Germany's annual inflation rate showed an unexpected decline in January, softening to 2.3% on a yearly basis, a figure that came in above market expectations of 2.6%. This development was accompanied by the European Central Bank's (ECB) decision to cut policy interest rates by 25 basis points, a move that did not surprise market analysts. The euro faced renewed selling pressure, with the EUR/USD trading below 1.0400 on Friday as investors reacted to these economic indicators.
The Harmonized Index of Consumer Prices in Germany also saw an increase, rising 2.8% annually, while the Consumer Price Index (CPI) declined by 0.2% on a monthly basis in January. These figures indicate a cooling in regional inflation, which could have broader implications for the European economic landscape. Despite these shifts, the EUR/USD pair showed no immediate reaction to the German inflation report, trading marginally lower at 1.0385.
As the European session progressed on Friday, GBP/USD traded within a narrow range above 1.2400, reflecting a balance amid a broadly subdued US Dollar price action and stabilizing risk sentiment. Meanwhile, gold prices hit a fresh all-time peak, touching the $2,800 mark during the early part of the session. The demand for safe-haven bullion continues to be underpinned by concerns over US President Donald Trump's threatened trade tariffs.
The ECB's rate cut was largely anticipated by market participants and is seen as part of an ongoing strategy to stimulate economic growth within the eurozone. The decision reflects the central bank's commitment to maintaining favorable financial conditions and supporting a sustainable recovery.
Despite the subdued reaction in the currency markets, broader economic trends are likely to influence future movements. Analysts are closely monitoring upcoming data releases, including the US Personal Consumption Expenditures (PCE) Price Index, which could provide further insights into inflationary pressures and consumer spending trends in the United States.