Insights 
VT 
The main refinancing operations rate in the Eurozone is at 2.15%, aligning with forecasts. This decision follows similar monetary policy positions in global markets, where the US Federal Reserve recently cut rates.
In currency markets, EUR/USD remains under pressure, trading below 1.1600. Meanwhile, GBP/USD contends with multi-month lows, hovering near 1.3100 amidst a strong US dollar. Gold prices rise past $4,000 per troy ounce, reversing recent declines despite dollar strength.
Cryptocurrency Market Gains
The cryptocurrency market sees gains following reduced US-China trade tensions. Bitcoin, Ethereum, and XRP increase by approximately 1%. In Zcash, the bullish trend persists, trading near $360 and aiming for $400.
US-China trade relations have seen improvement after the Trump-Xi meeting, reducing trade barriers without unexpected developments. Market dynamics continue to evolve as stakeholders evaluate these global economic shifts.
We are looking at a very different interest rate environment now than we were back when the ECB’s main rate was 2.15%. With the European Central Bank holding its rate at 3.75% to combat the latest core inflation figure of 3.9% from Eurostat, the landscape has completely shifted. The Federal Reserve is also maintaining a hawkish stance, keeping its key rate at 4.50%, a stark contrast to the rate cuts mentioned in the past.
This policy divergence is putting significant pressure on the EUR/USD, which is a far cry from the 1.1560 level we saw previously. With the pair currently trading around 1.0500, the sustained interest rate differential in favor of the dollar suggests this trend may continue. Traders should consider using options to position for further downside, especially as the CBOE Volatility Index (VIX) hovers around 19, indicating underlying market uncertainty.
Evolving Gold Market
The market for gold has also evolved significantly from when it was pushing past the $4,000 mark. Today, with high real yields making non-yielding assets less appealing, gold has settled back to around $3,550 per ounce. This sustained high-rate environment from central banks suggests that the headwinds for precious metals are likely to persist for the foreseeable future.
We’ve moved well past the era of simple trade truces between single leaders like Trump and Xi. The focus for us has now shifted to broader, more complex issues around strategic technology sectors and the ongoing realignment of global supply chains. This creates a different type of volatility that impacts specific industries far more than broad market sentiment.
That old 1.3100 target for GBP/USD seems like a distant memory in the face of persistent dollar strength. The pound has been struggling for similar reasons as the euro, with the Bank of England trying to balance inflation that is proving harder to tame than it was in the 2022-2023 period. We are watching for any signs of a policy pivot, but for now, the path of least resistance appears to be lower.
