Gold Rises on Demand for Safe-Haven Assets
The gold ( XAU/USD ) price rose by 0.77% on Wednesday amid growing concerns over the US fiscal outlook.
Investor risk appetite diminished after a proposed US federal budget was released, revealing a potential expansion of the already substantial fiscal deficit. This concern was intensified by Moody’s recent downgrade of the US credit outlook. The agency explained the downgrade, citing escalating debt levels and growing macroeconomic uncertainty. The Federal Reserve’s (Fed) cautious tone regarding the US economic outlook also added to investor unease, prompting a shift toward defensive assets.
At the same time, geopolitical instability—particularly the ongoing conflict in the Middle East and US President Donald Trump’s retreat from involvement in the Russia–Ukraine situation—further boosted the safe-haven appeal of gold. Meanwhile, Chinese customs data revealed that gold imports soared towards an 11-month high of 127.5 metric tonnes in April, a 73% increase from March. This spike was fuelled by heightened domestic demand and expanded import quotas issued by the People’s Bank of China amid escalating US–China trade tensions.
XAU/USD continued to rise during Asian and early European trading sessions. Today, US Jobless Claims at 12:30 p.m. UTC will shed light on the state of the US labour market, potentially altering Fed monetary policy expectations. Moreover, traders should monitor news related to trade tariffs and developments in negotiations. Key levels to watch for XAU/USD are the support level at $3,260 and the resistance level at $3,340.
Euro Rises Amid Growing Concerns Over US Fiscal Plans
The euro ( EUR/USD ) gained 0.41% against the US dollar (USD) on Wednesday due to concerns over US President Donald Trump’s fiscal policy.
The US dollar weakened broadly on Wednesday as investor confidence faltered amid concerns surrounding the Trump administration’s proposed tax cut and spending plans. Political divisions within the Republican Party continue to hinder progress, with fiscal conservatives criticising the bill for not including deeper spending cuts. President Trump’s meeting with House Republicans on Tuesday failed to unify support, intensifying market doubts over the administration’s fiscal direction.
Further pressuring the US dollar was a disappointing 20-year Treasury bond auction, in which $16 billion in bonds sold at a yield of 5.047%—a record high, above market expectations. The weak demand suggests that investors are increasingly reluctant to hold US government debt, reinforcing a broader aversion to US assets.
EUR/USD remained relatively flat during Asian and early European trading sessions. The US Jobless Claims and S&P Manufacturing and Services Purchasing Manager’s Index (PMI) reports will be released today at 12:30 p.m. and 1:45 p.m. UTC, respectively. Higher-than-expected Jobless Claims figures could be bullish for the euro, while weaker-than-expected data could exert downward pressure on EUR/USD. Similarly, lower-than-anticipated US PMI data may support the pair, while stronger readings will likely provoke a downward correction and push the euro down towards the 1.13000 level.
Japanese Yen Reached 143.000
The Japanese yen ( USD/JPY ) strengthened, with USD/JPY reaching nearly 143.000 on Thursday. This marks USD/JPY’s lowest level in over two weeks, as growing concerns about the US fiscal trajectory pressured the US dollar (USD).
Market sentiment turned risk-averse amid fears that US President Donald Trump’s proposed tax cuts—estimated to increase the national debt by over $3 trillion—could erode investor confidence in US financial assets and fuel market volatility. These anxieties drove demand for safe-haven currencies higher, boosting the Japanese yen (JPY) appeal.
On the policy front, Japanese Finance Minister Katsunobu Kato confirmed that exchange rate issues weren’t discussed with US Treasury Secretary Scott Bessent during recent G7 meetings. This statement counters speculation about coordinated intervention. Domestically, Japan’s economic indicators painted a mixed picture: core machinery orders surged by 13% in March—well above expectations and signalling strong capital investment—while May Purchasing Managers’ Index (PMI) data showed ongoing weakness in manufacturing and a slowdown in the services sector growth, highlighting uneven momentum in the broader economy.
USD/JPY continued to fall for the eighth consecutive day during Asian and early European trading sessions. Today, apart from tariff-related news, traders should focus on the US S&P Manufacturing and Services PMI report at 1:45 p.m. UTC. It may shed light on the state of the US labour market, potentially altering investors’ rate-cut expectations and triggering volatility across USD currency pairs. Key levels to watch are resistance at 144.500 and support at 143.200