The EUR/USD pair is trading below 1.0400 in European markets on Friday, as it continues to be on the back foot. Similarly, the GBP/USD has extended its drop below 1.2600 in the same session. The pairs are being undermined by increased demand for the US Dollar, which has gained strength amid growing concerns over tariffs imposed by US President Donald Trump. This uncertainty has weighed heavily on the risk-sensitive Pound against the safe-haven US Dollar.
Adding to the market complexities is the risk-off sentiment prevailing among investors, coupled with sliding US bond yields. These developments have done little to support precious metals like Gold. In fact, Gold prices have attracted sellers for the second consecutive day amid a broadly stronger US Dollar. Even upbeat economic indicators from Germany, such as Retail Sales and Import Prices, have failed to provide any substantial boost to the Euro.
On the inflation front, there are indicators that inflation may have eased in February, notably in France, due to a significant reduction in regulated electricity prices. However, prices continue to rise rapidly in the services sector, both in France and across the Eurozone. Despite disinflation becoming more prevalent, service prices remain on an upward trajectory.
Traders are now keenly awaiting the release of the US PCE Price Index for further guidance on market movements. German and US inflation data are also highly anticipated, as they are expected to provide meaningful insights into future economic trends. Market participants remain focused on these key data points, which could potentially sway market dynamics.