Euro Climbs as Trump and Powell Drive Volatility (07.02.2025)

Markets stayed cautious midweek as the U.S. dollar continued to weaken due to fiscal worries, political pressure on the Fed, and anticipation ahead of the jobs report.

The euro traded near $1.1790, supported by expectations of Fed rate cuts. The pound rose to $1.3740 on firm signals from the BoE, while gold stayed above $3,330 amid debt concerns. The yen slipped slightly after new trade threats from Trump, and silver held steady around $36 as investors waited for key labor data.

Time	Cur.	Event	Forecast	Previous
09:00	EUR	Unemployment Rate (May)	6.2%	6.2%
12:15	USD	ADP Nonfarm Employment Change (Jun)	99K	37K
14:30	USD	Crude Oil Inventories	-3.500M	-5.836M

EUR/USD at 1.1790 as Fed Cut Hopes Grow

The euro neared $1.1790 on Wednesday, just below its 3.5-year high, as persistent weakness in the U.S. dollar supported demand for the currency. The dollar’s decline was fueled by growing expectations of Federal Reserve rate cuts, with traders pricing in 64 basis points of easing this year, and odds of a July move at 21%. 

Fed Chair Jerome Powell’s cautious stance, as well as rising fiscal concerns over Trump’s $3.3 trillion tax-and-spending bill, further eroded confidence in the dollar. Ongoing trade conflicts and a flight from U.S. assets have strengthened the euro’s appeal, positioning it as a key alternative during the dolar’s weakness.

Resistance for the pair is at 1.1830, while support is at 1.1730.

R1: 1.1830	S1: 1.1730
R2: 1.1910	S2: 1.1690
R3: 1.2015	S3: 1.1630

Yen Slips as Trump Threatens 35% Tariff

The yen slipped toward 144 per dollar, pulling back from recent three-week highs after Trump threatened a 35% tariff on Japanese goods to push Tokyo into making trade compromises. Trump called the negotiations with Japan “really hard,” renewing his criticism of Japan’s resistance to importing U.S. cars and rice.

Recent data showed an improvement in business sentiment among large manufacturers in Q2, showing the sector’s resilience despite external pressures. Globally, yen remained underpinned by rising expectations of a more dovish Federal Reserve and market concerns over inflation stemming from Trump’s tax-and-spending proposals, which have weakened the U.S. dollar.

The key resistance is at $145.70, and the major support is at $143.55.

Fed Caution Keeps Gold Elevated

Gold held above $3,330 per ounce with the gains of over 1% from the day before, as a weaker U.S. dollar supported prices. The Senate's approval of Trump’s massive tax-and-spending package, expected to increase national debt by $3.3 trillion, added to these concerns.

Powell stressed a patient stance on rate cuts but didn’t rule out action this month, while Treasury Secretary Scott Bessent predicted cuts by September. Markets are now focused on upcoming U.S. labor data, especially Thursday’s payroll report, for direction on the Fed’s next moves. However, fading geopolitical risks slightly softened the gold demand, as Trump announced a 60-day Gaza ceasefire agreement with Israel and issued a warning to Hamas.

Resistance is at $3,350, while support holds at $3,300.

BoE Hawkish Tone Supports GBP

The British pound rose to $1.374, as the U.S. dollar weakness continued to support sterling. Market sentiment remained cautious before Thursday’s U.S. payrolls report.

Growing concerns over the inflationary impact of Trump’s $3.3 trillion tax-and-spending bill and political pressure on the Fed eased investor confidence in the dollar, allowing GBP/USD to build on recent gains. The pound also benefited from Bank of England Governor Andrew Bailey’s comments suggesting inflation pressures persist and that policy remains restrictive for now, giving GBP/USD relative support against the dollar.

Resistance is seen at 1.3760, while support holds at 1.3620.

Silver Dips to $36 Before Jobs Data

Silver prices dipped slightly with spot silver edging down 0.1% to $36 per ounce, as investors adopted a cautious stance before the U.S. labor market data. While the broader sentiment remained supportive due to a weaker U.S. dollar, which made precious metals more attractive to foreign buyers, traders remained on the sidelines, awaiting the ADP employment report and Thursday’s nonfarm payrolls for clearer direction.

Despite the dip, silver held near multi-year highs, reflecting ongoing demand and strong industrial interest.

Resistance is seen at 36.85, while support holds at 35.40.