In European trading on Friday, the EUR/USD pair found itself on the back foot, trading below the 1.0400 mark. Similarly, the GBP/USD pair extended its decline, slipping below 1.2600 during the session. This downward trend in both currency pairs is part of a broader market response to ongoing concerns about tariffs and inflation data that continue to impact trading dynamics across the Eurozone and beyond.
Disinflation trends appear to be gaining traction, yet prices in the services sector persist in their rapid ascent, not only in France but across the entire Eurozone. Coinciding with this, inflation likely eased in February, particularly in France, following a significant reduction in regulated electricity prices. Nevertheless, traders remain cautious as they await crucial German and US inflation data for further market direction.
The EUR/USD pair is primarily undermined by a surge in demand for the US Dollar, viewed as a safe haven amidst growing tariff concerns. Traders now turn their attention to the upcoming US PCE Price Index release, anticipated to provide fresh impetus for the markets. Meanwhile, upbeat German Retail Sales and Import Prices data have done little to bolster the Euro, reflecting a subdued market sentiment.
On the other side of the Atlantic, tariff uncertainty emanating from US President Trump has weighed heavily on the risk-sensitive British Pound. Despite prudent commentary from the Bank of England, this has resulted in a stronger US Dollar. The sliding US bond yields and an overarching risk-off mood further exacerbate pressure on the GBP/USD pair.
Adding to the market's precarious positioning, gold prices have attracted sellers for the second consecutive day. This trend highlights the challenge faced by precious metals in gaining support amidst a broadly stronger US Dollar and falling yields. The risk-off sentiment continues to dominate the trading landscape, leaving both the Euro and Pound grappling with their respective downward trajectories.