Trump Policies Lift Euro, BoJ Rate Hike Weighs on Yen (01.23.2025)

The GBP/USD remained steady at 1.2310, with traders eyeing upcoming PMI reports for direction, while silver prices paused their three-day rally at $30.60, facing headwinds from a potentially stronger US dollar.

The GBP/USD remained steady at 1.2310, with traders eyeing upcoming PMI reports for direction, while silver prices paused their three-day rally at $30.60, facing headwinds from a potentially stronger US dollar. The Japanese yen weakened to 156.5 as the Bank of Japan began its policy meeting, with expectations of a rate hike to 0.5%, the highest in 16 years. Gold surged past $2,750, driven by safe-haven demand amid escalating trade war concerns and a weaker dollar. Meanwhile, the euro reached a five-week high of $1.044, supported by optimism over President Trump's initial pro-business policies, though trade concerns lingered.

Dollar Stabilizes After Trump Policies

The euro climbed to $1.044, marking a five-week high, as markets reacted positively to President Donald Trump's decision to avoid imposing severe trade penalties early in his term. While fears of protectionist policies disrupting global growth and driving U.S. inflation had unsettled investors, Trump's initial emphasis on pro-business initiatives has strengthened market sentiment.

Concerns linger after Trump criticized the EU for being "very, very bad to us" and suggested the possibility of tariffs. In response, European Central Bank (ECB) President Christine Lagarde called on Europe to brace for potential trade actions, praising Trump’s choice to delay sweeping tariffs as a “shrewd move.” Meanwhile, the ECB is expected to maintain its accommodative monetary policy, with a 25 basis-point reduction in the deposit rate anticipated at next week’s meeting.

The first resistance level is at 1.0430, with further resistance levels at 1.0460 and 1.0515 if the price breaks above. On the downside, the initial support is at 1.0355, followed by additional support levels at 1.0270 and 1.0225.

Yen Weakens as BoJ Kicks Off Policy Meeting

The Japanese yen remained near 156.5 per dollar as the Bank of Japan commenced its two-day policy meeting. The central bank is predicted to increase its policy rate to 0.5% on Friday, marking the highest short-term borrowing cost in 16 years. BoJ Governor Ueda recently indicated that rate hikes would be considered if the economy stays strong, while Deputy Governor Himino expressed that negative real interest rates would be unusual once Japan overcomes deflationary pressures. Additionally, December data showed that Japanese exports outperformed expectations, with imports also recording growth. Globally, the yen may face downward pressure from a strengthening dollar, driven by U.S. President Donald Trump’s pro-growth, inflation-boosting policies.

The key resistance level appears to be 158.60, with a break above it potentially targeting 160.00 and 161.00. On the downside, 154.90 is the first major support, followed by 153.40 and 152.40 if the price moves lower. 

Trump Tariffs Push Gold Higher

Gold surged past $2,750 per ounce on Wednesday, extending a 1% gain from the previous session to hit its highest level since early November. The rise was driven by a weaker U.S. dollar and safe-haven demand amid ongoing trade war concerns. President Trump outlined potential tariffs on the EU, revisited a 10% tariff on China, and mentioned heavy levies on Canada and Mexico, heightening market anxiety. Traders also considered inflation risks from Trump’s policies, which could prompt the Federal Reserve to maintain higher interest rates, potentially limiting gold’s appeal due to its non-yielding nature.

Technically, the first resistance level will be 2760. In case of this level’s breach, the next levels to watch would be 2790 and 2800. On the downside 2660 will be the first support level. 2630 and 2600 are the next levels to monitor if the first support level is breached. 

GBP/USD Steady at 1.2310 Ahead of PMI Reports

The GBP/USD pair is trading near 1.2310 on Thursday morning. With minimal economic data expected today, traders are turning their focus to Friday's S&P Global PMI reports for both the UK and the US. The January PMI surveys are projected to show mixed results, with a slight decline in the services sector and a modest recovery in manufacturing. While PMI data usually has a limited market impact unless the results significantly deviate from forecasts, the relatively low response rates from survey participants suggest these figures should be interpreted cautiously. 

The first resistance level for the pair is at 1.2350. If this level is surpassed, the next resistance levels to watch are 1.2430 and 1.2460. On the downside, the initial support level is at 1.2265, with 1.2100 and 1.2080 as the subsequent levels to observe if the first support level is breached.

Silver Pauses Rally at $30.60

Silver prices (XAG/USD) have stalled their three-day rally, hovering around $30.60 during Thursday's Asian session. The dollar-priced metal faces headwinds as the US Dollar is anticipated to strengthen, with traders expecting the US Federal Reserve to maintain its benchmark overnight rate in the 4.25%-4.50% range at the January meeting.

From a technical perspective, the first resistance level is at $31.00. If this level is breached, the next targets are $31.80 and $32.50. On the downside, the initial support level stands at $29.85, with $28.80 and $28.50 as subsequent levels to watch if the first support is broken.