Markets Keep Steady on Fed Cut Bets and Geopolitical Risks (08.07.2025)

Markets showed cautious strength in early August as expectations for U.S. interest rate cuts continued to grow following weaker labor data and renewed tariff threats. 

The euro pushed above $1.16 with the Fed expected to act ahead of the ECB, while gold and silver reached multi-week highs amid safe-haven demand. The yen held steady after the Bank of Japan flagged inflation risks despite falling real wages. Meanwhile, the British pound recovered slightly ahead of the Bank of England's expected rate cut.

Yen Holds Ground as BOJ Flags Inflation Risks

The yen hovered around 147.5 per dollar as markets assessed the Bank of Japan’s policy outlook. While the BOJ held rates steady last week, it raised its inflation forecast and noted global risks. June meeting minutes showed openness to further tightening if conditions improve. Meanwhile, Japan’s real wages fell for a sixth straight month, with inflation still outpacing earnings.

USD/JPY faces resistance at 148.50, with support at 146.00.

Gold Hits Two-Week High on Fed Cut Bets

Gold rose toward $3,380 per ounce, reaching a two-week high, as renewed U.S. tariff threats and growing expectations of Fed rate cuts supported demand. President Trump announced significant new tariffs on semiconductors, as well as imports from India and Brazil. Soft U.S. economic data and signs of labor market weakness increased the likelihood of rate cuts in September and December. Trump also plans to nominate a new Fed Governor and is considering replacing Chair Powell, raising concerns about the Fed’s independence.

Gold is testing resistance at $3,400, with support at $3,340.

Sterling Rises to $1.328 Ahead of BoE Decision

The British pound climbed to $1.328 from an 11-week low of $1.321 after weak U.S. jobs data weighed on the dollar. Despite this recovery, the pound declined by 3.8% in July, marking its worst monthly performance since September 2022, as concerns about the UK economy persisted. Investors now turn their attention to the Bank of England's anticipated 25 basis point rate cut decision today.

GBP/USD is seeing resistance at 1.3330, with initial support at 1.3240.

Tariffs on India Lift Silver Above $38

Silver rose above $38 per ounce, reaching a one-week high as expectations for Federal Reserve rate cuts increased, driven by signs of a weakening U.S. labor market. Investors are now looking to jobless claims data for further confirmation. Geopolitical tensions also supported safe-haven demand, as President Trump announced a doubling of tariffs on Indian imports over continued Russian oil purchases and signaled the possibility of meeting with President Putin next week.

Silver is now testing resistance at $38.20, with support holding around $36.50.