AI Jitters Hit Tech Giants Ahead of Critical PCE Inflation

The EUR/USD pair extended its decline for a second consecutive session on Tuesday, trading below the mid-1.1800s during subdued Asian market hours. Despite the modest pullback, broader fundamentals suggest limited scope for a sustained downside move.

The US Dollar Index (USDX), which measures the Greenback against a basket of major currencies, maintained its recent gains and remained comfortably above the 97.00 level. At the same time, the euro is facing headwinds from growing expectations that the European Central Bank could move toward a rate cut. Those expectations gained traction after Eurozone inflation fell to its lowest level since September 2024, reinforcing speculation that policymakers may adopt a more accommodative stance in the months ahead.

However, the dollar’s upside appears constrained by increasing market confidence that the Federal Reserve will begin easing policy as early as June. Softer-than-expected US consumer inflation data released last week strengthened the case for lower borrowing costs. Additionally, ongoing concerns surrounding the Fed’s independence may temper aggressive bullish positioning in the dollar.

With investors hesitant to establish large directional positions, attention now turns to key US data releases for clearer policy guidance.

Markets will closely monitor the upcoming FOMC meeting minutes on Wednesday, followed by the advance US Q4 GDP estimate and the Personal Consumption Expenditures (PCE) Price Index later in the week. Global flash PMI readings are also expected to provide additional momentum and shape near-term direction in the currency pair.

Gold prices edged lower for a second consecutive session on Tuesday, slipping below $4,900 area during Asian trading hours. Activity remained relatively subdued due to reduced liquidity amid the Lunar New Year holidays in China. Despite the pullback, downside momentum appears limited as investors await clearer signals on US monetary policy.

Market participants are positioning cautiously ahead of the release of the Federal Reserve’s FOMC Minutes on Wednesday, which could offer fresh insight into the central bank’s rate-cut trajectory.

In the meantime, the US Dollar is holding onto modest recent gains, creating headwinds for the non-yielding precious metal. However, expectations that the Fed will begin cutting interest rates as early as June — with markets pricing in more than two rate reductions this year — are limiting the dollar’s upside potential. This dovish outlook continues to provide underlying support for bullion.

Geopolitical uncertainty is also lending some cushion to gold prices. Investor caution ahead of the second round of US-Iran nuclear negotiations, aimed at easing regional tensions, has helped sustain safe-haven demand and restrict deeper losses.

Oil prices edged lower on Tuesday in subdued trading conditions, as investors turned their attention to renewed diplomatic engagement between the United States and Iran. Trading activity remained muted due to public holidays across several Asian financial centers, including China, Hong Kong, Taiwan, South Korea, and Singapore.

Market participants are closely watching high-level discussions set to take place in Geneva between US and Iranian officials regarding Tehran’s nuclear enrichment program. Media reports indicate that representatives from both countries are expected to meet in Switzerland in an effort to ease mounting tensions.

US President Donald Trump stated that he would be “indirectly involved” in the talks, though further details were not provided.

The upcoming meeting follows earlier negotiations this month that yielded limited progress. Recent reports also suggest that Washington has deployed a second aircraft carrier to the Middle East ahead of the talks and is preparing contingency plans for a prolonged military presence should diplomatic efforts fail.

Oil prices also faced headwinds from a firmer US dollar as a stronger greenback typically weighs on dollar-denominated commodities by making them more expensive for foreign buyers.

With geopolitical tensions and monetary policy uncertainty both in play, oil markets may remain sensitive to incoming headlines and economic data in the near term.

US stock index futures moved lower in subdued trading late Monday, as investors remained cautious toward technology shares and the broader implications of artificial intelligence on the sector.

Market activity was muted due to a US holiday, while participants digested last week’s mixed inflation data and positioned ahead of a busy slate of economic releases and Federal Reserve commentary.

Investors are now turning their attention to several key US economic indicators scheduled for release this week, along with the minutes from the January policy meeting of the Federal Reserve.

The Fed left interest rates unchanged at its late-January meeting, and the minutes — due Wednesday — are expected to provide additional clarity on policymakers’ thinking regarding the future path of rates. Multiple Fed officials are also scheduled to speak in the coming days, which could further shape market expectations.

On the data front, industrial production and durable goods figures are set for release Wednesday, followed by December trade data on Thursday. Friday’s highlight will be the Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred measure of inflation, which may offer more definitive guidance on the interest rate outlook.

Major US equity indexes closed largely unchanged on Friday. Initial optimism over slightly cooler January inflation data was offset by renewed weakness in technology stocks, as investors assessed potential disruptions linked to advances in artificial intelligence. Software stocks were among the hardest hit, with selling pressure gradually extending to other sectors.