Gold Gains on Weakening US Dollar
The gold (XAU/USD) price rose by 0.83% on Monday, buoyed by a weaker US dollar and escalating trade tensions following Treasury Secretary Scott Bessent’s warning about potential tariff hikes.
Bessent indicated that if countries fail to negotiate "in good faith," tariff rates would revert to the harsher levels announced on April 2. This rhetoric has reintroduced uncertainty into markets that had briefly embraced optimism, increasing demand for safe-haven assets such as gold.
Adding to the cautious sentiment, Moody’s recent downgrade of the US credit rating has intensified investor concerns about the country’s fiscal trajectory. The downgrade, viewed as a reflection of mounting structural weaknesses in the US economy, has reinforced a broader risk-off mood across global markets. As Swissquote Bank’s senior analyst, Ipek Ozkardeskaya notes, the fragile optimism seen in previous sessions may prove short-lived, prompting investors to seek refuge in traditional hedges like precious metals.
XAU/USD fell slightly during Asian and early European trading sessions. Today, 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 Confidence report, due at 2:00 p.m. UTC, may trigger some volatility. Key levels to watch for XAU/USD are support level at $3,160 and resistance level at $3,250.
Waning Confidence in US Exceptionalism Has Sent the Dollar Tumbling
The euro (EUR/USD) won 0.69% against the US dollar (USD) on Monday.
The US dollar came under renewed selling pressure following Moody’s decision to downgrade the country’s sovereign credit rating by one notch—marking the third major agency to take such action after Fitch’s downgrade in 2023 and S&P’s in 2011. The move has reignited concerns over the sustainability of US fiscal policy and its long-term creditworthiness. George Vessey, lead currency and macroeconomic strategist at Convera, noted that "there’s a lot of scope for further downgrades, purely from a valuation perspective," suggesting that a broad "sell America" sentiment may resurface among global investors.
Adding to the market’s caution, US Treasury Secretary Scott Bessent reaffirmed on Sunday that President Donald Trump stands ready to reimpose the higher tariff rates threatened last month if key trading partners fail to engage in negotiations "in good faith." This assertive stance on trade policy is likely to amplify geopolitical risk and investor unease, potentially fueling further outflows from dollar-denominated assets. As a result, the combination of sovereign credit concerns and renewed trade uncertainty is reshaping short-term sentiment toward the US economy and its currency.
EUR/USD continues to rise during Asian and early European trading sessions. EUR/USD rose during the Asian and early European trading sessions. Today, traders should focus on the Consumer Confidence report, which will be released on 2:00 p.m. UTC. In addition, traders should monitor developments concerning global trade tariffs and Russia-Ukraine peace negotiations.Key levels to watch are support at 1.11000 and resistance at 1.13000.
Australian Dollar Weakens After RBA Decision
The Australian dollar (AUD/USD) rose by 0.84% against the US dollar (USD) on Monday after increased safe-haven demand for the Aussie after US President Donald Trump called for an interest rate cut supported the rise.
"The market is still very wary of the lack of austerity coming from the fiscal side in the US" said Rodrigo Catril, senior FX strategist at National Australia Bank. "We think that is potentially a driver for dollar weakness over the coming quarters as the market is likely to demand a higher premium to lend money to the US," he added.
With the Reserve Bank of Australia’s latest move largely priced in, market focus has shifted to the central bank’s updated economic forecasts and Governor Bullock’s commentary for clearer signals on the future trajectory of interest rates, especially as recent Australian data has cast doubt on expectations for further cuts this year. Adding to the uncertainty, political instability weighed on the Australian dollar after National Party leader David Littleproud declared the end of the coalition with the Liberals, signaling a more fragmented opposition as Labor secured a stronger mandate following the coalition’s collapse.
AUD/USD fell during Asian and early European trading sessions following the RBA’s decision. Traders should now monitor upcoming speeches from RBA officials. Key technical levels to watch are resistance at 0.65100 and support at 0.63600.