Central Banks and Geopolitical Strains Steer Market Sentiment (12.10.2024)

The euro hovered near $1.05 as traders braced for another ECB rate cut and grappled with Eurozone uncertainties, including political unrest and subdued economic indicators. Meanwhile, the yen remained steady as the BOJ weighed possible interest rate hikes, and gold gained ground amid Chinese policy shifts and tensions in the Middle East. 

The pound inched higher, anticipating steady BoE policy and upcoming UK data, while silver approached a one-month high, bolstered by expectations of a Fed rate cut and potential Chinese stimulus measures. Investors now turn their attention to this week’s inflation figures and central bank updates for clearer market direction.

ECB Expected to Cut Rates Again Amid Eurozone Uncertainty

The euro hovered near $1.05, slightly above two-year lows, as traders awaited the ECB’s policy decision. The ECB is expected to cut the deposit rate by 25 bps to 3% on Thursday, marking its fourth consecutive cut. Markets project further quarter-point cuts at each meeting through June, potentially lowering the rate to 2%. Weak Eurozone data, political instability in France and Germany, and geopolitical tensions add to the cautious sentiment. ECB President Lagarde warned of potential growth slowdowns and highlighted medium-term downside risks.

Technically, the firs resistance level will be 1.0600 level. In case of this level’s breach, next levels to watch would be 1.0660 and 1.0720 consequently. On the downside 1.0525 will be the first support level. 1.0500 and 1.0450 are next levels to monitor if first support level is breached.

Yen Holds Range as Markets Eye BOJ's Next Move

The Japanese yen traded near 151.50 per dollar on Tuesday, staying within its recent range as investors evaluated Japan's revised GDP data. Q3 growth was revised to 0.3% QoQ, exceeding initial estimates and forecasts of 0.2%. Along with strong wage data, this has fueled expectations for a more hawkish BOJ stance. However, opinions are divided on whether the next rate hike will come in December or January. BOJ Governor Ueda signaled a hike is imminent, while board member Nakamura expressed concerns over wage growth sustainability and economic vulnerabilities.

From a technical perspective, 151.70 appears to be the key initial resistance level, with a break above it potentially targeting 152.75 and 153.65. On the downside, 150.50 is the first major support, followed by 149.40 and 148.70 if the price moves lower.

Gold Gains Amid China Policy Shifts and Geopolitical Instability

Gold climbed above $2,660 per ounce on Tuesday, marking its second consecutive session of gains, supported by China’s policy shifts and Middle East tensions. China's Politburo pledged its first monetary policy easing in 14 years to spur growth, lifting commodity markets. Additionally, China's central bank increased gold reserves for the first time in seven months, increasing demand. Geopolitical instability in the Middle East, particularly the collapse of the Syrian government, further supported gold as investors turned to safe-haven assets. Attention now shifts to upcoming U.S. inflation data later this week, which could impact the Federal Reserve’s monetary policy stance

Technically, the firs resistance level will be 2675 level. In case of this level’s breach, next levels to watch would be 2690 and 2710 consequently. On the downside 2630 will be the first support level. 2600 and 2575 are next levels to monitor if first support level is breached.

Pound Nears $1.28 Ahead of Key Economic Data and BoE Decision

The British pound climbed to $1.28, nearing a four-week high, as investors looked ahead to key economic releases and central bank decisions. UK data, set for release next Friday, is projected to show economic growth and a recovery in manufacturing activity for October. The Bank of England is expected to maintain its current interest rate policy at its December 19 meeting. Meanwhile, in the U.S., markets are anticipating inflation figures and have largely factored in a 0.25% rate cut by the Federal Reserve next week. Attention is also on the European Central Bank’s meeting on Thursday, where a similar 0.25% rate cut is expected, bringing its deposit rate down to 3%.

Technically, the firs resistance level will be 1.2815 level. In case of this level’s breach, next levels to watch would be 1.2960 and 1.3060 consequently. On the downside 1.2720 will be the first support level. 1.2615 and 1.2550 are next levels to monitor if first support level is breached.

Silver Nears One-Month High Amid Fed and China Stimulus Hopes

Silver rose above $32.00 per ounce, nearing a one-month high, as markets awaited key US inflation data this week. The data could solidify expectations of a December Fed rate cut, with odds rising to 83% from 62% last week. Silver's rally mirrored gold gains, supported by China's central bank resuming gold purchases after a six-month pause. Focus also shifted to China’s Central Economic Work Conference, where new economic support measures are anticipated to address challenges including Trump’s return, increasing the metal’s demand outlook.

Technically, the firs resistance level will be 32.00 level. In case of this level’s breach, next levels to watch would be 32.50 and 33.00 consequently. On the downside 31.40 will be the first support level. 30.70 and 30.20 are next levels to monitor if first support level is breached.