Markets Remain Cautious as Fed Reaffirms Rate (03.20.2025)

Markets remain cautious as traders digest the Federal Reserve’s reaffirmed plan for two rate cuts in 2025 while uncertainty surrounds the European Central Bank’s policy path. 

EUR/USD dipped toward 1.0900 despite Germany’s fiscal reforms, while the yen strengthened past 148.5 per dollar on dollar weakness. Gold held near a record $3,050 amid safe-haven demand and trade tensions, while silver stayed elevated near $33.60. Investors now shift focus to ECB President Lagarde’s speech and the Bank of England’s policy decision.

ECB Rate Cut Hopes Fade, EUR/USD Nears 1.0900

EUR/USD fell for a second day, nearing 1.0900 in the Asian session. The pair found support as the dollar weakened on falling Treasury yields after the Fed reaffirmed plans for two rate cuts. However, uncertainty over Trump’s tariff policies kept sentiment cautious.

In Europe, German lawmakers approved a debt plan by likely Chancellor Friedrich Merz to increase growth and defense spending. A shift from Germany’s conservative fiscal stance could drive inflation and influence ECB policy.

Investors await ECB President Lagarde’s speech on economic and monetary affairs in Brussels on Thursday.

Key resistance is at 1.0950, followed by 1.1000 and 1.1050. Support stands at 1.0880, with further levels at 1.0800 and 1.0730. 

Dollar Weakens Post-Fed, Lifting Yen Beyond 148.5

The yen strengthened past 148.5 per dollar, rising for a second session as the dollar weakened after the Fed reaffirmed two rate cuts this year. Fed Chair Powell downplayed Trump’s tariffs as short-lived. The BoJ kept rates at 0.5% on Wednesday, adopting a cautious stance amid global risks, especially US tariffs. It also emphasized monitoring forex markets and their impact on the economy.

Key resistance is at 150.30, with further levels at 152.00 and 154.90. Support stands at 147.00, followed by 145.80 and 143.00.  

Gold Holds Near Record $3,050

Gold hovered near a record $3,050, supported by Fed rate cut expectations and safe-haven demand. The Fed reaffirmed plans for 50 bps cuts this year amid rising economic uncertainty, driving gold.

Middle East tensions escalated as Israel resumed ground operations in Gaza after an airstrike ended a two-month ceasefire. The US continued strikes on Houthi targets, with Trump warning Iran over future incidents.

Trade concerns persisted ahead of new tariffs in April, following the US’s 25% duty on steel and aluminum in February.

Key resistance stands at $3082, with further levels at $3100 and $3,150. Support is at $3000, followed by $2,980 and $2,916.    

Sterling Stays Firm as Fed Highlights Growth

GBP/USD held near 1.3000 as sentiment stayed upbeat after the Fed reaffirmed 2025 rate cuts, though delayed. Markets still expect a 25 bps cut in June, with Powell highlighting strong US growth and a healthy labor market.

The Fed lowered its 2025 GDP forecast to 1.7% from 2.1% and acknowledged trade policy risks but sees inflationary effects as short-lived.

Focus now shifts to the BoE’s Thursday rate decision, with no changes expected. On Friday, the UK’s GfK Consumer Confidence is projected to fall to -21.0 from -20.0.

If GBP/USD breaks above 1.3050, the next resistance levels are 1.3100 and 1.3150. On the downside, support stands at 1.2860, with further levels at 1.2800 and 1.2715 if selling pressure increases. 

Silver Holds Near $33.60 as Fed Signals 2025 Rate Cuts

Silver hovered near $33.60 after the Fed held rates at 4.25%-4.5%, signaling 50 bps cuts by 2025. Despite trade-war fears and Trump’s policies, silver remains near a five-month high.

Lease rates surged as stockpiles shrank, especially in London, with silver flowing to the US for higher prices, widening market price gaps. Spot silver is up 17% this year, outperforming other commodities.

Tariffs strain silver transfers from Canada and Mexico, tightening supply and fueling fears of a prolonged “silver squeeze.”

If silver breaks above $34.05, 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.