Gold Climbs Higher After Decline
Gold ( XAU/USD ) fell by 1.95% on Wednesday after the Federal Reserve (Fed) kept the funds rate at 4.25–4.5% for a third consecutive meeting.
Market sentiment turned cautious after US President Trump declared he wouldn’t lower 145% tariffs on Chinese goods to advance trade talks. This comment cast doubt over potential progress at an upcoming meeting between US and Chinese officials in Switzerland. As a result, the lack of optimism about a trade deal strengthened gold’s status as a safe-haven asset.
At the same time, the Fed’s decision to keep its benchmark interest rate unchanged put downward pressure on gold, which offers no yield. The Fed also expressed growing concerns about rising inflation and unemployment, maintaining a cautious stance on future monetary policy. Fed Chair Jerome Powell emphasised that the central bank isn’t considering a preemptive rate cut in response to any economic fallout from the ongoing tariff tensions, further influencing investor expectations.
XAU/USD rose during the Asian and early European trading sessions. Today, the Bank of England ( BoE ) will announce its base rate at 11:00 a.m. UTC, which may trigger market volatility. In addition, the US Jobless Claims report will come out at 12:30 p.m. UTC. Lower-than-expected figures could pause the rally in XAU/USD, though any setback is likely to be short-lived. Conversely, higher-than-expected numbers may push XAU/USD higher towards $3,083.
Euro Weakens After The Fed Interest Rate Decision
On Wednesday, the euro ( EUR/USD ) fell broadly by 0.59%, after the Federal Reserve left interest rates unchanged, in line with market expectations.
"They were a little more hawkish than a lot of the market expected, and they didn’t really change or water down any of the views on inflation being above average or the jobs market selling at a low level", said Marvin Loh, senior global market strategist at State Street. "I still think we’re in an extended hold period until data tells them that they need to do something and/or we get a lot more trade clarity," Loh added.
The US dollar (USD) remains steady against the euro today. The currency is holding on to its gains after its strongest rise in two weeks following the Fed’s comments about growing economic risks from rising inflation and unemployment. The expectation of easing trade tensions between Washington and Beijing further supports the greenback. Investors await Saturday’s US and China meeting about trade tariffs in Switzerland, hoping the countries will progress in regulating trade relationships.
EUR/USD remained above the important 50-day moving average. Today, the Bank of England (BoE) will announce its interest rate decision at 11:00 a.m. UTC. The announcement may add some volatility to EUR pairs. In addition, the US Jobless Claims report at 12:30 p.m. UTC may cause volatility in all USD pairs. Key levels to watch for EUR/USD are support at 1.12700 and resistance at 1.13800.
GBP Remains Near Its Three-Year High
GBP/USD fell by 0.6% on Wednesday, continuing to consolidate ahead of the Bank of England’s (BoE) meeting.
The BoE is widely anticipated to lower interest rates by 25 basis points (bps) towards 4.25% on Thursday, marking its fourth consecutive rate cut. Monetary easing is anticipated due to mounting concerns over slowing economic growth because of US President Donald Trump’s trade tariffs. Investors will scrutinise the meeting—the first since the tariffs were introduced—for any changes in the bank’s tone or economic projections. Additionally, U.K. inflation eased more than expected in March, dropping from 2.8% to 2.6%, supporting the case for the rate reduction.
"We take a slightly more cautious view", said Shaan Raithatha, senior economist at Vanguard. "Though we acknowledge the inflation outlook is softening, there are some near-term risks", he added, before mentioning improving growth prospects, higher utility prices, and tentative evidence that the rise in national insurance contributions and a national living wage is "starting to feed through to final prices".
GBP/USD rose during the Asian and early European trading sessions. The BoE will announce its rate decision today at 11:00 a.m. UTC. Traders should also monitor the Monetary Policy Report , Monetary Policy Summary, and the votes of the Monetary Policy Committee. The regulator may deliver a so-called ’hawkish cut’, meaning they will cut the rate but project fewer rate reductions in the future. In this case, GBP/USD may rally slightly. Conversely, if the BoE sounds explicitly dovish, the pair will likely drop towards 1.32500.