Global Markets Under Pressure: Currency and Commodity Trends (12.03.2024)

Recent market movements highlight the impact of geopolitical tensions, central bank policies, and economic forecasts. Gold and silver prices dropped due to a stronger US dollar, tempered by President-elect Trump’s tariff threats on BRICS nations considering alternatives to the dollar. 

The pound declined against the dollar amid concerns over trade barriers, though it strengthened against the euro due to political instability in France. Meanwhile, the yen hovered near 150 per dollar as the Bank of Japan hinted at rate hikes, and the euro fell sharply amid French political turmoil and speculation of further ECB rate cuts. Weak Eurozone growth, slowing inflation, and fears of US tariffs compounded its losses. Across markets, investors are closely watching central bank decisions, labor data, and political developments to gauge future trends.

EUR/USD Concerns Grow as Euro Suffers Worst Month in Over a Year

The euro fell over 0.6% to $1.05 as political turmoil in France deepened concerns over the stability of the Eurozone. France’s far-right party threatened to topple Prime Minister Michel Barnier’s fragile government in a no-confidence vote, escalating a standoff over the national budget. Meanwhile, dovish comments from ECB official Martins Kazaks fueled speculation about further rate cuts, with markets increasingly factoring in a 50 basis point reduction in December, though a 25 basis point cut remains more likely. Weak Eurozone growth, slowing services inflation, and fears of US tariffs have added to the euro’s struggles, culminating in a 3% drop in November, its worst monthly performance in over a year. Parity with the dollar is becoming a growing concern among investors.

Technically, the 1.0500-1.0510 range will serve as the initial resistance, with 1.0570 and 1.0600 as the next levels to watch in case of a breakout. On the downside, 1.0450 will be the first support, followed by 1.0400 and 1.0330 as additional key levels.

BOJ Governor Signals Potential Rate Hikes as Data Aligns

The Japanese yen edged toward 150 per dollar on Tuesday, weighed down by overall dollar strength, but remained close to its highest levels in seven weeks amid expectations that the Bank of Japan could soon raise interest rates again. Over the weekend, BOJ Governor Kazuo Ueda indicated that further rate hikes are "nearing" as economic data is aligning with expectations. He also highlighted the significance of momentum from fiscal 2025 wage negotiations. Markets are now pricing in a roughly 60% probability of a 25 basis point rate hike in Japan this month, up from around 50% recently. Meanwhile, investors remain cautious about the dollar's strength, which has been bolstered by expectations of US economic outperformance and Trump’s tariff threats against other major economies.

Technically, the 151.00 level will serve as the initial resistance, with 152.00 and 153.00 as the next levels to watch in case of a breakout. On the downside, 149.40 will be the first support, followed by 148.70 and 148.20 as additional key levels.

Gold Prices Drop Amid Stronger Dollar and Geopolitical Uncertainty

Gold held steady at around $2,640 per ounce on Tuesday as investors awaited key US jobs data and additional comments from Federal Reserve officials, which could provide further insight into the central bank's monetary policy direction. On Monday, Fed Governor Christopher Waller expressed support for another rate cut later this month, while New York Fed President John Williams hinted at a gradual move toward a more neutral policy. These statements led investors to raise expectations for a 25bps rate cut at the Fed's December 17-18 meeting, with markets now pricing in a 75% probability of such a move. This potential cut would lower the opportunity cost of holding non-yielding gold, increasing its attractiveness. Additionally, gold prices remained underpinned by ongoing geopolitical tensions in the Middle East, particularly the continued conflict between Israel and Hezbollah, despite a ceasefire agreement.

Technically, the 2650 level will serve as the initial resistance, with 2680 and 2710 as the next levels to watch in case of a breakout. On the downside, 2600 will be the first support, followed by 2575 and 2545 as additional key levels.

Pound Drops as Dollar Strengthens Amid Trade Barrier Warnings

The GBP/USD pair remains under pressure during Tuesday's Asian session, trading slightly below the mid-1.2600s. The British Retail Consortium reported a 3.3% drop in sales volumes for the year to November, the weakest since April, partly due to the timing of Black Friday. This highlights declining consumer confidence, weighing on the British Pound. A modest gain in the US Dollar, driven by concerns over Trump’s inflationary policies and geopolitical tensions like the Russia-Ukraine conflict, adds further pressure on GBP/USD.

Traders have reduced expectations for a Bank of England rate cut following last week’s UK inflation data, helping to limit the pair's downside. Market participants await key US economic data, including Nonfarm Payrolls, and Fed Chair Jerome Powell’s speech, which could offer policy insights and drive USD demand.

Technically, the 1.2700 level will serve as the initial resistance, with 1.2750 and 1.2820 as the next levels to watch in case of a breakout. On the downside, 1.2610 will be the first support, followed by 1.2540 and 1.2470 as additional key levels.

Trump's Tariff Warning on BRICS Weighs on Metal Markets

Silver is trading at around $30.70 on Tuesday morning. While the mixed PMI data from China over the weekend and Trump's threats to BRICS have pressured the precious metal, silver remains in positive territory as of Tuesday morning. The PMI, JOLTS and NFP data to be released later in the week, along with ongoing geopolitical risks, will likely determine the future direction of the white metal.

Technically, the 31.00 level will serve as the initial resistance, with 31.40 and 32.00 as the next levels to watch in case of a breakout. On the downside, 29.80 will be the first support, followed by 29.20 and 28.40 as additional key levels.