The US dollar fell in European trade on Friday against a basket of major rivals, widening losses for the fifth straight session and hitting a four-month low, and on track for the heaviest weekly loss since 2022. 

It comes amid positive sentiment in the markets after the announcement of a massive German stimulus plan, while Trump decided to delay his tariffs on Canada and Mexico for a month.

Now investors await important US jobs data, which will provide clues on the path ahead for US interest rates.

The Index

The dollar index fell 0.55% to 103.56, the lowest since November 5, with a session-high at 104.24.

On Thursday, the index lost 0.15%, marking the fourth daily loss in a row.

Weekly Trades

The index is down 3.7% so far this week, on track for the heftiest weekly loss since November 2022.

Positive Sentiment 

The markets are awash with positive sentiment after German coalition parties announced plans to set up an infrastructure fund valued at 500 billion euros and change borrowing rules to boost military spending and growth.

Otherwise, the White House announced exemptions to some automakers from the 25% tariffs on Canada and Mexico for a month.

US Rates

Fed Governor Christopher Waller said on Thursday said he’s strongly against a rate cut at the Fed’s March meeting, even as he thinks that rate cuts later this year could be appropriate if inflation continues to peter out.

New York Fed President John Williams said the US tariffs will likely push inflation higher, but he believes current interest rate policies are suitable and don’t require changes.

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at just 5%.

US Jobs

Later today, investors await a batch of crucial US jobs data, with the US economy expected to have created 159 thousand new jobs last month, up from 143 thousand in January, while unemployment is expected to remain at 4.0%.

Gold prices rose in European trade on Friday, resuming gains after a hiatus on Thursday, and about to mark a weekly profit as the dollar loses ground. 

The current gains are limited as traders shun big positions before major US labor data, expected to provide crucial pricing for the odds of a Fed rate cut in March.

Prices

Gold prices rose 0.15% today to $2914 an ounce, with a session-low at $2896. 

On Thursday, gold lost 0.3% away from a week high at $2929.

Weekly Trades

Gold prices are up 2% so far this week, on track for the ninth weekly profit in two and a half months.

The Dollar

The dollar index fell 0.25% on Friday, extending losses for the fifth straight session and about to hit four-month lows at 103.76 against a  basket of major rivals.

The dollar was hurt after German parties announced massive stimulus plans, while there were concerns that US President Trump’s tariffs could hurt growth.

Fed Governor Christopher Waller said on Thursday said he’s strongly against a rate cut at the Fed’s March meeting, even as he thinks that rate cuts later this year could be appropriate if inflation continues to peter out.

New York Fed President John Williams said the US tariffs will likely push inflation higher, but he believes current interest rate policies are suitable and don’t require changes.

According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in March stood at just 5%.

US Jobs

Later today, investors await a batch of crucial US jobs data, with the US economy expected to have created 159 thousand new jobs last month, up from 143 thousand in January, while unemployment is expected to remain at 4.0%.

SPDR

Gold holdings at the SPDR Gold Trust fell 1.72 tons yesterday to a total of 898.64 tons, the lowest since February 20.

The euro rose in European trade on Friday against a basket of major rivals, resuming gains against the dollar and trading near four-month highs, and about to mark the biggest weekly profit in 16 years. 

The recently announced massive German stimulus plans accelerated inflation forecasts in the eurozone, which might prompt the ECB to tighten its monetary policies once more. 

The European Central Bank voted on Thursday to cut interest rates to December 2022 lows, the fifth such cut in a row, with the bank expecting a pause in the cycle of rate cuts in April.

The Price

The EUR/USD pair rose 0.3% today to $1.0819, with a session-low at $1.0779.

The pair closed down 0.1% on Thursday, the first loss in four days on profit-taking away from four-month highs at $1.0853.

Weekly Trades

The EUR/USD pair is up 4.3% so far this week, marking the first weekly profit in three weeks, and the largest weekly profit since March 2009.

Massive German Spending Plan 

Germany’s coalition parties agreed to form an infrastructure fund with a budget of 500 billion euros, while changing borrowing rules to bolster military spending and economic growth.

Such massive plans only serve to underpin the euro as the debt limiters are lifted and growth accelerated.

ECB

The European Central Bank cut main borrowing rates by 25 basis points to 2.5% as expected, noting in its statement that inflation has slowed down in line with forecasts.

The ECB now expects inflation to hit 2.3% this year, before slowing down to 1.9% in 2026, before rising to 2% in 2027.

The ECB reduced forecasts for eurozone economic growth in 2025 to 0.9%, and in 2026 to 1.2%, and in 2027 to 1.3%. 

Lagarde

ECB President Christine Lagarde said the decision to cut interest rates was in line with economic developments and data in the eurozone.

She noted that inflation started to fall considerably in line with forecasts, and will likely settle at the targets sustainably. 

She added that the decision to cut or maintain interest rates in the future will rely on upcoming data and developments.

European Rates

Reuters reported that the ECB policymakers expect a pause in rate cuts in April before embarking on another round of cuts

The odds of an ECB rate cut in April is now less than 50%, compared to a 60% chance next week.

Interest Rate Gap

The US-eurozone interest rate gap will likely expand to 185 basis points in favor of the US, which continues to underpin the US dollar against the euro.

The Japanese yen rose in Asian trade on Friday against a basket of major rivals, extending gains for the third straight session against the dollar and about to touch five-month highs on strong haven demand. 

Yen’s gains are also boosted by a steep drop in US 10-year treasury yields as traders await the US payrolls report, expected to offer fresh pricing for the odds of a Fed rate cut.

The Price

The USD/JPY fell 0.35% today to 147.44 yen per dollar, with a session-high at 148.16.

The yen rose 0.6% on Thursday against the dollar, hitting a five-month high at 147.31 amid rising risk aversion.

Weekly Trades

The yen is up over 2% so far this week against the dollar, on track for the second weekly profit in three weeks on the unwinding of the yen carry trades.

Safe Havens 

US stock indices resumed their huge losses on Thursday with drops towards four-month lows amid concerns about trade war uncertainties. 

Wall Street is heading for the third weekly loss in a row, and the heftiest since September 2025 as Donald Trump continues to impose then delay 25% tariffs on Canada and Mexico.

US Yields 

US 10-year treasury yields fell 0.7% on Friday to five-month lows at 4.108%, heaping pressure on the dollar.

It comes as investors assess the impact of the latest US tariffs on Mexico and Canada, which were then quickly rolled back temporarily for a month.

According to the Fedwatch tool, the odds of a 0.25% Fed rate cut in March stood at 9%.

Now traders await the all-important US payrolls report for February later today, crucial for gauging the future path of US monetary policies.