The US Dollar is under tremendous downside pressure. Markets are preparing for release of the Federal Open Market Committee (FOMC) minutes from its March policy meeting. Traders continue to play it close to the vest amid heightening trade-related tensions between the U.S. and China. This unpredictability has fueled a cautious mood throughout the financial landscape.
As the FOMC prepares to unveil insights from its recent meeting, investors closely monitor the impact of ongoing tariffs on trade dynamics. The US has started setting tariffs on goods from China. In reply, China has countered by placing even more tariffs on US goods, including an 84% tariff on select American imports. As this tit-for-tat trade war has stoked fears over a possible recession in the US economy, adding more downward pressure on the dollar.
Against this chaotic backdrop, precious metals have proven to be favored bullish assets, riding the wave of safe-haven flows. Gold has exploded in the past couple weeks, with gold trading above $3,050 during the last hour of trading today. Investors are pouring capital into it as a sanctuary from an increasingly tumultuous and volatile market.
The Japanese yen became one of the leading safe-haven assets. It has shown tremendous strength in this challenging time. The same has been true of the Swiss franc as investors rush to this currency for safety. In this sense, the euro has taken on a quasi-safe-haven currency status. Its high liquidity provides greater choice and flexibility for risk-averse investors.
GBP/USD currency pair is still up on the session, remaining above the 1.2800 psychological mark. This stability is a sign of investor confidence, in spite of a very difficult economic landscape. The EUR/USD has skyrocketed the entire session, up more than 200 points. As of today, it has since broken back above the 1.1000 mark, indicating a continued stronger demand for the euro versus the dollar.
At the same time, fears of a recessing economic outlook – fueled by the US-China trade conflict – are increasing. Market participants are intently focused on economic data and central bank guidance. The impending release of the FOMC minutes is anticipated to offer insights into the Federal Reserve’s assessment of economic conditions and its future monetary policy direction.