Gold Collapses Amid Trade Tariff Easing
Gold ( XAU/USD ) declined by over 2.69% on Monday.
"Gold, conversely, faced significant headwinds, retreating from earlier highs above $3,400 down to nearly $3,200 as easing geopolitical fears and stronger economic optimism diminished safe-haven appeal", Saxo Bank analysts wrote.
The decline was driven by improved risk sentiment and reduced demand for safe-haven assets after a breakthrough in US–China trade negotiations. The countries agreed to lower tariffs: US rates on Chinese imports dropped from 145% towards 30%, and China’s levies on US goods fell from 125% towards 10% for the next 90 days.
"The progress made in trade talks between the US and China over the weekend significantly dials back trade tensions, stoking risk appetite, and sapping gold’s haven bid", Peter Grant, vice president and senior metals strategist at Zaner Metals, told MarketWatch.
XAU/USD rose slightly during the Asian and early European trading sessions. Today, traders should focus on the US Inflation Rate report at 12:30 p.m. UTC. The data may affect interest rate expectations and investor sentiment, increasing volatility in the Forex market, including XAU/USD. Key levels to watch are support at $3,195 and resistance at $3,265.
Euro Hits New Lows
The euro ( EUR/USD ) lost 1.46% against the US dollar (USD), closing at a five-week low on Monday after the US and China reached a deal regarding trade tariffs.
On Monday, Washington and Beijing announced a 90-day agreement to significantly reduce the hefty trade tariffs they had imposed on each other. The deal triggered a relief rally that lifted global stock markets and strengthened the US dollar.
"It’s way better than the market was expecting", said Rodrigo Catril, senior FX strategist at National Australia Bank. "It’s just an indication of, for one, the US administration is quite sensitive to the impact (tariffs are) having on the economy, and some would say there’s been a serious walk back in terms of what they’ve done".
EUR/USD fell during the Asian and early European trading sessions. Traders should stay alert for new developments in global trade tariffs and peace negotiations between Russia and Ukraine. In addition, the German ZEW Economic Sentiment report at 9:00 a.m. UTC today may add volatility to the market. Higher-than-expected figures could finally push EUR/USD above the critical 1.11500 level. Conversely, lower-than-expected numbers may trigger a pullback towards 1.10500.
British Pound Falls Against US Dollar
The British pound ( GBP/USD ) decreased by 0.96% on Monday as the US dollar (USD) strengthened due to the US–China trade agreement.
Earlier today, U.K. unemployment statistics were released. The increase in the U.K. unemployment rate from 4.4% towards 4.5% in March indicates a slight weakening in the labour market. A rising jobless rate may signal an economic slowdown, making the Bank of England more cautious about further rate hikes, as tighter monetary policy puts additional pressure on the economy. If this trend continues and inflation remains subdued, the central bank may even consider cutting rates to support employment and stimulate growth. This could increase the likelihood of pausing or reducing interest rates rather than further tightening.
GBP/USD rose during Asian and early European trading hours, trying to recover some of yesterday’s losses. Today, the US Inflation Rate report is due at 12:30 p.m. UTC. Higher-than-expected numbers could support GBP/USD. Conversely, lower-than-expected figures may deepen the downtrend in the pair. "Key technical levels to watch are resistance at 1.31400 and support at 1.30400.