Gold Declines as Middle East Tensions Ease
Gold prices () fell by 1.37% on Monday, marking the biggest single-day decline in a month.
The decline was driven by reports that Iran is seeking to ease tensions with Israel and is open to resuming nuclear negotiations with the U.S., provided Washington refrains from supporting Israeli military actions. However, despite Iran’s diplomatic initiative, U.S. President Donald Trump ordered an immediate evacuation from Tehran after Israel intensified its bombing campaign across Iran, targeting the country’s elite military units and state-run media outlets.
’Suspicion is that we’re about to see the U.S. begin some sort of military action in Iran, and we’re now seeing some risk aversion because it brings another element of uncertainty into the market’, said Tony Sycamore, a Market Analyst at IG.
XAU/USD rose slightly during the Asian and early European trading sessions. Today, the focus is on the U.S. report, due at 12:30 p.m. UTC, which could add volatility to the market. Higher-than-expected figures may pause the upward momentum in XAU/USD. Lower-than-expected results may push the pair back towards $3,380.
Euro Consolidates Near Three-Year High
The euro () edged up by 0.07% on Monday, supported by a flight to safety amid heightened geopolitical risks and global market uncertainty.
The euro found further support after U.S. President Donald Trump called for an evacuation from Tehran in response to intensified Israeli airstrikes. Trump reiterated that Iran should have accepted his proposed nuclear agreement, adding to the already tense atmosphere and strengthening the appeal of the U.S. dollar as a safe-haven asset.
Investor attention is now shifting towards the Federal Reserve’s (Fed) policy decision later this week. While markets broadly expect the central bank to leave interest rates unchanged, investors will closely monitor any signals about future monetary policy direction. Meanwhile, rising oil prices and lingering trade tensions continue to stoke inflation concerns, contributing to a cautious but supportive backdrop for the euro.
EUR/USD remained relatively unchanged during the Asian and early European trading sessions. Today, euro traders should focus on news about the peace talks between Israel and Iran. Additionally, the U.S. Retail Sales report, due at 12:30 p.m. UTC, is likely to add volatility to all USD pairs. Higher-than-expected figures may push EUR/USD down towards 1.15000. Conversely, lower-than-expected results may pull the pair towards 1.16300 again.
GBP Consolidates as Conflict in the Middle East Unfolds
The British pound () traded flat against the (USD) on Monday. Investors remained cautious ahead of this week’s Bank of England () policy meeting as geopolitical tensions between Israel and Iran continued to weigh on broader market sentiment.
The Bank of England will announce its policy decision on Thursday, with markets anticipating that rates will remain unchanged at 4.25%. However, forward guidance remains key as money markets are currently pricing in two 25-basis-point cuts by year-end, with the first starting in September. The BoE’s communication on inflation risks, wage trends, and global spillovers is expected to drive near-term movements in GBP and gilt markets.
Disappointing U.K. data—including weak manufacturing, sluggish gross domestic product growth, and a cooling labour market—continue to weigh on the British pound. Last week’s fiscal update from Chancellor Rachel Reeves failed to inspire confidence in the U.K.’s growth. According to analysts, it may have laid the groundwork for potential tax increases later this year, further weakening consumer sentiment and limiting GBP upside. Additionally, the continuing Middle East conflict heightens global uncertainty, prompting traders to reduce exposure to risk-sensitive currencies such as GBP.
GBP/USD continued to move sideways within a range of 1.35250–1.36300 during Asian and early European trading hours. GBP may rise if the Bank of England adopts a cautious tone on future rate cuts during Thursday’s policy meeting. Apart from the decision itself, the main focus will be on the BoE’s forward guidance. Any signals suggesting a more gradual or data-dependent approach to easing could support the pound.