Global Markets Weigh Euro Weakness, Yen Outlook, and Fed’s 2025 Plans (12.27.2024)

Global markets saw the euro slip toward a two-year low as the ECB signaled further easing. 

The yen attempted to regain ground amid speculation of a delayed BoJ rate hike, while gold found support above $2,600 per ounce on safe-haven demand. Silver extended gains but faced headwinds from a stronger dollar. Investors now look to upcoming economic data and central bank signals to clarify future policy directions and market trends.

Euro Pressured as ECB Signals More Rate Cuts in 2025

The EUR/USD pair slipped to 1.0415 during Friday's Asian session amid subdued holiday trading. Later, November's US Goods Trade Balance data is expected.

Initial Jobless Claims fell to 219,000, the lowest in a month, beating expectations of 224,000. Meanwhile, the US Dollar Index (DXY) rose slightly to 108.10, staying below its two-year high as the Fed signaled a slower pace of rate cuts for 2025.

In the Eurozone, ECB Governing Council member Boris Vujcic suggested further rate cuts are likely if data aligns with projections. The ECB has cut rates four times this year to 3.0%, with analysts expecting reductions to 2.0% by June, which could pressure the Euro.

From a technical perspective, the first resistance level is at 1.0465, with further resistance levels at 1.0515 and 1.0575 if the price breaks above. On the downside, the initial support is at 1.0330, followed by additional support levels at 1.0300 and 1.0230.

Yen Strengthens to 157.6 Amid Tokyo Inflation and BOJ Speculation

The Japanese yen strengthened to 157.6 per US dollar on Friday but stayed near a five-month low as investors assessed Tokyo's inflation data and the BOJ's December Summary of Opinions.

Tokyo inflation rose to 3% in December, up from 2.6% in November, bolstering expectations for a potential rate hike. The BOJ discussed this possibility but kept rates unchanged, awaiting more data on wage growth and the economic outlook under the incoming US administration.

Japan's economic indicators showed mixed results, with retail sales growth accelerating, industrial production declining, and unemployment holding steady.

The key resistance level appears to be 158.30, with a break above it potentially targeting 160.00 and 161.00. On the downside, 153.90 is the first major support, followed by 152.70 and 151.00 if the price moves lower.

Gold on Track for Best Year Since 2010 Despite Recent Dip

Gold slipped below $2,630 per ounce on Friday, easing from the prior session's gains in light holiday trading.

Investors awaited clarity on US economic policies under the incoming Trump administration while assessing the Federal Reserve's monetary outlook. Softer US PCE inflation data increased the likelihood of more Fed rate cuts next year, which could strengthen non-yielding gold.

Gold's safe-haven appeal remained strong, supported by geopolitical risks from the Russia-Ukraine war and Middle East tensions. The metal was on track for a 27% annual gain, its best performance since 2010, driven by central bank buying, geopolitical uncertainty, and global monetary easing.

Technically, the first resistance level will be 2635 level. In case of this level’s breach, next levels to watch would be 2670and 2710 consequently. On the downside 2605 will be the first support level. 2575 and 2545 are next levels to monitor if the first support level is breached.

Pound Weakens as Fed and BoE Outlooks Weigh on GBP/USD

GBP/USD stayed subdued for the third straight day, trading near 1.2520 during Friday's Asian session, weighed by low post-Christmas trading volumes and a stronger US Dollar supported by expectations of fewer Fed rate cuts.

In December, the Fed cut rates by 25 basis points and revised its 2025 outlook, projecting only two rate cuts instead of four. However, moderate US PCE inflation data tempered expectations for further cuts next year.

The British Pound weakened amid growing expectations for a dovish Bank of England (BoE) policy in 2025. The BoE held its key rate at 4.75% in December, but a split vote, with three members favoring cuts, pointed to a more aggressive easing path. Markets now anticipate a 53-bps rate cut in 2025, up from earlier forecasts of 46 bps, reflecting the MPC’s dovish shift.

The first resistance level for the pair will be 1.2600. In case of this level's breach, the next levels to watch would be 1.2680 and 1.2750. On the downside 1.2475 will be the first support level. 1.2400 and 1.2350 are the next levels to monitor if the first support level is breached.

Silver Gains on Safe-Haven Appeal Despite Stronger Dollar Pressure

Silver (XAG/USD) extended its six-day rally, trading near $29.90 during Friday's Asian session, supported by safe-haven demand as markets await clarity on the US economy under the incoming Trump administration and the Federal Reserve's 2025 rate plans.

Moderate US PCE inflation data fueled expectations of further Fed rate cuts, boosting silver’s appeal as a non-yielding asset. Rising geopolitical risks, including the Russia-Ukraine conflict and Middle East tensions, also strengthened demand for silver as a safe haven.

On Thursday, Reuters reported that Russia’s Federal Security Service thwarted assassination attempts on high-ranking officials by Ukrainian intelligence. In Gaza, officials claimed an Israeli airstrike killed five Palestinian journalists, which the Israeli military countered, alleging they were Islamic Jihad members posing as media.

Meanwhile, the US Dollar Index (DXY) hovered above 108.00, slightly below its November 2022 high of 108.54. A stronger dollar could limit gains for dollar-priced precious metals like silver by making them more expensive for non-USD buyers.

Technically, the first resistance level will be 29.95 level. In case of this level’s breach, the next levels to watch would be 30.15 and 30.70 consequently. On the downside 28.75 will be the first support level. 28.00 and 27.00 are the next levels to monitor if the first support level is breached.