The Euro is facing challenges as it remains under pressure from an invigorated US Dollar, driven by heightened demand for safe-haven assets amid ongoing tariff and geopolitical uncertainties. On Friday, the EUR/USD pair hovered near 1.0400 in European trading, as market participants turned their attention to the upcoming US Personal Consumption Expenditures (PCE) inflation data. This data release is poised to provide crucial insight into inflation trends, with the core PCE Price Index expected to rise by 0.3% in January.
Despite positive German economic indicators, including retail sales and import prices, the Euro failed to garner support. The currency's struggles are exacerbated by US President Trump's recent confirmation of imposing a 25% tariff on Canada and Mexico, effective March 4. Furthermore, an additional 10% levy on Chinese imports will compound the existing 10% tariff from February, intensifying trade tensions.
The US Dollar's role as a safe-haven currency has been reinforced amid these developments, overshadowing the appeal of other assets. While US bond yields have been sliding, the risk-off sentiment dampened interest in precious metals like gold, which saw sellers for the second consecutive day due to the stronger USD.
Investors are keenly awaiting the release of German and US inflation data to gauge future economic trajectories. The US Bureau of Economic Analysis is scheduled to release the PCE Price Index data for January at 13:30 GMT on Friday. This pivotal data is expected to influence market sentiment significantly.
Meanwhile, the British Pound faces pressure against the US Dollar due to tariff uncertainties. Despite prudent commentary from the Bank of England (BoE), these statements have not substantially impacted the Pound's performance. The Pound's vulnerability is further accentuated by its risk-sensitive nature amid a robust US Dollar environment.