.