The UK's ILO Unemployment Change report revealed that the unemployment rate remained steady at 4.4% for the three months ending in December, surpassing market expectations of a 4.5% rate. This stability comes as global economic factors continue to impact financial markets. In the meantime, the Reserve Bank of Australia (RBA) announced an anticipated interest rate cut, which RBA's Michele Bullock confirmed was not the beginning of a series of reductions. These developments have caused fluctuations in currency and commodity markets, with particular attention on gold, the GBP/USD, and the EUR/USD.
In response to the unchanged unemployment rate in the UK, the GBP/USD struggled to attract buyers but managed to maintain its position above 1.2600 during the European session on Tuesday. The market's focus shifted towards German ZEW and US-Russia discussions, which influenced risk sentiments. Meanwhile, Michele Bullock of the RBA noted that higher interest rates had effectively slowed economic activity and curbed inflation, emphasizing that the recent rate cut was a strategic move rather than a long-term trend.
In commodity markets, gold found favor with investors for the second consecutive day, driven by bets on potential further rate cuts by the Federal Reserve and ongoing concerns about a global trade war. Despite rebounding US bond yields and a modest uptick in the US Dollar, gold prices remained resilient. The XAU/USD pair continued to attract buyers, demonstrating a strong demand for safe-haven assets amid uncertainty.
Elsewhere in currency markets, the EUR/USD experienced downward pressure, holding near 1.0450 during Tuesday's European morning session. The renewed demand for the US Dollar, coupled with a risk-off market mood and rising US Treasury bond yields, contributed to this downside. Investors remain cautious as they navigate the complex interplay of global economic factors and monetary policies.