Gold Continues Rising
The gold (XAU/USD) price rose by 0.81% on Wednesday as investors continued to flock to safe-haven assets amid escalating concerns about the economic impact of a potential US–China trade war. Also, weaker-than-expected US macro statistics gave bullion an additional boost.
"Gold continues to be largely influenced by trade uncertainties—the tariffs with China and the retaliation has the market on edge, so safe-haven flows remain the dominant factor", said Peter Grant, vice president and senior metals strategist at Zaner Metals.
In response to US actions, China imposed its own tariffs on US goods earlier this week as the US President showed no interest in engaging with Chinese President Xi Jinping to mitigate the tensions.
Economists largely agree that trade tariffs could drive US inflation higher, making the Federal Reserve (Fed) more likely to hold its base interest rate higher for longer. At the same time, yesterday's US ISM Services report came out much weaker than expected, improving the chances for an additional interest rate cut later this year.
Overall, while the strong US dollar and still relatively hawkish Fed exert downward pressure on XAU/USD, geopolitical uncertainty continues to push investors into safe-haven assets.
XAU/USD was rising slightly during the Asian and early European trading sessions. Today, the formal macroeconomic calendar is relatively uneventful, but traders should monitor the news for any developments regarding US-China trade relations.
In addition, the Jobless Claims report at 1:30 p.m. UTC may spur some extra volatility. Lower-than-expected figures will likely have a slight bearish impact on XAU/USD, while higher-than-expected results may help the pair retest recent highs.
"Spot gold may rise to $2,934 per ounce, as suggested by a projection analysis and a rising channel", said Reuters analyst Wang Tao.
Euro Rises Slightly on Weakened US Dollar
The euro (EUR/USD) gained 0.24% against the US dollar (USD) on Wednesday as the greenback weakened following lower-than-expected US ISM Services Index figures.
Also, the absence of a US response to China's newly imposed import tariffs may have contributed to a belief among some investors that a full-scale trade war could be avoided. This may have led some traders to close their long positions in the US dollar, helping the euro recover.
"Markets continuing to price out tariff risks from FX markets", said Nick Rees, head of macro research at Monex Europe.
Still, the eurozone economy remains deeply troubled, with little sign of a significant turnaround. Yesterday, French and Spanish Services Purchasing Managers' Indices (PMIs) came out weaker than expected. The data raised concerns about a potential slowdown in Europe's non-manufacturing sector, which has been a key driver of the eurozone economy's growth lately.
Earlier today, EUR/USD fell during the Asian and early European trading sessions. Traders should pay attention to any developments regarding US–China trade relations. In addition, the German Factory Orders report at 7:00 a.m. UTC and Jobless Claims data at 1:30 p.m. UTC may heighten volatility. Technically, a failure to close above the key 1.04000 level means that bearish sentiment continues to dominate in EUR/USD.
Canadian Dollar Rises After a Pause in US Trade Tariffs
The Canadian dollar (USD/CAD) gained 0.1% yesterday after Canada won a reprieve from US trade tariffs.
Overall, USD/CAD has been one of the most volatile Forex pairs lately. Trade tensions between the US and Canada created significant uncertainty, impacting investor confidence and driving rapid price movements in the pair. However, despite a few substantial swings, USD/CAD seems to have stabilised as Donald Trump paused the implementation of new tariffs and gave way to negotiations.
"Tariff worries are easing—for now, at least—allowing the CAD to stabilise. Unless trade talks deteriorate significantly again, there is a chance that the USD/CAD peak reached Monday near 1.48 will represent a significant high-water mark for spot", said Shaun Osborne, chief currency strategist at Scotiabank.
In addition, Canada Statistics reported yesterday that the country has managed to achieve a trade surplus for the first time in 10 months, as exports expanded faster than imports. The news may have also contributed to the USD/CAD decline.
Earlier today, USD/CAD was rising during the Asian and early European trading sessions. Today, the formal macroeconomic calendar is relatively uneventful, but traders should monitor the news for any developments regarding US–China trade relations.
Also, Jobless Claims data due at 1:30 p.m. UTC may spur some extra volatility in the market. However, the major event for the USD/CAD traders is tomorrow's Labour Force Survey report. Most traders will focus on the change in employment over the past month. Higher-than-expected figures may push USD/CAD below 1.42200, whereas lower-than-expected results may prolong the bullish trend in USD/CAD.