The European foreign exchange market saw dramatic swings during Tuesday’s market, with the EUR/USD trading down to near daily lows of 1.1370. Further complicating the picture, this movement took place against a relatively strong rebound in the US Dollar, supported by a string of high-profile economic reports. Investor reactions to conflicting messages on interest rates and the economy’s health resulted in swift moves in currency markets.
In Australia, the Reserve Bank of Australia’s (RBA) recent meeting minutes revealed that board members debated a potential 50 basis points interest rate cut. Judging that less is more, the RBA settled on a more cautious 25 basis points cut to avoid shaking confidence in the future trajectory of monetary policy. The Australian Dollar (AUD) took a deeper plunge on the cautious pivot. After an impressive rally earlier in the week, the AUD/USD pair tumbled back down to 0.6460.
The Greenback has recouped with the help of a better-than-expected JOLTs Job Openings report. This recent news does signal optimism for the US labor market. With disappointing US Factory Orders data adding to concerns about economic momentum, caution remains the order of the day. Factory Orders unexpectedly dropped -3.7% in April when -3% were expected, making the situation even murkier.
We’re seeing a pretty wild swing in gold prices at the moment. They’ve since dropped to daily lows just under $3,330 after hitting a multi-week peak above $3,400 on Monday. These cumulative pressures on gold prices go deeper than just investor fear, speculating, and buying up the market due to uncertainty in global trade and economic stability.
Remarkably, the EUR/USD currency pair tumbled to daily lows immediately after the announcement of this US data. At the same time, the GBP/USD flattened out and could not hold above 1.3500 as the stronger Dollar weighed heavily. All financial market participants are waiting with bated breath for those economic indicators. Australia’s GDP data on Wednesday and NFP on Friday will certainly affect the direction of the currencies going forward.
As traders focus on the meaning of today’s data drops and central policy meetings, wariness continues to blanket the markets. Given current uncertainties in global trade and economic policies, we are sure to see more spikes in currency values going forward.