Major currency pairs trade in narrow ranges early Friday, following some volatility seen on Thursday, after gold gathered bullish momentum and rose more than 1% on Thursday.
XAUUSD continued to stretch higher and trades at an all-time peak near $2,800, as investors seek safety following Donald Trump’s continued tariff threats.
The US president’s plan stoked fears of trade wars and prospects of economic slowdown. The yellow metal’s momentum was further supported by looser monetary policies from major central banks.
Regional and nation-wide inflation data from Germany and December Personal Consumption Expenditures (PCE) Price Index data from the US will be watched closely by market participants on Friday.
Fourth-quarter Employment Cost Index data will also be featured in the US economic calendar ahead of the weekend.
The European Central Bank announced on Thursday that it lowered key rates by 25 basis points (bps) as expected.
The ECB didn’t make any significant changes to its policy statement and President Christine Lagarde refrained from committing to the next rate move, reiterating that their next decision will be driven by data and analysis.
After rising above 1.0450 in the second half of the day, EURUSD lost its traction and retreated below to close in negative territory on Thursday.
Early Friday, data from Germany showed that Retail Sales declined by 1.6% on a monthly basis in December, missing the market expectation for an increase of 0.2%. EURUSD showed no immediate reaction to this data and was last seen trading in a narrow channel at around 1.0400.
The Bureau of Economic Analysis (BEA) reported on Thursday that the US Gross Domestic Product expanded at an annual rate of 2.3% in the fourth quarter. This followed the 3.1% expansion recorded in the third quarter and came in below the market estimate for a growth of 2.6%.
On a positive note, weekly Initial Jobless Claims in the US declined to 207,000 in the week ending January 25 from 223,000 in the previous week. The DXY Dollar Index held its ground after mixed data and posted modestly gains on Thursday.
Early Friday, the index remains in a consolidation phase near 108.00.
Meanwhile, President Trump took to social media late Thursday to make a fresh tariff threat against Canada and Mexico.
According to his social media post, the US is set to impose a flat 25% import tax “because of fentanyl” on all goods crossing the border into the US from Canada or Mexico.
Trump also warned that they could impose 100% tariffs on BRICS nations if they were to try to replace the USD with a new currency in international trade.
Bank of Japan Governor Kazuo Ueda said on Friday that underlying inflation is still somewhat below 2%. Ueda added that the Japanese central bank would maintain an accommodative policy to support price trends.
After losing more than 0.5% on Thursday, USDJPY is staging a rebound and trades in positive territory above 154.50.
GBPUSD closed modestly lower on Thursday after meeting resistance above 1.2450. The pair was clinging to small daily gains early Friday, but remains below 1.2450.
(Source: OANDA)
