The release of economic data from the United States on Friday triggered significant volatility in the financial markets. Information from S&P Global revealed that the U.S. services sector contracted for the first time in over two years. This report heightened concerns about a potential slowdown in the U.S. economy in the future.
This sentiment is expected to continue influencing market movements during trading on Monday (February 24, 2025).
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GOLD
Gold prices (XAUUSD) exhibited high volatility on Friday before closing at $2,935.93 per troy ounce, down $6.63 or 66.3 pips from the prior trading session. The slight decline was attributed to profit-taking, as Gold approached its all-time high of $2,954.82 per troy ounce reached the previous Thursday.
In today’s trading, Gold is showing volatility in the range of $2,921 – $2,944 per troy ounce, with an upward bias. As previously noted, market participants are currently worried that the U.S. economy is beginning to show signs of distress, enhancing Gold’s appeal.
The services sector in the U.S. is a crucial component of the economy, contributing over 70% to economic growth and accounting for 80% of total employment. The experienced contraction is likely to have a substantial impact, prompting investors to flock to Gold as a safe haven asset. This sentiment will continue to influence Gold’s movements during the European trading session.
OIL
Oil prices (CLS10) plummeted by $2.35 during trading on Friday, settling at $70.17 per barrel, nearing a two-month low.
Fears regarding a potential slowdown in the U.S. economy have driven Oil prices down. Additionally, there is speculation that the Russia-Ukraine conflict may be nearing an end, which could imply a decrease in demand from the U.S. coupled with an increase in supply from Russia, putting significant downward pressure on Oil prices that is expected to persist in European trading.
EURUSD
The EURUSD pair experienced a sharp decline on Friday but quickly rebounded today to 1.05283. Compared to Friday’s closing, EURUSD gained 657 points (65.7 pips) and reached its highest level in the past month.
The positive sentiment around EURUSD was bolstered after the conservative CDU/CSU coalition triumphed in the German elections on Sunday (February 23, 2025). This victory is seen as a stabilizing factor for politics and pro-economic growth. Furthermore, it is anticipated that CDU/CSU will partner with the Social Democrats (SPD), which is viewed as market-friendly.
On the other hand, concerns about a slowdown in the U.S. economy are weighing on the dollar, thus maintaining a positive outlook for EURUSD.
GBPUSD
Similar to EURUSD, this currency pair fell from its two-month high on Friday due to profit-taking. However, today it has made a strong recovery to 1.26902, marking the highest level since December 18.
In addition to the weakening dollar, a series of economic data from the UK that exceeded expectations suggests that the Bank of England (BoE) may hold interest rates steady for a longer duration. This prospect generates positive sentiment for GBPUSD.
USDJPY
USDJPY experienced a significant drop last week, reaching its lowest level in 11 weeks. The yen is currently strong as Japan approaches the end of its fiscal year in March, prompting many companies, institutional investors, and financial institutions to repatriate funds and assets from abroad, thereby strengthening the yen.
Moreover, Japan’s economy remains robust, thereby increasing the likelihood of the Bank of Japan (BoJ) raising interest rates soon. On the flip side, disappointing economic data from the U.S. continues to pressure the dollar, suggesting USDJPY may face ongoing downward pressure.
Nasdaq
The poor economic data from the U.S. resulted in a sharp drop in the Nasdaq, which fell by 475 index points to 21,660 during Friday’s trading. The contraction in the U.S. services sector, combined with declining consumer sentiment, dealt a heavy blow to the Nasdaq.
Moreover, the risk of a trade war remains significant, leading to high uncertainty regarding future economic conditions. This sentiment is likely to continue impacting the Nasdaq’s movements during the European trading session.
