Traders Trim Risk, Rate Bets Drive the Tone (12.02.2025)

Markets traded cautiously on Tuesday as shifting rate expectations and profit-taking shaped moves across assets.

EUR/USD climbed back above $1.16, its strongest level since mid-November, while mixed inflation readings across the Eurozone kept attention on upcoming data.

GBP/USD slipped toward $1.3220 as markets continued to digest the UK’s November budget and the debate surrounding its £26 billion tax package.

Gold pulled back to $4,210 after touching a six-week high, while silver dipped toward $57 after its record level, with both metals supported by expectations of a Fed rate cut next week and ongoing supply concerns.

Euro Gains After Softer US PMI 

EUR/USD edged toward 1.1615 in early Asian hours after the latest US ISM report showed manufacturing weakening again. November’s PMI slipped to 48.2, undershooting forecasts and reinforcing expectations that the Federal Reserve may ease policy next week. Rate-cut odds for December 9-10 climbed to 87%, up from 71% a week earlier.

Key levels remain unchanged, with 1.1550 acting as firm support and 1.1640 marking near-term resistance.

Yen Pulls Back as Traders Book Gains

The yen softened to around 155.7 per dollar, giving up part of its recent advance as some market participants secured profits. Earlier strength had been driven by rising talk of a possible BOJ policy shift. Finance Minister Satsuki Katayama stressed that Tokyo and the central bank share the same economic outlook, reinforcing expectations of closer policy coordination going forward.

Technically, upside pressure meets resistance near 157.95, while support remains anchored at 154.20.

Gold Pauses After Touching a Five-Week High

Gold eased to $4,210 per ounce on Tuesday as profit-taking followed Monday’s climb to the strongest level in six weeks. The metal continues to draw support from growing confidence in a December Fed cut after US manufacturing contracted for a ninth consecutive month. Attention now turns to Fed Chair Powell’s upcoming remarks for additional clues on the policy outlook.

Support is seen near $4,190, with resistance around $4,260.

Pound Steady with UK Budget Debate

GBP/USD hovered near 1.3220, easing from recent highs while staying supported against a softer US dollar. The market continued to process details from the UK’s November budget, including the £26 billion tax package. Chancellor Rachel Reeves pushed back against claims of misrepresenting the public finances, arguing the measures were necessary to restore stability.

Support is located around 1.3150, with resistance at 1.3260.

Silver Pulls Back After Record Run

Silver eased to roughly $57 in Asian hours after Monday’s all-time high prompted fresh profit-taking. Even with the pullback, expectations for another Fed cut this month and ongoing supply shortages may limit deeper declines. Traders are also trimming exposure ahead of this week’s high-impact US data.

Resistance stands near $57.90, while support forms around $55.80.