Political Uncertainty and Central Bank Actions Shape Market Moves (12.04.2024)

Global markets grapple with heightened political and economic risks, as the euro struggles with Eurozone instability. 

The yen anticipates a possible BOJ rate hike, and gold and silver maintain momentum amid safe-haven demand. Central bank policies and upcoming data, including the Fed's Beige Book and non-farm payrolls, remain pivotal.

Euro Struggles Amid Political and Economic Turmoil

The euro edged up to $1.0510 amid political uncertainty in France, where Prime Minister Michel Barnier faces a no-confidence vote over a contentious budget proposal with tax hikes and spending cuts. Volatility hit its highest level since March 2023, driven by concerns over weak economic data, political unrest in the Eurozone, and a strong U.S. dollar. Markets expect a 25 basis point rate cut in December, though a 50 basis point reduction is gaining traction.

Technically, the first resistance level is seen at 1.0570. Above this, 1.0600 and 1.0660 could be the next key levels to watch. On the downside, the initial support is at 1.0450, with a break below this level potentially leading to further support at 1.0400 and 1.0330.

BOJ Governor Signals Potential Rate Hikes as Data Aligns

The Japanese Yen (JPY) traded lower on Wednesday, pressured by strong US Manufacturing PMI and job openings data, signaling a resilient US economy and strengthening the dollar. However, growing expectations of a Bank of Japan rate hike this month may offer short-term support for the JPY.

Political instability in France, tensions in South Korea, and Middle East geopolitical risks could also boost safe-haven demand for the JPY. Key US data releases, including the ADP Employment Change, Services PMIs, and the Fed’s Beige Book, along with Fed Chair Powell's speech, remain in focus for further market direction.

Technically, the 151.00 level will serve as the initial resistance, with 152.00 and 153.00 as the next levels to watch in case of a breakout. On the downside, 149.40 will be the first support, followed by 148.70 and 148.20 as additional key levels.

Investors Eye Fed Policy and Jobs Data as Gold Maintains Momentum

Gold held above $2,640 per ounce on Wednesday as markets assessed the political and monetary outlook while awaiting key economic data. Strong US job openings highlighted labor market resilience, with attention now shifting to Friday's non-farm payrolls and upcoming Fed speeches for policy clues. Odds of a 25bps Fed rate cut stand at 73%, boosting gold by lowering the opportunity cost of holding it. The metal also found support from its safe-haven appeal amid political instability in South Korea and France, as well as ongoing Middle East and Russo-Ukrainian tensions.

Technically, the 2660 level will serve as the initial resistance, with 2680 and 2710 as the next levels to watch in case of a breakout. On the downside, 2600 will be the first support, followed by 2575 and 2545 as additional key levels.

BoE Signals Risks as Pound Declines Post-Weekly Surge

The British pound fell to $1.268, retreating from a 1.6% weekly gain, its largest since mid-August, as the US dollar strengthened following President-elect Trump's comments on protecting the dollar's dominance. The Bank of England warned that higher trade barriers could slow global growth, create inflation uncertainty, and raise borrowing costs. Markets expect the BoE to cut rates by 75 bps by 2025. Focus now shifts to the BoE's Decision Maker Panel on December 5 for insights into inflation and monetary policy. The pound gained against the euro amid growing political instability in France.

Technically, the first resistance level is seen at 1.2700. Above this, 1.2750 and 1.2820 could be the next key levels to watch. On the downside, the initial support is at 1.2610, with a break below this level potentially leading to further support at 1.2540 and 1.2470.

Silver Surges as Fed Dovishness and Geopolitical Risks Boost Demand

Silver prices climbed toward $31 per ounce on Tuesday, hitting a one-week high as dovish Fed comments raised expectations for a 25 bps rate cut in December, with odds rising to 75% from 59% last week. Geopolitical tensions in the Middle East, including Israeli strikes on Hezbollah positions, supported safe-haven demand. Speculation about new stimulus measures from China also increased demand prospects in the world's largest metals consumer.

Technically, the first resistance level is seen at 31.40. Above this, 32.00 and 32.50 could be the next key levels to watch. On the downside, the initial support is at 30.70, with a break below this level potentially leading to further support at 30.20 and 29.80.