In a series of significant economic developments, the European Central Bank (ECB) has announced a 25 basis points cut in policy interest rates. This move comes as the ECB seeks to stimulate the Eurozone economy amid cooling inflation in Germany. Meanwhile, geopolitical tensions and impending US trade tariffs have driven the demand for safe-haven assets, propelling gold prices to an unprecedented peak of $2,800. In the currency markets, EUR/USD faces renewed selling pressure, trading below 1.0400 as traders brace for upcoming US PCE data.
The ECB's decision to cut interest rates marks another step in its ongoing rate cut cycle, designed to address slowing growth and inflation concerns within the region. This latest cut is expected to have significant implications for the currency markets, as evidenced by the EUR/USD pair experiencing downward pressure. Regional inflation cooling off in Germany has contributed to this trend, further weighing on the euro.
In parallel, the GBP/USD pair trades narrowly above 1.2400 during the European session on Friday. The US dollar's subdued price action reflects a stabilizing risk sentiment in the market. However, traders remain cautious as they anticipate the release of the US PCE data, which could potentially impact currency dynamics further.
Amidst these economic events, gold has emerged as a preferred safe-haven asset, with prices reaching a fresh all-time high. The driving factors behind this surge include geopolitical tensions and US President Donald Trump's threatened trade tariffs, both of which have intensified investors' inclination towards bullion as a secure investment option. Given these conditions, gold is poised to continue its upward trajectory.
The market is on edge as it awaits the release of US PCE data. Traders are closely monitoring these figures, which are expected to provide insights into inflationary pressures within the US economy and influence future monetary policy decisions. The subdued performance of the US dollar indicates that investors are exercising caution in anticipation of this crucial data release.