Markets React to US Inflation, Trade, and Rate Expectations (03.17.2025)

Gold hit a record $2,980, driven by risk aversion and Fed rate cut speculation. Euro neared $1.09 as Germany finalized debt reform, while the yen traded near five-month highs on BOJ rate hike expectations. The pound fell to $1.29 after UK GDP unexpectedly contracted, while silver surged to $33.90 on weak U.S. inflation data and rising trade tensions.

Yen Gains on Rate Hike Expectations

The Japanese yen traded around 148.6 per dollar on Monday, near a five-month high, as expectations for BOJ rate hikes remained strong. However, the central bank is expected to keep its policy unchanged in this week’s meeting.

Major Japanese firms approved wage hikes for the third year, boosting consumer spending and inflation, and potentially allowing future rate increases. The yen also gained from dollar weakness as US economic concerns and trade policies pushed investors toward safe-haven currencies like the yen and Swiss franc.

Key resistance is at 149.20, with further levels at 152.00 and 154.90. Support stands at 147.00, followed by 145.80 and 143.00. 

Gold's Record Week: $2,980 Milestone

Gold surged above $2,980 per ounce, hitting a record and heading for a 2% weekly gain as risk aversion and Fed rate cut expectations grew. Trump escalated trade tensions, threatening a 200% tariff on European wines after the EU's 50% tax on U.S. whiskey.

February's PPI and CPI data showed easing inflation, increasing Fed flexibility for rate cuts, and raising gold's appeal. Strong ETF inflows and continued central bank purchases, with China extending its buying for a fourth month, further supported prices.

Key resistance stands at 3000, with further levels at 3045 and 3100. Support is at 2980, followed by 2916 and 2885.   

Pound Drops to $1.29 After Unexpected Contraction

The British pound fell to $1.29 after UK GDP unexpectedly shrank by 0.1% in January, missing forecasts of 0.1% growth, mainly due to weakness in the production sector.

The Bank of England recently cut its Q1 growth forecast to 0.1% from 0.4%, with rates expected to stay at 4.5% in next week’s policy decision. Markets also await Chancellor Rachel Reeves' fiscal plans and the OBR’s economic outlook on March 26. Meanwhile, US economic concerns and trade tensions have limited the pound’s losses.

If GBP/USD breaks above 1.2980, the next resistance levels are 1.3050 and 1.3100. On the downside, support stands at 1.2860, with further levels at 1.2760 and 1.2660 if selling pressure increases.  

Silver Climbs on Weak Inflation Data

Silver surged toward $33.90 an ounce, its highest since late October with ongoing trade tensions and rising Fed rate cut expectations after weak U.S. inflation data.

Trump threatened 200% tariffs on European wines in response to the EU’s 50% tariff on U.S. whiskey, further heightening market uncertainty. U.S. producer prices remained flat in February in the meantime, consumer inflation rose just 0.2%, and jobless claims declined, signaling a resilient labor market.

If silver breaks above $34.00, the next resistance levels are $34.85 and $35.00. On the downside, support is at $33.80, with further levels at $33.15 and $32.75 if selling pressure increases.