Gold has drawn the attention of buyers for a second consecutive day, driven by mounting concerns over a potential global trade war. This renewed interest in the precious metal comes as investors seek safe-haven assets amidst growing economic uncertainties. Concurrently, currency movements reflect a complex market landscape where GBP/USD and EUR/USD face challenges. The Sterling struggles to attract buyers but manages to hold above 1.2600 during the European session on Tuesday, while the Euro remains subdued near 1.0450.
The allure of gold is further supported by expectations that the Federal Reserve might opt for additional rate cuts. Such monetary policy adjustments could bolster gold's appeal as a hedge against inflation and currency devaluation. Nonetheless, rebounding US bond yields and a modest uptick in the USD may limit the upside potential for the XAU/USD pair.
In currency markets, GBP/USD's struggle can be partly attributed to mixed economic signals from the United Kingdom. The latest data shows that the ILO Unemployment Change held steady at 4.4% in the three months to December, defying market expectations of an increase to 4.5%. Despite this positive news, sterling's momentum remains constrained.
Meanwhile, EUR/USD remains on lower ground as investors focus on upcoming economic indicators and geopolitical developments. The market's attention is particularly drawn to the German ZEW economic sentiment index and ongoing US-Russia diplomatic talks. These factors contribute to a risk-off atmosphere that has fueled renewed demand for the US Dollar.
The rising yields on US Treasury bonds are also playing a significant role in bolstering the Dollar's strength. As yields increase, the attractiveness of holding USD-denominated assets rises, further pressuring competing currencies like the Euro and Pound.