Gold Continues Its Rally

The gold ( XAU/USD ) price rose by 0.55% on Wednesday, driven by concerns over trade tariffs and declining U.S. inflation , which could prompt further interest rate cuts by the Federal Reserve Fed .

Yesterday's U.S. Consumer Price Index (CPI) revealed that core price rose by just 0.2% in February, below the expected 0.3% increase. Slowing inflation means that the Fed will more likely cut interest rates. In theory, this will reduce the opportunity cost of holding non-yielding assets like gold, increasing its appeal as a safe-haven investment.

Financial markets now expect the Fed to resume cutting rates in June because of the deteriorating economic outlook. However, according to Reuters, the improvement in inflation is likely temporary. U.S. President Donald Trump's aggressive tariffs on imports will likely raise the cost of most goods in the months ahead. A potentially dovish Fed and the risk of escalating trade tariffs that threaten global economic stability support gold prices. Risk appetite and investors' sentiment worsen, and investors seek a safe haven against the potentially increased volatility and diminished returns in traditional asset classes.

XAU/USD rose during the Asian and early European trading sessions. Today, the main focus is on the U.S. macro statistics: Producer Price Index (PPI) and Weekly Jobless Claims due at 12:30 p.m. UTC. These reports can influence interest rate expectations and investors' sentiment. Data that show a rise in producer inflation or a drop in unemployment claims may temporarily pause the rally in XAU/USD. Conversely, weaker-than-expected figures will likely pull the pair towards the $2,973 level.

"Spot gold may revisit the 24 February high of $2,956 per ounce, as it has broken $2,939, the last barrier towards the high", said Reuters analyst Wang Tao.

Geopolitical and Political Anxieties Pressure Euro

The euro ( EUR/USD ) lost 0.29% against the US Dollar (USD) on Wednesday despite a slowdown in U.S. inflation.

U.S. Consumer Price Index (CPI) rose by just 0.2% in February, below the 0.3% increase expected by the market. Still, EUR/USD failed to gain on the data. This is probably because trade uncertainties continue negatively impacting market confidence, particularly in the Eurozone. After 25% duties on all steel and aluminium imports, U.S. President Donald Trump said he would set additional tariffs if the EU implemented reciprocal tariffs on certain American goods.

"Whatever they charge us, we're charging them'" Trump told reporters at the White House.

The EU has threatened to impose counter-tariffs on €26 billion ($28 billion) worth of U.S. goods from next month.

'Obviously, the overarching theme has been around the trade war and the back-and-forth on tariffs not just with the North America partners but also with the other countries in Europe in particular and China. The sentiment is on a very short leash, and it can change so quickly based on the headline risks', said Amarjit Sahota, executive director at Klarity FX.

Over the past week, the euro has been buoyed by the prospect of substantial German fiscal spending. However, the situation has become more complex after the Greens party vowed to block those plans and unveiled rival proposals. Additionally, the potential for a ceasefire in Ukraine has bolstered investors' optimism. However, this remains highly precarious as Russia hasn't yet committed to any concrete cessation of hostilities, leaving the situation vulnerable to rapid escalation. EUR/USD is now at a critical crossroads. The pair's trajectory heavily depends on resolving these conflicting forces: German fiscal plans, the U.S.-EU trade war, and the war in Ukraine.

EUR/USD fell slightly during the Asian and early European trading sessions. Today's most important event is the release of U.S. macro statistics. The Producer Price Index (PPI) report and Weekly Jobless Claims data are due at 12:30 p.m. UTC. These reports can influence interest rate expectations and investors' sentiment. Thus, traders may see sharp price movements in various financial instruments, including EUR/USD. Key levels to watch are resistance at 1.09000 and support at 1.086400.

Trade Tariff Tensions Support the Japanese Yen

The Japanese yen ( USD/JPY ) lost 0.32% against the U.S. dollar (USD) on Wednesday as the greenback strengthened due to safe-haven flows.

President Donald Trump's unpredictable tariff pronouncements ignited a trade brinkmanship between the U.S. and its trading partners, creating significant uncertainty. Japan has avoided confrontation with the U.S. regarding tariffs, but the broader global trade tensions and the risk-off sentiment exert downward pressure on the USD/JPY. Investors seek the relative safety of the Japanese yen during periods of heightened market volatility and economic uncertainty stemming from trade disputes.

USD/JPY has lost more than 6% since the beginning of 2025 despite a large interest rate differential between the U.S. and Japan. Still, the divergence in monetary policy expectations continues to support JPY. Money markets indicate an almost 30% chance that the Bank of Japan (BoJ) will lift its base rate towards 1% by the end of the year. Meanwhile, the Federal Reserve (Fed) is expected to reduce its base rate by 50 basis points over the same period. Earlier today, BoJ Governor Kazuo Ueda expressed optimism about consumer spending. He reiterated the bank's commitment to reducing its oversized balance sheet, signalling a step away from monetary stimulus.

USD/JPY fell during the Asian and early European trading sessions. Today, the market focuses on the U.S. macro statistics: PPI and Weekly Jobless Claims due at 12:30 p.m. UTC. These reports can potentially influence interest rate expectations and investors' sentiment. Overall, traders may see sharp price movements in various financial instruments today, including USD/JPY. Key levels to watch are resistance at 148.400 and support at 147.500.