Gold Declines as Middle East Conflict De-escalates
Gold prices () fell towards $3,350 on Tuesday, pressured by easing geopolitical tensions in the Middle East.
The precious metal, typically seen as a safe-haven asset during geopolitical uncertainty, lost some appeal following the announcement of a ceasefire between Israel and Iran. The resolution significantly reduced immediate risk premiums priced into the market, prompting investors to return to riskier assets.
The de-escalation followed late Monday remarks from US President Donald Trump, who confirmed that Iran had agreed to an immediate ceasefire, with Israel expected to follow 12 hours later. The agreement came after Iran launched a symbolic retaliatory strike on a US base in Qatar, which resulted in no casualties. Markets interpreted the limited scope of the response and the swift move toward de-escalation as a sign that both sides were aiming to avoid a broader confrontation.
XAU/USD continued falling during the Asian and early European trading sessions. Market participants are now shifting focus to monetary policy developments, particularly the upcoming testimony by Federal Reserve (Fed) Chair Jerome Powell before Congress. Powell’s testimony on Tuesday and Wednesday is expected to provide further clarity on the Fed’s policy stance amid persistent concerns and mixed economic data. Any hints of rate cuts or shifts in policy trajectory could further influence the direction of gold prices. Key levels to watch are support at $3,340 and resistance at $3,400.
Euro Rises on Expectations of Dovish Fed Rhetoric
The euro () gained 0.49% against the (USD) on Monday. EUR/USD rose after dovish remarks from Federal Reserve (Fed) Governor Michelle Bowman, who suggested that the central bank may soon need to consider interest rate cuts.
Bowman’s shift in tone was particularly notable, given her traditionally hawkish stance on monetary policy. She highlighted concerns over a weakening labour market and appeared less concerned about inflationary pressures from trade tariffs, signalling a potential pivot towards policy easing. Her comments sparked a sell-off in the US dollar (USD), as markets interpreted them as a strong indication that rate cuts could happen sooner than expected. Helen Given, Director of Trading at Monex USA, emphasised the impact of Bowman’s comments, noting that her hawkish reputation made the dovish shift especially impactful.
“Any indication that she’s leaning toward rate cuts is enough to put downward pressure on the dollar”, Given said.
Broader geopolitical relief also supported the rise of the euro. Investors expect Iran’s response to recent US strikes on its nuclear infrastructure to be measured and contained, further diminishing safe-haven demand for the US dollar.
Meanwhile, eurozone economic data added another layer of complexity to the global monetary outlook. Flash Purchasing Managers’ Index (PMI) data indicated a steeper-than-expected contraction in private sector activity. This reinforced expectations that the European Central Bank will implement a 25-basis-point in September, potentially lowering the deposit rate to around 1.75%. Despite the eurozone’s soft data, the dovish shift in the Fed’s rhetoric provided enough contrast to keep the US dollar under pressure in Monday’s trading session.
EUR/USD continued rising during the Asian and early European trading sessions. Today, investors should focus on Fed Chair Jerome Powell’s speech at 5:00 p.m. UTC. Traders are speculating whether he will adopt an unexpectedly dovish stance or maintain a more neutral, balanced approach. Key levels to watch are resistance at 1.16300 and support at 1.14500.
GBP Rises on Expectations of Fed Rate Cut and Middle East De-escalation
The British pound () rose towards 1.35200 on Monday following the de-escalation of the Middle East conflict.
S&P Global’s flash composite for June edged up to 50.7, slightly above expectations and signaling marginal expansion in private sector activity. The manufacturing sector continued to contract but at a slower pace than forecast, while services activity aligned with analyst estimates. While this data provided a modest cushion for the pound, it was insufficient to counteract the broader risk-off sentiment dominating global markets.
U.K. business activity expanded modestly in June, supported by a rise in new orders—the first increase this year—although the broader outlook remained cautious, with employers accelerating job cuts and voicing concern over geopolitical risks. S&P Global’s flash (PMI) for June edged up towards 50.7, slightly above expectations and signalling marginal expansion in private sector activity. The manufacturing sector continued to contract but slower than expected, with services activity matching analyst estimates. The data offered modest support for the pound.
Still, last week’s unexpectedly dovish stance from the Bank of England (BoE) added pressure on GBP. The central bank left rates unchanged, but the internal vote revealed a deeper split than markets anticipated. Three of the nine members of the Monetary Policy Committee favoured an immediate rate cut. The BoE underscored ongoing inflation concerns and highlighted ’two-sided risks’, noting that inflation is likely to remain elevated well into 2025. This cautious tone prompted markets to reassess the likelihood of future rate cuts, putting pressure on the pound.
GBP/USD slightly rose during the Asian and early European trading sessions. Investor attention is now on Federal Reserve Chair Jerome Powell’s upcoming testimony before the US Congress on Tuesday and Wednesday. Markets will be looking for signals on the Fed’s policy trajectory amid mixed economic data. Market expectations for a July rate cut have increased, with the CME FedWatch Tool now indicating a 20% probability of a , up from 14.5% just a day earlier.