The European Central Bank (ECB) has slashed policy interest rates by 25 basis points, signaling a possible continuation of its rate cut cycle. This decision comes as regional inflation in Germany cooled off in January, further fueling expectations for ECB rate cuts. Meanwhile, in the financial markets, GBP/USD trades in a narrow range above 1.2400 during the European session on Friday, while EUR/USD faces renewed selling pressure, falling below 1.0400.
In the backdrop of these economic developments, gold prices have surged to an all-time high, reaching $2,800. The demand for safe-haven bullion is rising, driven by US President Donald Trump's threatened trade tariffs and ongoing geopolitical tensions. These factors have collectively led investors to seek refuge in gold, sustaining its upward trajectory.
The US Dollar's price action remains broadly subdued as traders anticipate the release of the US Personal Consumption Expenditures (PCE) Price Index data. The data's release is keenly awaited by market participants, who are bracing for its potential impact on currency and commodity markets. In the meantime, risk sentiment appears to be stabilizing, offering a modicum of relief amid global economic uncertainties.
The ECB's decision to cut interest rates again underscores its commitment to supporting the eurozone's economy. The cooling off of German regional inflation has provided the central bank with the necessary leeway to implement this monetary policy measure. However, the rate cut has exerted pressure on the euro, leading to its depreciation against major currencies like the US Dollar.
At the same time, global investors are closely monitoring geopolitical developments and trade policies, given their significant influence on market dynamics. The threat of trade tariffs and regional tensions have heightened concerns among investors, prompting a flight towards safe-haven assets like gold.