On Friday, the Nigerian naira (NGN) was the best-performing currency among the 20 global currencies we track, while the Russian rouble (RUB) showed the weakest results. The Japanese yen (JPY) was the leader among the majors, while the Swiss franc (CHF) underperformed.
Gold Rises Above 2,000 for the First Time Since May
Gold (XAU) surged by over 1% on Friday and reached a new five-month high as the military escalation in the Middle East prompted investors to buy safe-haven assets.
XAU/USD surged past the pivotal $2,000 mark as news surfaced that Israel commenced a ground operation in the Gaza Strip.
"No one wanted to go home short over the weekend. You have no idea where gold could have opened Sunday evening if something really goes pear-shaped," said Tai Wong, a New York-based independent metals trader.
Meanwhile, the general macroeconomic environment also supports the bullish case for gold as the market expects the Federal Reserve (Fed) to keep its base interest rate unchanged this Wednesday. The long-term outlook, however, is less certain. Rising inflation is set to challenge the global economy in the coming year. Three quarters of over 200 economists surveyed by Reuters believe the primary risk is that inflation could surpass their predictions, indicating that interest rates might stay elevated for an extended period. While gold is often viewed as protection against inflation, elevated interest rates can diminish the allure of gold as it doesn't yield any passive returns.
XAU/USD was declining during the Asian and early European trading sessions. Today, investors will likely continue closely monitoring the developments in the Middle East.
"Spot gold may break resistance at 2,006 per ounce and rise into a range of 2,019–2,036," said Reuters analyst Wang Tao.
Ole Hansen, Saxo Bank's head of commodity strategy, wrote in a note:
"A close above 2,000 may signal a move towards the two record closing highs of around 2,050 from March 2022 and May this year"
Euro Continues to Trade Below 1.06000 as Investors Await Critical GDP Data From Germany
Euro (EUR) gained 0.04% in a very volatile session on Friday.
The release of the U.S. Personal Consumption Expenditure report produced mixed results and did not really move investors' interest rate expectations. Equally, the revision of Michigan's consumer sentiment data was largely overlooked by the market as investors kept focus on the developments in the Middle East.
EUR/USD was falling slightly during the Asian and early European sessions. Today, the traders will focus on the German Gross domestic product (GDP) report at 9 a.m. UTC. If the numbers are higher than expected, EUR/USD may rise above 1.05800. However, if the data comes out weaker than expected, the pair may continue to move downward and drop below 1.05300.