After violent moves and volatility during the currency markets this week, it was the GBP/USD pair that burst over the psychological level of 1.3500 Tuesday. The British pound just hit an incredible high. It has jumped to multi-day highs as the U.S. dollar sells off. Meanwhile, the EUR/USD skyrocketed, hitting fresh new two-week highs just shy of 1.1760. Investor enthusiasm persisted as trade war tensions continued, and fears grew over the independence of the Federal Reserve.
Market participants were surprised to see the US dollar under pressure. This drop is largely fueled by ramping up trade anxiety. These geopolitical tensions have had such an impact on market dynamics that they have forced investors’ hands and driven them into safer, more appealing assets. Both GBP and EUR are trending upwards against the dollar. Most strikingly, GBP/USD has broken out above the 1.3500 level.
Gold prices hit an all-time high this week, with prices topping $3,400 per troy ounce. This increase is the highest the precious metal has climbed in five weeks. Gold prices extended their advance as the US dollar pulled back. This is a weakening, made worse by the fact that yields on the entire US yield curve are falling. As yields fall, gold tends to become a more appealing investment vehicle, triggering more buying interest.
Market analysts credit the resurgence in gold prices to both international and domestic influences. The dollar’s weakening and increasing trade war rhetoric have contributed to this incredible amount of uncertainty in global markets. Investors often rush to gold in times of uncertainty, and that has been the case during the past couple of trading days.
As GBP/USD climbed past 1.3500, traders expressed optimism about the pound’s strength, noting that the pair had gathered additional momentum from the US dollar’s sell-off. This potent cocktail of positive domestic indicators and growing geopolitical worry has helped create the perfect storm for the pound’s recent rise.
Likewise, the EUR/USD’s subsequent push to fresh highs in the 1.1760 area points to a pronounced dollar weakness. First, the euro has been quite strong lately, largely reflecting the market perception of a more stable economic outlook in Europe. At the same time, the United States has ongoing challenges that need attention.