The USD remains firmly supported; XAUUSD has managed to recover modestly, returning to the $4,200 area; EURUSD is consolidating around 1.1455; Bitcoin briefly advanced towards 64,600.
- The greenback continues to benefit from the Federal Reserve’s hawkish stance and the growing acceptance that rates may stay higher for considerably longer.
- Following the recent sell-off, gold appears to be searching for equilibrium.
- The euro has struggled to establish a sustained recovery so far, as markets continue to assess the widening divergence between the European Central Bank and the Federal Reserve.
- The bitcoin’s move currently appears more aligned with a technical rebound than the beginning of a fresh bullish leg.
FX snapshot
XAUUSD
The elevated interest rates and a stronger USD continue to limit upside potential. On the other hand, lingering uncertainty and investors’ preference for defensive assets are helping to underpin demand for precious metals.
EURUSD
Whilst relatively hawkish rhetoric from the ECB provides some support to EURUSD, the broad strength of the US dollar remains the dominant force weighing on the pair.
BTC
In an environment with elevated interest rates and a strong greenback, risk assets generally find it more difficult to generate sustained upside momentum.
Market sentiment
The new week begins with investors adopting a distinctly cautious tone. Following a series of policy decisions from the world’s major central banks, markets have received one common message: interest rates are unlikely to come down anytime soon, whilst inflation has once again re-emerged as the principal concern. As a result, investors remain reluctant to embrace risk aggressively, despite the recent easing in geopolitical tensions.
