Gold prices rose in European trading on Friday to resume gains that were temporarily paused yesterday, moving back close to trading above $5,000 per ounce, while the advance is being capped by the stronger US dollar against a basket of global currencies.

Strong US labor market data reduced the likelihood that the Federal Reserve will cut US interest rates next March. To reprice those expectations, investors are awaiting the release of key US inflation data later today.

Price overview

Gold prices today: gold rose by 1.55% to $4,997.43, from the opening level at $4,921.70, and recorded a low of $4,886.63.

At Thursday’s settlement, gold prices fell by 3.2% due to correction and profit-taking activity, after recording a two-week high the previous day at $5,119.21 per ounce.

US dollar

The dollar index rose on Friday by 0.1%, maintaining gains for the fourth consecutive session, within a recovery from two-week lows, reflecting stronger US currency levels against a basket of global currencies.

This rise followed the release of strong US labor market data, which reduced the chances of a near-term Federal Reserve interest rate cut.

US interest rate

The US economy added more jobs than expected last December, with the unemployment rate declining and average hourly earnings rising.

Following those figures, and according to the CME FedWatch tool, market pricing for keeping US interest rates unchanged at the March meeting rose from 79% to 95%, while pricing for a 25 basis point rate cut fell from 21% to 5%.

US inflation data

To reprice the above expectations, traders are awaiting later today the release of key US inflation data for January, which is expected to influence the Federal Reserve’s monetary policy path this year.

Gold outlook

Kyle Rodda, analyst at Capital.com, said the gold market will remain in an upward trend over time, but with the current sharp volatility and these elevated levels signaling market direction, large moves are clearly accelerating price action.

Rodda added that precious metal prices declined alongside equities overnight, with no major economic catalyst supporting them, noting that the heavy selling seen overnight was clearly driven by renewed concerns about the impact of artificial intelligence.

SPDR

Holdings of SPDR Gold Trust, the world’s largest gold-backed ETF, fell on Thursday by about 5.14 metric tons, bringing the total down to 1,076.18 metric tons, the lowest level since January 15.

The euro declined in European trading on Friday against a basket of global currencies, extending its losses for the fourth consecutive day versus the US dollar, due to the rebound in the US currency following the release of strong US labor market data.

European Central Bank President Christine Lagarde downplayed the impact of the euro exchange rate on the path of monetary policy, saying the recent rise in the currency has already been incorporated into current inflation projections.

Price overview

•Euro exchange rate today: the euro fell against the dollar by 0.1% to $1.1858, from today’s opening level at $1.1870, and recorded a high of $1.1873.

The euro ended Thursday’s trading down by less than 0.1% against the dollar, marking the third consecutive daily loss, after data showed a decline in US weekly jobless claims.

US dollar

The dollar index rose on Friday by 0.1%, maintaining its gains for the fourth straight session, within a recovery from two-week lows, reflecting higher levels of the US currency against a basket of global currencies.

Strong US labor market data reduced the likelihood that the Federal Reserve will cut US interest rates next March. To reprice those expectations, investors are awaiting later today the release of key US inflation data for January.

According to the CME FedWatch tool: market pricing for keeping US interest rates unchanged at the March meeting currently stands at 95%, while pricing for a 25 basis point rate cut stands at 5%.

Christine Lagarde

Following last week’s European Central Bank policy meeting, President Christine Lagarde downplayed concerns about the euro–dollar exchange rate’s impact on the bank’s monetary policy path, stressing that recent currency moves do not represent a fundamental shift requiring a policy adjustment.

Lagarde said the euro has risen recently but remains within expected ranges, and that the effects of this rise have already been factored into current inflation forecasts, emphasizing that monetary policy will remain primarily data-dependent rather than driven by exchange rate volatility alone.

Lagarde confirmed that the ECB is closely monitoring the euro exchange rate, noting that the current strength of the single currency helps contain imported inflation and could support reaching targets without the need for additional tightening.

European interest rate

•Money market pricing for the probability that the ECB will cut interest rates by 25 basis points at the March meeting remains below 30%.

•To reprice those probabilities, investors are awaiting further euro area economic data on inflation, unemployment, and wages.

The Japanese yen declined in Asian trading on Friday against a basket of major and minor currencies, pulling back from a two-week high against the US dollar due to corrective moves and profit-taking, in addition to a rise in the US currency ahead of the release of key US inflation data.

Despite this pullback, the Japanese yen remains on track to post its largest weekly gain in 15 months, specifically since November 2024, supported by a strong buying wave following the landslide victory of the ruling party in Japan led by current Prime Minister Sanae Takaichi.

As the focus shifts from spending toward growth, traders are betting that Takaichi’s sweeping victory puts her in a strong position to pursue more fiscally responsible policies and gives her greater ability to control downside pressure in government bonds.

Price overview

•Japanese yen exchange rate today: the dollar rose against the yen by 0.4% to 153.35 yen, from today’s opening level at 152.71 yen, and recorded a low of 152.64 yen.

The yen ended Thursday’s trading up by about 0.35% against the dollar, marking the fourth consecutive daily gain, and recorded a two-week high at 152.27 yen, supported by easing financial concerns in Japan.

US dollar

The dollar index rose on Friday by 0.1%, extending its gains for the fourth straight session, within a recovery move from two-week lows, reflecting higher levels of the US currency against a basket of global currencies.

Strong US labor market data reduced the likelihood that the Federal Reserve will cut US interest rates next March. To reprice those expectations, investors are awaiting later today the release of key US inflation data for January.

Weekly trading

Over the course of this week’s trading — which officially ends with today’s price settlement — the Japanese yen is up about 2.5% so far against the US dollar, on track for its largest weekly gain since November 2024.

Financial concerns

Takaichi’s landslide victory gave investors greater confidence in her ability to push growth-supporting fiscal policies and ease living cost pressures, while at the same time placing her in a position to use stimulus tools more responsibly.

There is little doubt that Takaichi’s expected adoption of more coherent economic policies would ease financial concerns and strengthen confidence in the overall economic path, and that stimulus measures would support deficit control and contain public debt growth.

Opinions and analysis

•Vishnu Varathan, head of macro research at Mizuho, said that such a sweeping victory gives Takaichi’s government a stronger grip to control downside paths in Japanese government bonds and the yen, within what is known as “Takaichi trades”.

•Varathan added: she can adopt a more coherent fiscal policy… she certainly has a plan with reasonable figures, which would reduce doubts surrounding her. What she needed was the political capital to implement it without having to make multiple concessions to various parties seeking more stimulus.

•Yosuke Miyairi, FX and rates strategist at Nomura, said the dollar/yen exchange rate could follow the narrowing interest rate differentials between the United States and Japan and fall toward around 150 if investors see Takaichi as more fiscally responsible.

•Harvey Bradley, co-head of global rates at Insight Investment, said that with Prime Minister Sanae Takaichi shifting from a relatively conservative fiscal stance toward more precisely targeted economic stimulus, the balance of risks may have tilted toward further tightening by the Bank of Japan.

•Bradley added that the Bank of Japan’s neutral interest rate at around 1.5% appears to be a reasonable estimate.

Japanese interest rate

•Market pricing for the probability that the Bank of Japan will raise interest rates by a quarter point at the March meeting is currently below 10%.

•To reprice those probabilities, investors are awaiting more data on inflation, unemployment, and wages in Japan.

US stock indexes declined on Thursday, driven by a renewed selloff in software and technology shares, while strong labor market data reduced expectations for interest rate cuts by the central bank.

Concerns about disruptions linked to artificial intelligence triggered sharp volatility on Wall Street during the current month, pressuring sectors including software, legal services, and wealth management, with the transportation sector emerging as the latest affected by those fears.

Despite that, at least one rate cut is still expected in June, though the probability that the Federal Reserve will keep borrowing costs unchanged has risen to nearly 40%, compared with 24.8% previously, following the release of jobs data on Wednesday, according to the CME Group’s FedWatch tool.

Additional economic data due this week could guide market movements, including the Consumer Price Index — a key measure of inflation — scheduled for release on Friday.

In trading, the Dow Jones Industrial Average fell by 1.2% (or 590 points) to 49,530 as of 18:07 GMT. The broader S&P 500 index declined by 1.2% (or 83 points) to 6,858, while the Nasdaq Composite dropped by 1.6% (or 375 points) to 22,690.