Markets Keep Steady Amid Changing Political Conditions (02.25.2025)

Global markets remain steady amid mixed economic signals and evolving trade policies. 

The euro climbed to around $1.0475 following strong German election results, while investors await coalition talks. The yen strengthened near a 12-week high at 149.5 on expectations of further BOJ hikes as key inflation data looms. Gold held near record highs, supported by safe-haven demand amid Trump's tariff actions and inflation fears, and silver traded near $31.8 as traders watch for upcoming US inflation reports and Fed cues. Meanwhile, the British pound rose above $1.26 on optimistic UK data, reflecting cautious sentiment across global assets.

Euro Steady After German Elections, Coalition Talks in Focus

On Tuesday, EUR/USD traded around 1.0475 as markets reacted to Germany’s election results. The conservative CDU/CSU won 28.6%, the far-right AfD 20.8%, and the center-left SPD 16.4%, all aligning with forecasts. CDU leader Friedrich Merz is expected to pursue a coalition with the SPD, though negotiations may take time. Meanwhile, AfD and the Left Party secured a third of the seats, potentially obstructing key legislation, including pro-growth measures and debt brake reforms.

Key resistance is at 1.0520, followed by 1.0600 and 1.0650. Support stands at 1.0350, with further levels at 1.0275 and 1.0220.

Yen Strengthens as Investors Await BoJ Policy Clues

The Japanese yen traded around 149.5 per dollar on Tuesday, near a 12-week high, as expectations grew for further Bank of Japan rate hikes following strong Q4 inflation. Investors await key data on Friday, including industrial production, retail sales, and Tokyo inflation, for policy insights. Safe-haven demand also supported the yen amid trade and geopolitical tensions. Meanwhile, U.S. President Donald Trump confirmed tariffs on Canada and Mexico will resume next week after a one-month delay.

Key resistance is at 154.90, with further levels at 156.00 and 157.00. Support stands at 149.20, followed by 147.10 and 145.80.

Gold Prices Steady as Inflation Fears and Tariff Uncertainty Persist

On Tuesday, gold dipped below $2,950 per ounce but remained near record highs as safe-haven demand grew amid concerns over Trump’s tariff policies. His confirmation that tariffs on Canadian and Mexican imports will continue raised inflation fears, potentially influencing Fed policy. Meanwhile, SPDR Gold Trust holdings climbed to 904.38 tonnes, the highest since August 2023. Investors now await Friday’s PCE report, which is expected to show the slowest price growth since June, though persistent inflation may keep the Fed cautious about rate cuts.

Key resistance stands at $2,949, with further levels at $2,975 and $3,000. Support is at $2,880, followed by $2,830 and $2,760.

Pound Rises to $1.26 Amid Strong UK Data

The British pound traded near $1.26, a two-month high, as data reinforced expectations of a cautious Bank of England. Inflation hit 3% last month, exceeding the 2.8% forecast, while services inflation rose to 5%, just below the BoE’s 5.2% estimate. Wage growth accelerated in Q4 2024, with real wages increasing after inflation. Retail sales also jumped 1.7%, driven by strong food demand, leading markets to price in just two rate cuts this year, bringing rates down to 4%.

The first resistance level for the pair will be 1.2670. In the event of this level's breach, the next levels to watch would be 1.2720 and 1.2770. On the downside 1.2340 will be the first support level. 1.2265 and 1.2100 are the next levels to monitor if the first support level is breached. 

Silver Prices Ease as Investors Watch PCE Report and Fed Policy Signals

Silver dipped to $32.1 per ounce, extending losses from a three-month high of $33.39 on February 14, as uncertainty over U.S. tariffs weighed on demand. Investors await key economic data, including the January PCE Price Index, expected to show a 0.3% monthly rise and annual increases of 2.4% (headline) and 2.6% (core). Upcoming Fed speeches may also provide clues on future rate decisions.

Technically, the first resistance level will be 33.15 level. In case of this level’s breach, the next levels to watch would be 33.80 and 34.50. On the downside, 31.40 will be the first support level. 30.90 and 30.20 are the next levels to observe if the first support level is breached.