Gold Explodes on Weak US Data & Trade War Fears

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USD Down on Data Miss

Following heavy declines over the last two days, the US dollar stabilized over the European morning on Tuesday. The weakest US manufacturing PMI in 10 years sent USD down heavily yesterday. However, bearish developments elsewhere in the G10 have allowed the USD index to find support at the 97.10 level for now. Looking ahead today, traders will be keen to hear comments from Fed chairman Powell who will be discussing the Fed’s strategy at a Chicago conference.

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Eurozone CPI Weaker Than Expected

EURUSD has softened a little today on the back of weaker than expected May eurozone CPI. This saw the core reading print at 0.8% vs 0.9% expected and the headline reading print at 1.2% vs 1.3% expected. EURUSD remains capped by the 1.1264 level today, after briefly piercing above the level yesterday.

UK Manufacturing Falls for First Time In 3 Years

GBPUSD has been a little higher over the European session today so far. This is despite a weak UK manufacturing reading this morning which saw the sector contracting for the first time in three years, printing 48.6 vs 50.6 expected. GBPUSD is hugging the 1.2658 level for now, with focus remaining on further downside in the near term.

Risk Assets Stabilize

Risk assets have seen some recovery today also, likely helped by USD weakness over the last couple of days. The SPX500 is fighting to stay above the 2744.13 level which was briefly pierced this week. Weak US manufacturing data has likely quelled any expectations of a Fed rate hike in the near term, keeping equities bid. However, the outlook remains clouded given the ongoing trade tensions between the US and China which continually threaten to escalate further.

Safe Havens Soaring

Safe havens have been the big winners this week with both gold and JPY storming higher against USD. Gold is now sitting comfortably above the 1321.52 level where it’s holding for its second day now, keeping focus on further upside. Similarly, USDJPY is holding beneath the 108.12 level following yesterday’s break.

Crude Cruising Lower

Crude oil prices remain subdued today also with price currently treading water around 52.68, just off last week’s lows. Ongoing trade tensions between the US and China as well as news of weaker manufacturing in the US and the UK, have heightened concerns over the demand outlook for crude.  Later today traders will get the first indication of US crude inventory levels this week, from the API report, ahead of the main EIA report tomorrow.

CAD Down, AUD up

USDCAD has been in the green so far today though we have seen some retracement of earlier gains. Subdued oil prices are keeping the pair bid, despite the sell-off in USD over the last two days. Canadian manufacturing released yesterday echoed the readings we’ve been seeing elsewhere with the sector contracting May, missing expectations. At its recent meeting, the BOC said that it believed the current slowdown to be temporary.

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