Strong Safe-Haven Demand Pushes Gold Towards New Highs
The gold (XAU) price rose 1.08% on Tuesday and reached another all-time high of $3,034, according to Saxo Bank.
Safe-haven demand fuelled by geopolitical tensions, tariff uncertainty, and solid central banks’ purchases continues to support gold. Israel renewed airstrikes in Gaz after two months of relative calm, triggering a flight to safety among investors. Furthermore, the ambiguity surrounding the Federal Reserve’s ( Fed ) upcoming rate decision creates a climate of macroeconomic uncertainty. The lack of clarity fosters a cautious approach, with investors choosing the existing bullish momentum in gold rather than attempting to anticipate the Fed’s potentially market-shifting announcement.
"If the FOMC meeting takes on a dovish tone in response to growing uncertainty over how tariffs may impact growth, this could provide a further assist to the gold price... could be a green light for gold to make a push above $3,050", KCM Trade chief market analyst Tim Waterer said.
XAUUSD rose slightly during the Asian and early European trading sessions. Today is the week’s most important event—Fed interest rate decision at 6:00 p.m. UTC. Traders expect the Fed to leave its policy rate unchanged in the 4.25–4.5% range. The decision itself may not affect the market, but new details in the FOMC Statement and during the press conference may cause volatility in USD. Traders will pay close attention to the Fed’s economic outlook and the so-called ’dot plot’ to understand the central bank’s policy trajectory. The dot plot is a chart that visually represents the projections of each FOMC member for the target range of the federal funds rate. If the Fed downgrade its economic forecast and the FOMC dots median decreases while the Fed Chair hints that more rate cuts are coming, XAUUSD will rise. If the FOMC Statement includes better economic assessments, the dots median rises, and Jerome Powell sounds less dovish or even hawkish, XAUUSD may drop significantly. ’Spot gold may test support at $3,017 per ounce, a break below which could cause a fall into $2,993–3,002 range’, said Reuters analyst Wang Tao.
Euro Finds Support in ECB Monetary Policy and New Budget Plan
The euro (EUR) rose by 0.2% against the U.S. dollar (USD) on Tuesday as Germany’s parliament approved a large-scale spending plan.
Germany’s recent parliamentary decision to authorise a significant increase in government expenditures marks a step away from its traditionally cautious fiscal approach. This shift aims to stimulate economic expansion and bolster military capabilities.
"Germany, and by extension the eurozone, getting their fiscal act together isn’t only long overdue but supports the bull case for the common currency over the medium-term", said Michael Brown, senior research strategist at Pepperstone.
Data indicating a stronger-than-anticipated improvement in German investor sentiment for March further bolstered the euro.
Meanwhile, the likelihood of the European Central Bank ( ECB ) implementing two additional rate cuts in 2025 dropped below 30%. The change implies that the anticipated differences in monetary policies between the ECB and the Federal Reserve (Fed) are now negligible. This additionally supports the euro.
EURUSD remained essentially flat during the Asian and early European trading sessions. Today, traders should focus on the Fed’s interest rate decision, due at 6:00 p.m. UTC. Analysts anticipate the Fed will keep its monetary policy unchanged due to persistent inflation. Investors are more interested in the Fed’s new economic projections and seeking clues about how U.S. central bankers perceive the effects of Donald Trump’s policies.
"The SEP (Summary of Economic Projections) will be the most interesting aspect, I imagine, with near-term inflation expectations likely nudged higher, and growth projections marked down a touch, though conviction behind those forecasts is going to be lacking amid the ever-changing macro outlook,", said Michael Brown, senior research strategist at Pepperstone.
Fed Interest Rate Decision May Outline USD/JPY Trend
The Japanese yen (JPY) attempted to rise towards 150.000 against the U.S. dollar (USD) yesterday but failed and finished the day essentially unchanged.
Just a few hours ago, the Bank of Japan ( BOJ ) announced that it would keep its key interest rate unchanged, highlighting policymakers’ cautious approach. They prioritise carefully assessing the potential impact of escalating global economic risks, particularly those from increased U.S. tariffs, on Japan’s delicate economic recovery. USDJPY rose in the immediate aftermath of the decision, though moves in the currency became slightly more volatile shortly after.
"The decision to leave monetary policy unchanged itself is not a surprise, so its impact on exchange rates is limited. However, the earlier-than-usual timing of the announcement seems to have led financial markets to initially interpret that the BOJ didn’t consider bringing forward a rate hike," said Hirofumi Suzuki, chief FX strategist at SMBC.
Fundamentally, investors expect the central bank to deliver at least two 25-basis-point hikes later this year. The probability that Japan’s base rate will rise towards 1% by December 2025 currently stands at 26%. It’s reasonable to expect that the broader bearish trend in USDJPY, which began in mid-January 2025, will likely persist in the medium term.
USDJPY was rising during the Asian and early European trading sessions. Today, traders will focus on the Federal Reserve interest rate decision at 6:00 p.m. UTC. Traders expect the policy rate to remain unchanged in the 4.25–4.50% range. New details in the FOMC Statement and during the press conference may outline the U.S. dollar trend. If the Fed downgrades its economic forecast and Jerome Powell, Fed Chair, hints at more rate cuts, USDJPY will likely fall below 149.000. Otherwise, with less dovish or hawkish comments and statements, USDJPY may rise above 150.700.