Gold Rebounds on Concerns Over US Economic Outlook and Budget Deficit
The gold ( XAU/USD ) price fell by 1.13% on Friday but later recovered some losses after ratings agency Moody’s downgraded the US government’s credit rating. The agency stripped it of its triple-A rating, citing large budget deficits and rising interest costs.
Last week, the gold price fell by over 3%, marking their steepest weekly decline since November. The decline was largely driven by a surge in investor risk appetite following progress in US–China negotiation. A 90-day pause in tariffs between the countries eased fears of an imminent global recession, dampening demand for safe-haven assets like bullion.
Meanwhile, weaker-than-expected US economic data and slowing inflation have raised market expectations that the Federal Reserve may implement further interest rate cuts later this year. Non-yielding assets such as gold usually perform well under an easing monetary policy.
XAU/USD rose during Asian and early European trading sessions. Today’s macroeconomic calendar is rather uneventful, but traders should monitor any developments around trade tariffs. Additionally, Fed officials will give speeches, adding volatility to all USD pairs. Key levels to watch for XAU/USD are support at $3,160 and resistance at $3,250.
EUR/USD Rises Following a Sharp (OTC: SHCAY ) Decline
The euro (EUR/USD) lost 1.31% against the US dollar (USD) on Friday. However, the decline was limited by expectations that the European Central Bank (ECB) wouldn’t cut the base rate amid persistent core inflation in the eurozone despite signs of slowing growth.
ECB President Christine Lagarde stated that the euro’s recent rise against the US dollar—despite ongoing global uncertainty—was due to a mounting loss of confidence in US policymaking.
"It’s impressive to note that in a period of uncertainty when we should normally have seen the dollar appreciate significantly, the opposite happened. It’s counterintuitive but justified by the uncertainty and loss of confidence in US policies among certain segments of the financial markets".
EUR/USD rose during Asian and early European trading sessions. Today’s formal macroeconomic calendar is relatively uneventful, so volatility is likely to be low. However, investors should closely monitor potential shifts in US trade policy and the Russia–Ukraine peace talks. These developments could significantly impact the market. In addition, the eurozone’s Consumer Price Index (CPI) report, due at 12:00 p.m. UTC, may trigger some volatility. Key levels to watch are support at 1.11000 and resistance at 1.12500.
JPY Strengthens on USD Weakness
The Japanese Yen ( USD/JPY ) remained under downward pressure on Friday, declining for the fifth consecutive trading session.
Recent data revealed that Japan’s economy shrank in Q1 2025, with gross domestic product (GDP) contracting more than analysts had expected. This marked the country’s first economic contraction in a year.
Market focus is now shifting to the upcoming Japanese trade figures, especially as concerns grow over the potential impact of new US tariff measures. Prime Minister Shigeru Ishiba reaffirmed Japan’s stance, stating that Tokyo wouldn’t agree to any preliminary trade deal that omits key provisions on automobiles. He also called on Washington to eliminate the 25% tariff on Japanese cars.
USD/JPY fell slightly during Asian and early European trading sessions. Today’s macroeconomic calendar is relatively uneventful, so the probability of significant price movements is low. USD/JPY traders should watch the critically important 144.800 level, as a break below could trigger a major sell-off.