Meanwhile, the GBP/USD currency pair has enjoyed incredible gains, rising above the 1.3500 threshold and currently around 1.3550. The US Dollar is facing a fresh wave of seller’s exhaustion. That reversal comes in the wake of July’s US Retail Sales data coming in as expected, failing to inspire faith in the dollar’s bullish prospects. Analysts have pointed to US Dollar weakness more broadly as the cause of the GBP/USD increase. Buoyant markets are a critical partner in making this shift happen.
This followed US Retail Sales in July coming in right in line with analyst expectations, signaling continued strength in the world’s largest economy. In spite of this stability, the US Dollar is still flashing red with skepticism amongst traders. As it turns out, this much awaited dollar bullish data is still available on offer in most dollar bearish trading setups. GBP/USD has been the prime beneficiary of this sentiment. Its phenomenal ride is probably not done just yet.
At the same time, the EUR/USD currency pair continues to trade below the important 1.1700 mark after the same retail sales report. The euro, at about $1.05, is on the ropes. This is largely a function of jittery market sentiment—with investors trying to gauge the long-term effect of continuing trade skirmishes in a new US administration.
Gold prices are responding to these developments, staying range-bound below $3,350 per troy ounce. In the face of US Dollar weakness, the shiny metal has shown a sidelined disposition as it works its way under the weight of selling pressure. Market analysts report that gold has a hard time finding an upside breakout through resistance creating a tight trading range.
The unifying factor driving all of these market shifts has been the increasing trade tensions started by former President Donald Trump’s administration. By all accounts, these tensions are on the verge of re-escalating. Rising customs revenues and continuing loss of traction on free trade agreements with trading partners will fuel this sharpening. The dangerous political climate in which we’re all living greatly exacerbates the risk of escalation. Previous analyses by our experts estimate that such increasing tensions could lower world output by some 0.7 percentage points over the medium-term.
With tensions in trade relations just as problematic between the United States and just about every other country, market participants are on constant watch. That market buoyancy might be temporary distraction with a storm of new trade barriers and tariffs hanging in the air. These trade dynamics might have major effects on both the value of currencies and commodities.