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Dollar Slides as Moody’s Downgrade Shakes Confidence
The U.S. dollar index (.DXY) slipped to a two-week low following Moody’s downgrade of the U.S. government’s credit rating last Friday. The downgrade cited rising fiscal risk and projected deficit expansion under President Trump’s proposed tax cuts. UBS analysts noted that the downgrade triggered a fresh round of dollar selling, supporting gold by making it more attractive to foreign buyers.
In FX markets, the dollar weakened across the board. It fell to 144.095 yen and dropped 0.7% against the Swiss franc. Traders are now watching U.S.-Japan discussions, which may touch on currency management and volatility. With Treasury Secretary Scott Bessent expected to meet his Japanese counterpart this week, any signal favoring a weaker dollar could give gold bulls more fuel.
Bond Market Roiled by Fiscal Fears
Long-end Treasury yields jumped on Wednesday, as the 30-year yield topped 5% and the 10-year yield hit 4.5%, spurred by expectations that the Trump administration’s tax bill could deepen the deficit by up to $5 trillion. According to Deutsche Bank, final outcomes on the tax bill will significantly shape near-term deficit projections.
Bridgewater’s Ray Dalio added to the pessimism, warning that the real risk is not default, but inflation triggered by the Federal Reserve potentially printing money to manage debt service. This sentiment, echoed in the bond market, is driving capital into gold as investors seek a hedge against monetary debasement.
Gold Technicals Hint at Breakout Potential
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