- Analytics
- News and Tools
- Market News
CFD Markets News and Forecasts — 01-01-2025
European Central Bank (ECB) President Lagarde said on Wednesday that the central bank hopes to hit the 2% inflation target in 2025
Key quotes
“We have made significant progress in 2024 in bringing down inflation and hopefully 2025 is the year when we are on target as expected and as planned in our strategy,”
“Of course we will continue our efforts to ensure that inflation stabilizes sustainably at that 2% medium-term target.”
Market reaction
At the time of writing, EUR/USD is trading 0.01% higher on the day to trade at 1.0353.
ECB FAQs
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the European Central Bank (ECB) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the ECB stops buying more bonds, and stops reinvesting the principal maturing on the bonds it already holds. It is usually positive (or bullish) for the Euro.
- AUD/USD flat lines near 0.6185 in Thursday’s early Asian session.
- A slower pace of the Fed rate cut might lift the USD against the Aussie.
- A falling Chinese Yuan has led the Aussie to multi-year lows.
The AUD/USD pair trades on a flat note around 0.6185 during the early Asian session on Thursday. However, the expectation that the US Federal Reserve (Fed) will take a slow and cautious approach to further rate cuts this year might boost the US Dollar (USD) and acts as a headwind for AUD/USD.
In the final monetary policy meeting on December 18, the Fed indicated that it would only reduce interest rates two times next year, down from four rate cuts in September’s updated economic projections. The rising bets that the US central bank will hold interest rates higher than peers lift the Grenback to dominate rivals.
Furthermore, the rising geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war could underpin the USD, a safe-haven currency, in the near term. “The greenback has been boosted by "rising growth concerns elsewhere against the background of geopolitical risk," noted analysts at Action Economics.
The Australian Dollar (AUD) declined around 9.2% in 2024, the weakest yearly performance since 2018. On Tuesday, AUD/USD fell to a multi-year low, pressured by the weakening of the Chinese Yuan and a lack of confidence in the outlook for China's economy. "The problem with the Australian dollar appears to be that there was a real wobble in the Chinese currency into New Year's Eve,” said InTouch Capital Markets senior FX analyst Sean Callow.
Looking ahead, the Chinese Caixin Manufacturing Purchasing Managers Index (PMI) for December is due later on Thursday. Also, the US weekly Initial Jobless Claims and S&P Global Manufacturing PMI for December will be released.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
| Raw materials | Closed | Change, % |
|---|---|---|
| Silver | 28.893 | -0.17 |
| Gold | 2622.92 | 0.66 |
| Palladium | 911.5 | 1.1 |
| Index | Change, points | Closed | Change, % |
|---|---|---|---|
| Hang Seng | 18.53 | 20059.95 | 0.09 |
| ASX 200 | -75.9 | 8159.1 | -0.92 |
| CAC 40 | 67.18 | 7380.74 | 0.92 |
| Dow Jones | -29.51 | 42544.22 | -0.07 |
| S&P 500 | -25.31 | 5881.63 | -0.43 |
| NASDAQ Composite | -176 | 19310.79 | -0.9 |
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.61809 | -0.54 |
| EURJPY | 162.786 | -0.23 |
| EURUSD | 1.03488 | -0.49 |
| GBPJPY | 196.717 | 0.01 |
| GBPUSD | 1.25044 | -0.29 |
| NZDUSD | 0.55767 | -1.05 |
| USDCAD | 1.43714 | 0.17 |
| USDCHF | 0.90567 | 0.23 |
| USDJPY | 157.168 | 0.23 |
© 2000-2025. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
