Concerns surrounding former President Donald Trump's trade tariffs and the specter of a global trade war continue to cast a shadow over market sentiment, providing some support for the bullion market. The XAU/USD pair faces challenges as it is undermined by a broad US Dollar rebound, yet the underlying bearish sentiment towards the USD might help limit losses. Traders are adopting a cautious stance, refraining from making significant moves as they await key economic data.
In the currency markets, the GBP/USD pair has surged to its highest level in two months, trading above 1.2650 during the European session on Friday. This rally comes on the back of positive UK data, revealing a 1.7% increase in retail sales in January. The upbeat retail figures have bolstered the Pound Sterling, offering it some resilience amid uncertain global economic conditions.
Market participants are closely monitoring the preliminary Purchasing Managers' Index (PMI) reports from both the Eurozone and the United States. These reports are expected to offer insights into economic activity and potentially influence trading strategies. In particular, distinct dynamics are at play across major economies, including the US, eurozone, and the UK, each presenting unique challenges and opportunities for investors.
In the US, repo rates appear more attractive, with bills anticipated to appreciate. There is speculation that the Federal Reserve may opt to cut rates more aggressively than previously expected, a move that could echo potential rate-cutting actions in the UK. Such monetary policy shifts could have significant implications for currency valuations and broader market dynamics.
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