Market Digest

Markets opened the week under renewed geopolitical and trade pressure after US President Donald Trump escalated tariff threats against multiple European countries, tying the measures to tensions surrounding Greenland. The development quickly revived trade-war concerns, pushing investors into defensive positioning and increasing demand for safe-haven assets across the board.

Gold led the market reaction, surging to fresh all-time highs as risk appetite deteriorated and confidence in US policy stability came under scrutiny. The move was supported by a combination of rising geopolitical uncertainty, fears of a broader US–EU trade conflict, and ongoing questions around the long-term independence of the Federal Reserve. While expectations for aggressive rate cuts in 2026 have moderated, the US dollar still weakened broadly, reinforcing bullish conditions for bullion.

In FX, the US dollar retreated against European currencies and safe-haven alternatives, with the euro rebounding more on USD aversion than on domestic strength. The New Zealand dollar remained resilient despite the risk-off backdrop, supported by a hawkish Reserve Bank of New Zealand bias and persistent inflation expectations ahead of key CPI data.

Crude oil struggled to extend gains and remained capped, stabilizing as Iran-related supply risks eased but facing headwinds from trade-driven demand uncertainty and ongoing surplus expectations. With key UK labor market data and German indicators ahead, markets remain highly sensitive to fresh macro signals, keeping volatility elevated across major asset classes.

Gold: Safe-Haven Demand Drives Fresh Record Highs

Gold and silver accelerated higher after Trump’s tariff threats reignited global risk aversion, encouraging investors to rotate toward traditional defensive assets. The proposed tariff path, beginning at 10% from February 1 with the possibility of rising to 25% by mid-year, increased fears of a wider breakdown in transatlantic trade relations and a prolonged period of market uncertainty.

Beyond tariffs, the rally was reinforced by broader confidence concerns surrounding US assets, persistent geopolitical risks linked to Europe and ongoing tensions involving Iran and Ukraine, and heightened attention on US policy credibility. Even as markets reduced expectations for near-term Fed easing, the combination of USD weakness and risk hedging kept gold demand structurally strong.

XAU/USD surged to new highs near the $4,690 area before consolidating, reflecting a wave of profit-taking after the initial spike. However, the fact that price action remained elevated and held above breakout levels suggests the underlying bid remains intact as long as geopolitical uncertainty stays elevated.

Oil: Stabilises After Iran Premium Eases, But Trade Risks Limit Upside

WTI crude traded in a stabilising range around the $59.3–$59.4 zone after slipping earlier in the session. The market digested easing Iran-related tension after Trump signaled potential delays in military action, which reduced immediate fears of supply disruptions. However, the supportive impact was limited, as the president also warned that tougher measures could return if conditions worsen, keeping a residual risk premium in place.

At the same time, oil struggled to gain traction due to renewed trade risks. The tariff threats against Europe raised concerns that weaker global trade flows could translate into softer energy demand. These headwinds were reinforced by expectations of a near-term supply surplus, which continues to cap bullish follow-through despite disruptions to Kazakh exports through the Black Sea.

USOIL rebounded from intraday lows near $58.50 but remained capped below recent highs, reinforcing the view that crude is currently trapped in a range where geopolitics provides downside protection, but demand uncertainty limits sustained upside momentum.

New Zealand Dollar: Outperforms as RBNZ Hawkish Bias Offsets Risk-Off

The New Zealand dollar showed resilience as the US dollar weakened broadly on tariff-driven uncertainty. While risk aversion typically pressures higher-beta currencies, NZD held firm due to strong domestic policy expectations. Markets continued to price a hawkish RBNZ outlook, with a growing probability of a rate hike by September and expectations of full pricing by October.

China’s Q4 GDP reading offered mild support to antipodean currencies, but the key focus remains New Zealand’s upcoming CPI release, with quarterly inflation expected at 0.5% and annual inflation forecast to stay near 3%, the upper limit of the RBNZ target band. This reinforces the idea that inflation persistence could keep the central bank biased toward tightening or at least maintaining restrictive conditions.

NZD/USD climbed toward the 0.5780–0.5790 region, but upside momentum slowed below resistance as traders remained cautious amid fragile global sentiment.

Euro: Gains on Dollar Weakness as Trade Risks Rise

European leaders moved quickly to prevent a transatlantic trade war as Trump’s tariff threats escalated. Reports indicated that EU officials were preparing potential retaliatory measures, including large-scale tariff packages and consideration of the EU’s anti-coercion instrument, underlining how seriously the bloc is treating the risk of escalation.

Despite the political urgency, the euro’s rebound was largely driven by USD weakness rather than improved Eurozone fundamentals. Concerns remain that an extended trade dispute would weigh on growth prospects and reinforce the ECB’s cautious stance, limiting how far EUR can rally sustainably.

EUR/USD recovered from session lows and held above 1.1600, trading near 1.1645, but broader upside remains sensitive to whether the situation de-escalates or intensifies.

US Dollar: Broad Weakness as Policy Uncertainty Weighs on Confidence

The US dollar started the week under pressure as the tariff escalation undermined investor confidence and triggered a shift toward safe-haven positioning. While the Swiss franc benefited strongly, the Japanese yen saw more mixed demand as USD/JPY remained supported, reflecting persistent yield differentials and positioning dynamics.

The US Dollar Index slipped toward the 99.10–99.00 zone, confirming broad softness across G10 FX. GBP/USD held firm near 1.3420, USD/CAD drifted lower toward 1.3870, and USD/CHF dropped sharply before stabilizing near 0.7980, highlighting strong demand for CHF as geopolitical and trade uncertainty increased.

Overall, the dollar’s reaction suggests markets are pricing a rising credibility risk premium, where policy unpredictability becomes a driver of capital rotation and currency repricing even without a major shift in macro data.

Technical Snapshot: Key Levels and Market Bias

NZD/USD is showing early bullish stabilisation after rebounding from the 0.5680–0.5725 support zone. RSI holding above 50 and price reclaiming the Bollinger mid-band suggest improving sentiment, but the pair remains capped below the 200 EMA, meaning the longer-term bearish structure is not fully broken. A break above 0.5840 would strengthen upside momentum, while a failure back below 0.5725 risks renewed downside pressure.

EUR/USD remains under bearish pressure after rejecting the 1.1795 resistance zone. RSI below 50 and a bearish MACD crossover keep the downside bias intact, with price action leaning toward the lower Bollinger Band. A decisive move below 1.1510 exposes 1.1480, while only a sustained recovery above 1.1795 would shift the structure toward neutral.

XAU/USD remains firmly bullish, holding above all major moving averages and pressing toward the 4,700 resistance zone. Momentum remains elevated, with MACD supportive and Bollinger Bands expanding, confirming strong trend conditions. However, RSI in overbought territory signals a rising probability of consolidation or a corrective pullback before further extension. A break above 4,700 opens the path toward 4,800, while 4,600 and 4,530 remain key supports on any retracement.

Upcoming Data Watch: What Markets Are Pricing Next

Attention now shifts to UK labor market figures, where unemployment and employment changes will shape Bank of England expectations. A stable unemployment rate paired with weaker employment growth would reinforce cooling conditions and strengthen the case for future cuts, while stronger outcomes could support GBP.

In Europe, German PPI and ZEW sentiment will be watched for inflation direction and confidence signals. Stronger readings would help support EUR through improved growth and inflation expectations, while weak data would reinforce the ECB’s cautious bias.

With geopolitical risks elevated and macro catalysts ahead, markets remain highly sensitive to headlines and data surprises, keeping the short-term outlook volatile across FX, gold, and oil.