The Federal Reserve (Fed) maintains its cautious stance on interest rates as it monitors the robust U.S. labor market and solid economic growth. This decision comes amid rising trade tensions and inflation concerns that are influencing global markets. Meanwhile, U.S. President Donald Trump's tariff plans are anticipated to boost gold prices in the near term.
With the U.S. economy demonstrating resilience, the Fed sees no immediate need to reduce interest rates. The strength of the labor market and economic growth remain central to the Fed's monetary policy decisions. According to the latest data from the U.S. Bureau of Labor Statistics, the Consumer Price Index (CPI) rose by 3.0% year-over-year in January, slightly above the forecasted 2.9%.
President Trump has ordered a 25% import tax on steel and aluminum entering the U.S., intensifying trade tensions. The imposition of these tariffs is expected to lead to reciprocal measures from other countries, potentially escalating into a global trade war. These developments have exerted pressure on the EUR/USD currency pair, with traders expressing concerns over the potential impact on international trade.
In Europe, the German Harmonized Index of Consumer Prices (HICP) is projected to remain steady at 2.8% year-over-year for January. The HICP is a critical measure of inflation, harmonized across European Union member states to enable comparisons. Despite stable inflation in Germany, broader economic uncertainties persist due to trade disputes.
Gold prices have been volatile, attempting to hold above the $2,900 mark early Thursday following fluctuations the previous day. Analysts suggest that Trump's tariff plans could support higher gold prices as investors seek safe-haven assets amid growing trade tensions.
The CME FedWatch Tool indicates that the probability of a rate cut by the Fed in June has dropped to nearly 30%, reflecting the central bank's current position on monetary policy. This shift comes as the Fed continues to weigh economic indicators such as employment and inflation against external factors like trade policies.
The market movements and economic indicators discussed in this article are based on forward-looking statements that involve risks and uncertainties. The views and opinions expressed here are those of the authors and do not represent the official stance of FXStreet or its advertisers.