It has been a rather volatile couple of days in the financial markets. Much of the volatility has been in the stock markets where the major indices rose sharply late in the day yesterday after the EU and U.S. diffused their trade disputes, only for the optimism to be met with a heavy 20% sell-off in Facebook shares in extended hours on the back of the social network’s poorly received earnings report and forward guidance.
Gold faces an important few days as three major central banks announce their respective policy decisions. All bar one is expected to make a rate change and that’s the Federal Reserve today. According to the to the CME’s FedWatch tool the probability of a 25 basis point rate increase is 96%, which means it is more or less already priced in. That may help explain why the dollar has stopped going up since the end of May.
This has certainly been a rollercoaster trading week for financial markets thanks to geopolitical uncertainty and renewed trade war fears. Easing political tensions in Italy have rekindled risk appetite, ultimately resulting in global equity markets venturing higher.
Gold has managed to hold onto a significant chunk of its gains made yesterday despite the U.S. trading conciliatory messages with North Korea again, something which has boosted the global stock markets and the U.S. dollar. This comes after Donald Trump yesterday canceled the June 12 meeting with Kim Jong Un, which triggered a risk-off response in the markets.