The gold (XAU/USD) price rose by 0.92% on Tuesday as the US dollar (USD) continued to weaken due to worries over economic slowdown and trade wars.
Global markets have experienced considerable instability over the past couple of days. Concerns over economic growth have intensified due to US President Donald Trump imposing trade tariffs on major trading partners. XAU/USD tends to rise during periods of economic uncertainty because investors seek a safe haven for their capital and often flock to gold. This is because precious metals are perceived as a more reliable asset than volatile currencies or equities.
In addition, the weakening USD has been supporting XAU/USD lately, making gold more affordable for holders of other currencies. Still, there are doubts that the bullish rally can continue longer because bullion is already near its all-time highs.
"The gold price is already trading at a very high level due to the sharp rise since the start of the year, which limits the upside potential", Commerzbank analysts said in a note.
XAU/USD remained relatively unchanged during the Asian and early European trading sessions. Today, the main focus is on the US Consumer Price Index (CPI) report due at 12:30 p.m. UTC. The CPI data could shed light on the future path of US interest rates and affect investors' monetary policy expectations. According to a Reuters poll, the market expects a 0.3% rise in monthly core inflation and a 3.2% annual increase. If the CPI number is higher than expected, XAU/USD may drop sharply. If the report shows slowing inflation, XAU/USD will likely rise slightly.
"Spot gold may break resistance at $2,927 per ounce and rise toward $2,956", said Reuters analyst Wang Tao.
Prospects of a Ceasefire Push Euro Higher
The euro (EUR/USD) rallied by 0.79% against the US dollar (USD) on Tuesday, hitting a fresh five-month high as the prospect of a ceasefire in Ukraine bolstered investors' confidence.
Ukraine agreed to accept an immediate 30-day ceasefire during talks with US officials in Saudi Arabia. However, the ceasefire will take effect only if Russia agrees to it. Thus, traders should monitor the upcoming news closely as the agreement will likely directly impact EUR/USD. Previously, the euro has been rallying on expectations of increased defence spending in Germany, the continent's largest economy.
"Increased European defence spending and the prospect of a ceasefire in Ukraine are positive for the euro. Adding the ceasefire, even if it's just for a month, and the idea that something concrete can actually happen between Russia and Ukraine is an excellent sign for the euro", said Juan Perez, director of trading at Monex USA.
However, the fundamental pressure on EUR/USD remains bearish as investors expect the European Central Bank (ECB) to cut interest rates in 2025. Currently, interest rate swaps market data implies a 31% chance of two 25-basis-point rate cuts by the ECB by the end of the year.
EUR/USD fell during the Asian and early European trading sessions. Today's main event is the US Consumer Price Index (CPI) report at 12:30 p.m. UTC. The CPI data will give clues on the US interest rate path and affect monetary policy expectations. The market expects a 0.3% monthly rise in core inflation and a 3.2% annual increase. If the CPI report reveals a higher-than-expected inflation, EUR/USD may drop sharply. Otherwise, EUR/USD will likely rise slightly on weaker data. Key levels to watch are resistance at 1.10170 and support at 1.08284.
Canadian Dollar Awaits Interest Rate Decision and Trade Tariffs News
On Tuesday, the Canadian dollar (USD/CAD) fluctuated within a broad 1.43780–1.45200 range against the US dollar (USD) but finished the day essentially unchanged.
USD/CAD has been one of the most volatile currency pairs in 2025, primarily due to the escalating trade tensions between the US and Canada. Persistent tariff fears have severely undermined investors' confidence, increasing risk aversion and fluctuations in the pair's exchange rate as markets react to any news. However, the Canadian dollar has been recovering recently. USD/CAD failed to close above the critical 1.45200 level ahead of an expected rate cut by the Bank of Canada (BoC) and after US and Canadian officials agreed to meet to discuss trade tariffs.
"Reality is catching up with Canadian interest rates. The Bank of Canada is going to have to cut a bit more than the market was pricing", said Erik Nelson, a macro strategist at Wells Fargo Securities in London.
The market anticipates a 25-basis-point interest rate reduction from the Bank of Canada (BoC) today and at least two additional cuts by the end of 2025. Since June, the BoC has lowered the benchmark rate by two percentage points, bringing the interest rate towards 3% to stimulate economic activity.
USD/CAD rose slightly during the Asian and early European trading sessions. Today, the pair will likely experience above-normal volatility due to several key events. Firstly, the US Consumer Price Index (CPI) report at 12:30 p.m. UTC will shed light on US interest rate paths. Secondly, the BoC will announce its interest rate decision at 1:45 p.m. UTC and hold a press conference at 2:30 p.m. UTC. Furthermore, more developments regarding trade tariffs will significantly impact market sentiment and the Canadian dollar.