Markets Cautious as Fiscal and Policy Risks Mount (09.03.2025)

On September 3, markets traded cautiously as monetary and fiscal signals drove sentiment. The euro slipped toward $1.16, pressured by surging French and German 30-year yields, their highest since the 2011 debt crisis. Germany’s plan for nearly €500 billion in new debt through 2029 raised fresh fiscal worries.

The yen weakened past 147.5 per dollar as investors awaited wage data for Bank of Japan guidance. Governor Ueda pointed to rising wage growth in a tight labor market, though tariff risks kept policy expectations uncertain.

Gold stayed above $3,530, near record highs, supported by Fed easing bets and safe-haven demand. Silver held around $40.7, close to 2011 peaks, after a 2% jump. Markets priced a 90% chance of a September Fed cut, with Fed’s Daly backing easing if labor risks intensify.

The pound fell below $1.34, its weakest since early August, as 30-year gilt yields hit their highest since 1998. Fiscal concerns mount, with expectations that Chancellor Reeves may introduce new tax measures in the Autumn Budget.

Overall, investors remain highly reactive to central bank moves, fiscal policies, and geopolitical risks, reinforcing a cautious market tone.

EUR/USD Weakens as Yields Support USD Demand

EUR/USD declined for a second session, trading near 1.1620 in Asian hours Wednesday, with traders awaiting HCOB PMI data from the Eurozone and Germany. The pair fell as the U.S. dollar gained on higher Treasury yields, with the 2-year at 3.65% and the 10-year at 4.28%, drawing capital into U.S. assets. Sentiment was further hit after a U.S. appeals court ruled most of Trump’s tariffs illegal, though they remain until October 14 pending Supreme Court review.

The resistance sits at 1.1700, with support at 1.1590.

USD/JPY Climbs to One-Month High Amid Yen Weakness

The Japanese yen extended losses in Wednesday’s Asian session, pressured by political and trade uncertainties. BoJ Deputy Governor Ryozo Himino’s lack of a hawkish stance on Tuesday added to selling pressure, while a stronger U.S. dollar pushed USD/JPY close to 149.00, matching Tuesday’s one-month high. Speculation of a BoJ rate hike later this year, supported by a tight labor market and potential wage-driven inflation, may cap downside risks, though expectations of a Fed cut this month could restrain further gains. Traders now look to Friday’s U.S. Nonfarm Payrolls report.

Resistance is at 149.25, while support holds at 147.

Gold Hits Record High Ahead of US Jobs Data

Gold (XAU/USD) extended its two-week rally, reaching a fresh record near $3,546 during Wednesday’s Asian session. Expectations of a Federal Reserve rate cut this month and ongoing trade uncertainty supported demand for the safe-haven asset. Gains were limited as a stronger U.S. dollar, driven by weakness in the British pound and Japanese yen, restrained further momentum. Overbought technical conditions and caution ahead of Friday’s U.S. Nonfarm Payrolls report also kept investors cautious, with the data expected to shape the Fed’s policy outlook.

Gold resistance stands at $3,555, with support at $3,470.

GBP/USD Pressured by UK Fiscal Concerns

GBP/USD slipped toward 1.3365 in Wednesday’s Asian session as sterling weakened on worries over the UK’s fiscal outlook. Britain’s 30-year borrowing costs reached their highest since 1998, raising doubts about the Labour government’s fiscal discipline. With the budget not due until November, speculation about tax hikes is weighing on sentiment and confidence. Traders now await BoE policymaker Sarah Breeden’s remarks, though persistent fiscal risks and a fragile economic backdrop are likely to keep pressure on the pound.

The resistance is at 1.3410, with support at 1.3300.

Silver Consolidates After Reaching 14-Year Peak

Silver (XAG/USD) eased slightly from the $41.00 mark, a 14-year high touched in Wednesday’s Asian session, and now trades near $40.70, down 0.5% on the day. Overbought RSI levels prompted some profit-taking, though the downside looks limited. The break above last year’s highs and the key $40.00 threshold has strengthened bullish momentum, with any pullbacks likely to be viewed as new buying opportunities.

Resistance is at $41.25, with support at $39.80.