Markets Await U.S. Inflation Data and Fed Guidance (11.14.2024)

As the market reacts to U.S. inflation data and comments from Fed officials, major currencies and metals experience heightened volatility. 

The dollar index climbs to a yearly high, supported by expectations of inflationary policies if Trump secures a second term, which could affect Fed rate decisions. Meanwhile, EUR/USD hovers near a one-year low, USD/JPY weakens further, and gold and silver face downward pressure due to rate cut speculations. Upcoming data, including PPI, retail sales, and Fed Chair Powell's remarks, will likely influence market direction in the days ahead.

EUR/USD Awaits Powell and Inflation Data

The EUR/USD traded around 1.0545 on Thursday morning, while the U.S. dollar index held above 106.5, its highest in a year, as investors reacted to inflation data and Fed commentary. U.S. annual inflation rose to 2.6% in October, aligning with expectations, while core inflation stayed at 3.3%. Fed officials, including Kashkari, Logan, and Musalem, expressed optimism that inflation will return to target with gradual rate adjustments. Investors now await U.S. producer inflation data, Powell’s remarks, and Friday’s retail sales report for more rate outlook signals. The dollar’s strength is also bolstered by "Trump trades," anticipating higher growth and inflation under a possible second term, which could limit the Fed's rate cuts.

For EUR/USD, resistance levels are 1.0600, 1.0650, and 1.0700; support is at 1.0520, with further levels at 1.0450 and 1.0400.

Yen Falls to 156 per Dollar Amid Policy Uncertainty and Stronger USD

The Japanese yen weakened to around 156 per dollar on Thursday, its lowest in nearly four months, amid domestic policy uncertainties and expectations of a more hawkish U.S. stance under the Trump administration. Although Japan's producer inflation rose at its fastest rate in over a year in October, mixed sentiment surrounds the Bank of Japan’s plans for policy normalization following recent political changes. The bank maintains its target to raise the policy rate to 1% by late 2025. Investors now look to Friday’s Q3 GDP data for more economic insight, while the yen remains pressured by a stronger dollar driven by "Trump trades" and expectations of gradual Fed rate cuts.

In USD/JPY, support levels are at 154.50 (200-day moving average), 153.40, and 152.30, with resistance at 156.00, 156.50, and 157.00.

Gold Drops for Fifth Day as Fed Rate Cut Odds Shift

Gold fell to around $2,560 per ounce on Thursday, marking its fifth consecutive loss and hitting an eight-week low as a stronger dollar pressured prices following the latest U.S. CPI data. Although the CPI met expectations, the three-month annualized core inflation rate rose slightly. Despite this, the market expects a December Fed rate cut, with an 80% probability, up from 60% before the report. Gold has lost over 4% since last Friday, weighed down by speculation that inflationary policies under a potential Trump presidency might prompt the Fed to hold off on further cuts. Investors now await today's PPI data and weekly jobless claims, with retail sales due Friday.

For gold, support levels are at $2,545, $2,520, and $2,500, while resistance is at $2,595, $2,625, and $2,660.

GBP/USD Drops on Inflation Fears and BoE Caution

The British pound traded around 1.2690 on Thursday, a three-month low, pressured by a stronger U.S. dollar and expectations that Trump’s policies could drive inflation, limiting Fed rate cuts. In the UK, labor data aligned with the Bank of England’s cautious stance on rate cuts; regular pay rose 4.8% in the three months to September, and total pay growth, including bonuses, accelerated. However, the unemployment rate rose to 4.3%, with job vacancies at their lowest since May 2021. Last week, the Bank of England cut rates by 25 basis points and maintained a cautious outlook. Key UK Q3 GDP data is due later this week.

GBP/USD support levels are at 1.2685, 1.2650, and 1.2600, while resistance is at 1.2800, 1.2830, and 1.2880.

Silver Steady at $30 as Markets Await Fed Rate Cut

Silver held steady around $30 per ounce on Thursday, pausing after a selloff that brought it to a one-month low of $30.7. With U.S. inflation data meeting expectations, markets are now anticipating a December Fed rate cut, reducing the opportunity cost of holding silver. Headline inflation was 2.6% in October, and core inflation held at 3.3%, fueling rate cut expectations. However, silver's recovery was capped by weak industrial demand and lack of new stimulus from China, which has led to oversupply concerns in the solar panel market, a major silver consumer. Chinese-owned manufacturers have also started cutting solar panel production amid the risk of higher tariffs post-Trump election.

Key resistance levels are at 30.60, 31.00, and 31.70; support levels are at 29.85, 29.30, and 28.80.