Gold Declines, but the Bullish Trend Persists
The gold (XAU/USD) price dropped by 0.61% on Friday after US inflation aligned with market expectations, suggesting that the Federal Reserve (Fed) won't take a more dovish approach to monetary policy.
Due to ongoing economic uncertainty exacerbated by trade tariffs and geopolitical instability, the US Dollar Index (DXY) continued to rise on Friday, pushing XAU/USD lower.
"I think the main element impacting the gold and silver markets is the profit-taking in week-long liquidation and the strong US Dollar Index", said Jim Wyckoff, a senior market analyst at Kitco Metals.
At the same time, Wall Street's main stock indices continued to weaken as investors remained cautious over potential price pressures from US President Donald Trump's policies. Losses in equities had an additional bearish impact on gold prices. Overall, XAU/USD had its first weekly loss since the end of December 2024. However, gold set a second consecutive monthly gain, boosted broadly by concerns over Trump's tariff plans.
XAU/USD was rising during the Asian and early European trading sessions. Today, the main focus is on the US ISM Manufacturing Purchasing Managers' Index (PMI), due at 3:00 p.m. UTC. Lower-than-expected figures might force the Fed to reassess the projected monetary policy path and adopt a more dovish stance. If ISM PMI numbers are below the expected 50.6, XAU/USD may rally. Conversely, higher-than-expected results will lower the probability of an additional rate cut by the Fed and push XAU/USD lower.
"Spot gold may test resistance at $2,879 per ounce, a break above which could open the way toward $2,894 to $2,909 range", said Reuters analyst Wang Tao.
Euro Lacks Support Due to Dovish ECB and Strengthening US Dollar
The euro (EUR/USD) lost 0.21% on Friday against the US dollar (USD) as the latter strengthened amid persistent geopolitical tensions and economic uncertainty related to Donald Trump's trade tariffs.
Investors' optimism on a potential peaсe settlement between Russia and Ukraine has been rising lately, exerting a minor bullish pressure on EUR/USD. However, that optimism started to wane after Ukrainian President Volodymyr Zelenskiy and US President Donald Trump had a heated discussion in the White House on Friday.
"It looked like we were moving towards progress on a peace deal or a ceasefire between Russia and Ukraine, and maybe now that gets to come on hold, so you have to price in a little bit more uncertainty", said Jack Mcintyre, portfolio manager at Brandywine Global in Philadelphia.
After falling for several months from a more than one-year high hit last September, the currency has shown signs of stabilising, partly due to hopes that peace could be reached. However, the latest developments have dashed hopes that it will happen soon.
At the same time, the fundamental pressure on EUR/USD remains mostly bearish as investors still expect the European Central Bank (ECB) to be more dovish than the Federal Reserve (Fed). Fed officials have recently indicated they plan to hold rates steady until signs of a slowing economy and more clarity about the impact of trade tariffs on inflation. In contrast, ECB policymakers indicated during their previous meeting that the eurozone's interest rates were still restrictive, which suggests they remain eager to cut them further.
EUR/USD was rising during the Asian and early European trading sessions. Today, the main focus is on the eurozone Consumer Price Index (CPI), due at 10:00 a.m. UTC. In addition, the US ISM Manufacturing Purchasing Managers' Index will come out at 3:00 p.m. UTC and likely trigger more volatility in all USD pairs. These data releases might enable EUR/USD to escape its short-term trading range of 1.03595–1.042300. A break above will open the way towards 1.048000, while a break below will allow bears to target new multi-week lows.
Canadian Dollar Awaits New Data on US Trade Tariffs
The Canadian dollar (USD/CAD) lost just 0.19% against the US dollar (USD) on Friday as investors assessed domestic data showing stronger-than-expected economic growth and awaited the potential implementation of US trade tariffs.
Although USD/CAD changed little on Friday, it was up as much as 1.69% for the week as traders priced in the likelihood of higher trade tariffs from the United States. Friday's data showed that Canada's gross domestic product (GDP) expanded by 2.6% annually in Q4, surpassing expectations of a 1.8% increase, driven by a jump in consumer spending. However, the relatively strong US inflation data and trade tariff threats pushed USD/CAD slightly higher on Friday.
Meanwhile, Canadian officials were expected to meet with US Commerce Secretary Howard Lutnick, US Trade Representative Jamieson Greer, and other senior Trump administration officials to forestall the tariffs. Canada seeks to show evidence of progress in curbing the flow of fentanyl opioids into the US ahead of a 4 March deadline for punishing 25% tariffs on their goods imports.
"Markets remain somewhat skeptical that, if it comes to it, 25% tariffs will be in place for long. The economic consequences for Canada from high tariffs are significant, but they are non-negligible for the US", said Shaun Osborne, chief currency strategist at Scotiabank.
If the Trump administration accepts the evidence and cancels the tariffs, USD/CAD will likely drop sharply.
USD/CAD was relatively unchanged during the Asian and early European trading sessions. Today, the main focus is on the US ISM Manufacturing Purchasing Managers' Index (PMI), due at 3:00 p.m. UTC. Lower-than-expected figures might pause the rally in USD/CAD and push the pair towards 1.44170. Conversely, higher-than-expected results may pull USD/CAD towards recent highs near 1.44700.