Donald Trump's energy release continues to determine overall market sentiment. The belligerent position of the head of the White House on tariffs was confirmed by US Trade Representative Robert Lighthizer, who said that the Chinese side had abandoned its previous obligations, prompting anger and outrage from the American leader.
Today, official Beijing contacted, announcing its intention to attend the trade talks in Washington on Friday. China will be represented by the main trade negotiator Liu He. This news had a calming effect on market participants. Thus, a clear risk schedule was established for the entire week. Traders are waiting for reports of trade negotiations for Friday.
If we are talking about risks in the foreign exchange market, the mood vector was well defined at the beginning of the week: negative news about trade negotiations between the US and China is a strong G3 led by the yen. The British pound and the Swiss franc are moving independently. Sterling remains under Brexit's influence, and traders no longer perceive the franc as a safe haven, unlike what it used to be, which implies structural weakness.
About gold
Traders did not rush to hide in gold, and the precious metal did not go into a short-term rally, as expected. In fact, it should have been at least until Thursday, because on Friday, as you know, a Chinese diplomat will arrive in Washington for negotiations. However, gold failed to gain a foothold even at the level of $1285-1290, which indicates the weakness of buyers.
Open interest has shown that the number of buyers is three times the number of sellers. But even in this case, gold is not ready to move up. From this we can conclude that the decline in metal prices from the end of March to the present is not due to an increase in sellers, but to a deterioration in demand for safe assets.
It is also worth noting that the market is fueling the Fed's rhetoric. Against this background, the lion's share of investors, despite the approaching summer vacation, when the portfolio is revised, puts on a further rise in the dollar.
From a fundamental point of view, the market is now in a state of euphoria. Fans of gold now have nothing to catch, with the exception of short bursts of panic, on which you can collect a couple of dollars inside the day. It is also risky to rely on long-term growth, since there are no weighty arguments foreshadowing changes in the US market.
As for the dollar, the short-term support for it, as well as the euro as a funding currency, provides a large-scale closure of carry trade positions due to the growing risks of escalation of the trade conflict between the two largest economies of the world. This leads to a decrease in the currencies of developing countries and keeps the EUR/USD pair near the $1.12 mark.
We look forward to Friday and follow the headlines from China and the United States on the trade agreement. The escalation of the conflict contributes to the weakening of the euro, the improvement of the situation will incite the rate of the single currency.
The material has been provided by InstaForex Company - www.instaforex.com