The EUR/USD pair extended its daily recovery, trading above 1.0450 on Monday, while the GBP/USD gathered bullish momentum, surpassing 1.2650. This movement reflects the overall shift in market sentiment as investors anticipate critical economic data and navigate geopolitical uncertainties. The core HICP inflation in the Euro area increased by 0.6% on a monthly basis in February, providing further impetus for the euro's rise.
As markets opened on Monday, all eyes turned to the Institute for Supply Management (ISM), which was set to reveal the February US Manufacturing Purchasing Managers’ Index (PMI). This report serves as a crucial barometer for the health of the US manufacturing sector and is eagerly awaited by investors looking for insights into economic performance. The anticipation of this data has added to the positive shift in risk mood, complicating the US Dollar's ability to find demand.
Amidst this economic backdrop, geopolitical tensions continue to cast a shadow over market stability. The ongoing Russia-Ukraine conflict keeps markets on edge, as traders navigate potential impacts on global trade and economic growth. Gold, often seen as a safe-haven asset during times of uncertainty, rebounded from its multi-week low of $2,830 on Friday to trade above $2,870 on Monday.
Adding to the complexity, US President Donald Trump's recent announcement of tariffs on Chinese, Mexican, and Canadian imports further contributes to market volatility. These tariffs have sparked concerns about global trade tensions, influencing currency movements and commodity prices.
The positive risk sentiment accompanying these developments has made it challenging for the US Dollar to find support. The EUR/USD pair edged higher as investor focus shifted towards upcoming US data releases and geopolitical factors. This dynamic environment reflects broader market trends that emphasize both economic indicators and political developments.