Fed Rate Cut Hopes Lift Euro, Yen Rally Continues, and Silver Hits $31 (01.17.2024)

The euro rebounded to $1.03 on phased tariff news, though ongoing rate cut expectations and inflation risks tied to Trump's policies keep it under pressure. 

The yen strengthened near 155.5 amid hints of a hawkish BOJ, while gold hovered above $2,710 on tempered safe-haven demand after a Middle East ceasefire. The British pound weakened to $1.22 on soft economic data and debt concerns, and silver climbed to $31, driven by Fed rate cut hopes despite industrial demand worries. Investors now watch upcoming data and central bank signals for further market direction.

Euro Rises to $1.03 Amid Reports of Phased Tariff Plan

The euro rose to $1.03 from a two-year low of $1.018 amid reports of a phased tariff plan by Trump’s team to avoid sudden inflation spikes. The plan suggests gradual monthly tariff increases of 2-5%. The euro remains pressured as markets reassess rate cut expectations and inflation risks from Trump’s policies. Focus shifts to ECB minutes and Eurozone inflation data for policy insights.

From a technical perspective, the first resistance level is at 1.0350, with further resistance levels at 1.0460 and 1.0500 if the price breaks above. On the downside, the initial support is at 1.0270, followed by additional support levels at 1.0125 and 1.0100. 

BOJ Rate Hike Speculation Lifts Yen Amid Cooling US Inflation

The Japanese yen steadied at 155.3 per dollar on Friday, poised for its strongest week since late November, amid speculation of a Bank of Japan rate hike next week. BOJ officials Kazuo Ueda and Ryozo Himino hinted at a potential hike, citing strong inflation and wage growth data. Ueda expressed confidence in wage increases, which were supported by industry feedback. Finance Minister Katsunobu Kato reiterated readiness to act in support of the yen. Internationally, the yen gained as cooling US inflation boosted expectations of further Federal Reserve rate cuts.

The key resistance level appears to be 158.60, with a break above it potentially targeting 160.00 and 161.00. On the downside, 154.90 is the first major support, followed by 153.40 and 152.40 if the price moves lower.  

Geopolitical Calm Tempers Gold Gains, but Bullish Trend Continues

Gold traded at $2,710 per ounce on Friday, near a month-high, and set for a third weekly gain. Cooler U.S. core inflation and weak retail sales bolstered hopes for multiple Federal Reserve rate cuts this year, reinforced by Fed Governor Christopher Waller’s comments on potential easing. Rate cuts would increase gold's appeal as a non-yielding asset. Additionally, anticipated inflation from Trump’s proposed tariffs further strengthened gold’s role as an inflation hedge. However, a ceasefire between Israel and Hamas reduced safe-haven demand. Gold has risen about 1% this week.

Technically, the first resistance level will be 2725 level. In case of this level’s breach, the next levels to watch would be 2750 and 2790 consequently. On the downside 2660 will be the first support level. 2630 and 2600 are the next levels to monitor if the first support level is breached. 

Pound Weakens on Stagflation Fears and Fiscal Concerns

The British pound weakened to $1.22, near late 2023 lows, as traders evaluated economic data and stagflation risks. GDP grew just 0.1% in November, missing forecasts, with three-month growth stalling. The economy risks stagnating for a second quarter unless December GDP grows by at least 0.07%, per the ONS. Annual inflation fell to 2.5% in December, matching BoE forecasts but below market expectations. Traders expect only one quarter-point rate cut from the BoE this year. UK financial and bond markets remain strained by concerns over debt levels and the government’s ability to meet budget targets.

The first resistance level for the pair will be 1.2265. In the event of this level's breach, the next levels to watch would be 1.2350 and 1.2460. On the downside 1.2100 will be the first support level. 1.2080 and 1.2000 are the next levels to monitor if the first support level is breached.

Silver Hits $31 on Fed Rate Cut Hopes and Softer Inflation

Silver surged toward $31 per ounce on Thursday, hitting a one-month high as softer US core inflation fueled expectations of more Fed rate cuts this year. Lower rates could strengthen commodities by spurring growth and weakening the dollar. However, prices remain below October’s 12-year high of $35 due to concerns over manufacturing demand, especially from China’s solar panel sector, where supply regulation efforts may curb silver use.

Technically, the first resistance level will be 31.00 level. In case of this level’s breach, the next levels to watch would be 31.80 and 32.50 consequently. On the downside 29.85 will be the first support level. 28.80 and 28.50 are the next levels to monitor if the first support level is breached.