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CFD Markets News and Forecasts — 03-01-2025
- Gold bids cooled back below $2,650, crimping the week’s gains at the tail end.
- Market risk appetite recovered on Friday after US ISM data improved.
- Fedspeak further cooled investors concerns, Fed’s Barkin soothes market concerns.
XAU/USD dipped on Friday, with Gold prices falling roughly two-thirds of a percent and dipping back below $2,650 per ounce as market sentiment recovers from the early week’s risk-off appetite. It’s been a wobbly start to global markets during the first week of the 2025 trading season, but investors are still looking for reasons to firm up their stance heading into the new year.
Federal Reserve (Fed) Bank of Richmond President Tom Barkin spoke to a bankers association in Maryland on Friday, highlighting that the Fed has already reduced interest rates by a full percentage point during 2024, bringing the fed funds rate down to the 4.25%-4.5% range. The US unemployment rate is also holding at historically low levels, while inflation appears to be drifting back toward the Fed’s target of 2% annually. Fed’s Barkin also downplayed the potential negative effects of incoming President Donald Trump’s plans to enact sweeping tariff proposals on his first day in office that would see the US functionally enter into simultaneous trade wars with all of the US’ closest allies and trading partners unilaterally. According to Fed policymaker Barkin, markets shouldn’t be too worried about a potential 10%-20% fee on all imported goods into the US, because the “pass-through from tariffs to prices is not straightforward, it depends on multiple factors including business supply chains, and the price elasticity of consumers.”
Coming up next week, American markets and institutions will be taking Thursday off in observation of the passing of former President Jimmy Carter, who died on December 29th at the age of 100. Friday will follow up with the first US Nonfarm Payrolls (NFP) print of 2025.
Gold price forecast
Gold prices have been caught in a rough cyclical churn through the last quarter of 2024, with XAU/USD bids routinely spinning around the $2,650 handle. Gold’s sideways grind is best highlighted by the 50-day Exponential Moving Average (EMA), which has been moving sideways since early November and is acting like a trap for bids, keeping price action constrained.
Bulls have failed repeatedly to muscle prices back above $2,720, while selling pressure remains bolstered by a near-term technical floor at the $2,600 handle.
XAU/USD daily chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- GBP/USD climbed back above the 1.2400 handle on Friday.
- Markets pivoted into a cautiously risk-on stance to end the week.
- UK data broadly missed the mark on Friday, US PMI figures beat the street.
GBP/USD found a thin recovery on Friday, gaining roughly four-tenths of one percent and ending the first trading week of 2025 back above the 1.2400 handle. UK macroeconomic and consumer credit data broadly missed the mark early on Friday, but the low-tier figures barely registered on the needle. On the US side, US business activity survey results helped to keep investor sentiment on the hopeful side, keeping risk appetite on the high side.
US ISM Manufacturing Purchasing Managers Index (PMI) activity surveys came in higher than expected for December, climbing to 49.3 versus the expected hold at 48.4. It’s the highest print in the key manufacturing activity indicator in nine months, However not all is rosy in the manufacturing outlook: The ISM Manufacturing Employment Index and the ISM Manufacturing Prices Paid index prints in December both missed expectations,implying producer-level inflation is still rising beneath the surface and businesses are still trimming more jobs than expected.
Coming up next week, the UK continues the trend of having little to no meaningful data on the economic release calendar; everything on the GBP side of the data docket will be strictly low-impact releases. On the US side, American markets and institutions will be taking Thursday off in observation of the passing of former President Jimmy Carter, who died on December 29th at the age of 100. Friday will follow up with the first US Nonfarm Payrolls (NFP) print of 2025.
GBP/USD price forecast
Despite the pair’s last-minute bullish push to muscle bids back over the 1.2400 handle, Cable is ending the first trading week of the year on a bearish note. GBP/USD is down 1.3% for the week and is still poised for an extended drop to 2024’s lows near 1.2300.
Price action still favors the low side of things as the 50-day (1.2685) and 200-day (1.2785) Exponential Moving Averages (EMA) extend a bearish cross, keeping a technical ceiling on any bullish attempts.
GBP/USD daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Federal Reserve (Fed) Bank of Richmond President Tom Barkin delivered prepared remarks to the Maryland Bankers Association in Maryland on Friday, outlining the Fed's case for when to cut rates again, and the conditions required to do so. Fed's Barkin also downplayed direct and immediate impacts of incoming President Donald Trump's planned sweeping tariff plan.
Key highlights
Too much uncertainty to factor the Trump policy into the outlook.
We must see inflation at 2% or weakening in demand to cut rates.
The message from businesses is loud and clear that consumers are becoming more price sensitive.
I am in the camp of staying restrictive for longer, given the possible upside inflation risks.
The pass-through from tariffs to prices is not straightforward, it depends on multiple factors including business supply chains, and the price elasticity of consumers.
Conditions for cutting rates again include confidence in inflation's return to 2%, or a weakening of demand.
Companies feel more optimistic about the economy but are concerned about how coming changes will impact their businesses.
I still perceive that core underlying inflation is coming down nicely.
Housing demand is still very healthy compared to supply.
US debt is large and growing, it puts pressure on long rates.
I don't see the need to be nearly as restrictive as the Fed once was.
The Fed is well positioned to respond regardless of how economy develops.
Uncertainty in financial markets appears to have fallen, market predicted policy path seems aligned with fed median.
There is increased understanding that long-term rates may not fall as much as had been hoped.
The labor market is more likely to break toward increased hiring than toward layoffs.
There are some potential upside risks to inflation.
Inflation is still not back to target, more work to do.
The story of 2025 will be less about monetary policy, more about economic fundamentals and perhaps geopolitics.
The baseline outlook for 2025 is positive, with more upside than downside risk to growth.
As long as employment and asset values remain strong, consumers will spend.
- The business activity in the US manufacturing sector contracted at a softer pace than expected in December.
- The US Dollar Index stays in negative territory near 109.00.
The business activity in the US manufacturing sector continued to contract, albeit at a softening pace in December, with the ISM Manufacturing PMI rising to 49.3 from 48.4 in November. This reading came in better than the market expectation of 48.4.
The Employment Index of the PMI survey edged lower to 45.3 from 48.1 in the same period and the Prices Paid Index climbed to 52.5 from 50.3, highlighting stronger price pressures. Finally, the New Orders Index improved to 52.5 from 50.4.
Commenting on the survey's findings, "demand improved, production execution met November's performance (and companies' plans), de-staffing continued (but should end soon), and price growth was marginal," said Timothy R. Fiore, Chair of the Institute for Supply Management (ISM) Manufacturing Business Survey Committee, and continued: "Fifty-two percent of manufacturing gross domestic product (GDP) contracted in December, down from 66 percent in November."
Market reaction
The US Dollar Index showed no immediate reaction to this report and was last seen losing 0.3% on the day at 108.95.
- AUD/USD trades back and forth around 0.6200 with investors focusing on the US ISM Manufacturing PMI data.
- The Fed has signaled fewer interest rate cuts for this year.
- RBA policymakers need to be confident that inflation will decline as per their expectations before pivoting to interest rate cuts.
The AUD/USD pair trades sideways around 0.6200 in Friday’s North American session. The Aussie pair consolidates as investors await the United States (US) ISM Manufacturing Purchasing Managers’ Index (PMI) data for December, which will be published at 15:00 GMT.
Economists expect the Manufacturing PMI to have remained unchanged at 48.4, suggesting that activities contracted at a steady pace. Signs of weakness in factory activities would boost expectations that the Federal Reserve (Fed) will follow a “slower and cautious” interest rate cut approach this year.
In the latest dot plot, the Fed signaled fewer interest rate cuts this year as policymakers were upbeat over the US economic outlook. For the upcoming policy meeting on January 29, the Fed is expected to leave interest rates unchanged in the range of 4.25%-4.50%, according to the CME FedWatch tool.
Ahead of the US ISM Manufacturing PMI data, the US Dollar (USD) drops slightly. Still, it is close to an over two-year high, with the US Dollar Index (DXY) trading around 109.00.
Meanwhile, the Australian Dollar (AUD) trades sideways as investors await monthly Consumer Price Index (CPI) data for November, which will be released on Wednesday. The monthly CPI is estimated to have grown by 2.3%, faster than the former release of 2.1%. Signs of accelerating price pressures would force the Reserve Bank of Australia (RBA) to delay plans of pivoting to interest rate cuts.
RBA Governor Michele Bullock said on December 10 that the central bank doesn’t need to see inflation returning in the desired range to start reducing its Official Cash Rate (OCR). However, the board needs to be “confident” that price pressures will return to the central bank’s target of 2%.
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.
UK money supply and lending data for November came in on the weak side of expectations. Softer demand for mortgages suggests the rebound in UK house prices is starting to crimp demand, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
Yield spreads remain supportive
“The pound has picked up some support after yesterday’s dip to the mid-1.23s and the pound’s recent performance stands in stark contrast to relatively elevated UK rates and more supportive UK/US spreads than the pound’s recent performance would suggest.”
“Gains in Cable from yesterday’s intraday low suggest some consolidation in the pound’s recent losses but are not enough to signal a major rebound. The short-term charts suggest strong resistance overhead at 1.2480/00. Support is 1.2350.”
The Euro (EUR) has recovered a little from new cycle lows near 1.0240 made yesterday against the US Dollar (USD) but the rebound has stalled below 1.03 so far on the session, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
EUR scratches out a minor rebound
“The EUR is quite undervalued, from my point of view, but there is little reason to expect a significant pick up at this point. German unemployment rose 10k in December, holding the unemployment rate at 6.1%. The data was better than expectations of a 15k gain.”
“Short-term price signals suggest a minor reversal may have developed around yesterday’s intraday low. A bullish ‘hammer’ signal on the 6-hour candle chart has provided some positive momentum for the EUR into the weekend but the broader trend remains strongly bearish and the rebound is unlikely to flourish at this point.”
“Resistance is developing around 1.03 but a minor squeeze could develop above the figure to reach 1.0360/90 where better selling interest is likely to emerge. Support is 1.0240/50.”
The CAD is little changed on the session and continues to hold in the trading range established prior to the holiday break, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
USD/CAD is USD-bullish on a clear push above 1.4430
“US/Canada terms spreads have stabilized and a dearth of domestic news—economic or political—is helping steady the CAD for now. Scope for any CAD rebound is very limited at present, however, and still elevated implied volatility (3m vol is holding just under 7%) reflects underlying concerns about the risks facing the CAD in the short run.”
“There is no obvious change in the CAD’s technical condition. Spot is consolidating and the pattern of trade clearly keeps technical risks tilted towards a resumption of the USD’s appreciating trend in the near future. Resistance is 1.4430 (USD-bullish on a clear push above here). Support is 1.4350.”
After a solid start to the year yesterday, broad dollar gains have been checked back somewhat, leaving the Dollar Index (DXY) in consolidation mode into the weekend, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
Strong USD advance leaves valuation looking stretched
“Some restraint in the dollar’s overall advance would not be too surprising, despite its robust performance in the past couple of weeks. Fundamentals are favourable and seasonal trends suggest that strength is likely to persist through Q1. But the gains in the DXY are looking stretched relative to our fair value estimate based on rate differentials alone.”
“There is a Trump premium being built into the USD on the assumption that the presidentelect’s policies will be pro-growth, perhaps somewhat inflationary and therefore supportive of the USD.”
“But the DXY is trading close to two standard deviations above its spread-based equilibrium estimate now and sustaining that sort of performance may prove difficult without drivers warranting such a performance. Moreover, gains are prone to a reversal if market assumptions about Trump policies are challenged—in terms of scale, scope or timing, for example.”
- NZD/USD holds key support of 0.5600 as the NZD rebounds after PBoC’s dovish guidance on interest rates.
- The US Dollar declines as the Fed is expected to follow a more gradual policy-easing approach this year.
- Investors await the US ISM Manufacturing PMI data for December.
The NZD/USD pair gains firm-footing near the round-level support of 0.5600 in Friday’s North American session. The Kiwi pair rebounds as the New Zealand Dollar (NZD) bounces back after reports that the People’s Bank of China (PBoC) will reduce its reserve ratio requirements (RRR) and interest rates further this year “at an appropriate time”.
The PBoC stated that monetary policy adjustments are needed to “promote a steady decline in corporate financing and household credit costs." The central bank also highlighted that expansionary interest rate policies will “promote stabilisation and recovery of property market”. The Kiwi dollar capitalizes on expectations of China’s lenient monetary policy stance as New Zealand is one of the leading trading partners of China.
Meanwhile, a slight sell-off in the US Dollar (USD) has also pushed the Kiwi pair higher. The US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, slides to near the key support of 109.00 in Friday’s North American session. Still, it is close to an over-two-year high of 109.55.
The Greenback remains broadly firm as the Federal Reserve (Fed) is expected to follow a “slower and cautious” interest rate cut approach. The Fed has signaled fewer interest rate cuts for this year. Meanwhile, investors await the United States (US) ISM Manufacturing Purchasing Managers’ Index (PMI) data for December, which will be published at 15:00 GMT.
NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5868, is declining.
The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.
The Kiwi pair could decline to near the 13-year low of 0.5470 and the round-level support of 0.5400 if it breaks below the psychological support of 0.5500.
On the flip side, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.
NZD/USD weekly chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
The People's Bank of China's (PBoC) Monetary Policy Committee said on Friday that they will cut the reserve ratio requirements (RRR) and interest rates at proper time, per Reuters.
Key takeaways
"Recommending strengthening intensity of monetary policy adjustments."
Will strengthen implementation of interest rate policies to promote steady decline in corporate financing and household credit costs."
"Will maintain Yuan exchange rate basically stable."
"Will enhance resilience of FX market, stabilise market expectations, strengthen market management."
"Will enrich and improve monetary policy toolkit, conduct buying and selling of treasury bond, and monitor changes in long-term yields."
"Will promote stabilisation and recovery of property market."
"Will maintain ample liquidity and guide financial institutions to increase credit supply."
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
- Silver price climbs to near $29.80 amid renewed geopolitical tensions.
- US Joe Biden discusses possible ways to strike on Iran’s nuclear facility.
- Investors expect the Fed to leave interest rates unchanged in the policy meeting this month.
Silver price (XAG/USD) rises further to near $29.80 in Friday’s European session. The white metal gains as demand for safe-haven assets has improved on renewed geopolitical tensions. According to reports from Axios, US President Joe Biden discussed possible strikes on Iran’s nuclear facilities with his national security team, with few weeks remaining for President-elect Donald Trump to take administration.
Axios reported that White House National Security Advisor Jake Sullivan presented President Biden with options for a potential US attack on Iran's nuclear sites. Historically, demand for safe-haven assets, such as Silver, improves in heightened geopolitical uncertainty.
Additionally, prospects of high inflation under the administration of Trump, as he is expected to tighten immigration controls, elevate import tariffs, and lower taxes, have also strengthened safe-haven demand. Silver tends to face high demand as investors use it as a hedge against inflation.
Meanwhile, the US Dollar (USD) edges down on Friday after a sharp rally on Thursday, with investors focusing on the US ISM Manufacturing PMI data for December, which will be published at 15:00 GMT. The Manufacturing PMI is estimated to have remained unchanged at 48.4, suggesting that factory activities contracted steadily.
10-year US Treasury yields drop to near 4.55% even though the Federal Reserve (Fed) is certain to pause the current policy-easing spell in the policy announcement on January 29.
Silver technical analysis
Silver price rebounds to near the 20-day Exponential Moving Average (EMA), which trades around $29.85. However, the outlook of the white metal remains bearish till it stays below the upward-sloping trendline, which is plotted from the February 29 low of $22.30 on a daily timeframe.
The 14-day Relative Strength Index (RSI) rebounds above 40.00. A bearish momentum would come to an end if it sustains above that level.
Looking down, the September low of $27.75 would act as key support for the Silver price. On the upside, the 50-day EMA around $30.90 would be the barrier.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
EUR/USD has resumed its phase of decline after breaching below lower limit of recent range (1.0330), Societe Generale’s FX analyst note.
EUR/USD resumes its decline
“Daily MACD has started posting positive divergence, but signals of a meaningful bounce are not yet visible. The high achieved earlier this week near 1.0460 is an important resistance near term.”
“Inability to cross this could mean persistence in downtrend towards next potential objectives located at projections of 1.0070 and 1.0000.”
December inflation in Turkey surprised to the downside with a drop from 47.1% to 44.4% YoY, below market expectations, ING’s FX analyst Frantisek Taborsky notes.
TRY returns to the weakening trajectory of previous weeks
“Downside risk was indicated by inflation numbers from Istanbul yesterday. This is good news for the central bank after the start of the cutting cycle last week. The month-on-month rate fell from 2.2% to 1.0% MoM, while the market was expecting 1.6%. The central bank can thus continue the cycle at the January meeting.”
“Although the market reacted strongly to the first central bank rate cut last week, especially at the front of the OIS and bond curve, we believe the market still has room to price in more cuts, particularly in this segment of the curve.”
“TRY stabilized yesterday and today after holiday volatility and is returning to the traditional weakening trajectory of previous weeks. Despite the start of the FX carry cutting cycle, it remains attractive, which should keep market attention strong this year.”
The 4Q24 drop in EUR/USD was primarily driven by the widening in the short-dated swap rate differential due to diverging policy expectations between the Federal Reserve and the European Central Bank, ING’s FX analyst Francesco Pesole notes.
EUR/USD set to rebound short-term
“Over the Christmas holiday period and in particular, in yesterday’s trading session, the EUR/USD decline accelerated in spite of a re-tightening in the EUR:USD two-year swap rate gap from 200bp (on 12 December) to the current 185bp. We estimate that EUR/USD is trading around 2.5% below its short-term fair value, therefore displaying a risk premium associated with growth concerns for the eurozone.”
“Aside from the implications of expected US protectionism under Trump, we think pressure is being added by the rise in TTF gas prices to 50 EUR/MWh caused by Ukraine’s pipeline shutdown. The pound was the worst performer yesterday, and it is probably not a coincidence that GBP is the most negatively correlated with gas in the G10.”
“If the technical picture is pointing to a EUR/USD short-term rebound, the euro remains a broadly unattractive currency in the longer run, and we cannot exclude another leg lower might be needed – perhaps to the 1.0200 mark – before a recovery.”
Trump’s policy mix will trigger further US Dollar (USD) strengthening, with European currencies – and the Euro (EUR) in particular – coming under pressure from protectionism and monetary easing. Emerging market currencies should have a tough year too, ING’s FX analyst Francesco Pesole notes.
Macro and political story continues to point to 110.0 in DXY
“The USD is seasonally strong in January and February. Interestingly, last month was also a strong one for DXY (+2.6%), breaking a seven-year losing streak in the month of December. That showed macro factors and expectations for Trump’s policies were strong enough to counter the negative seasonal effect. Now that seasonality turns positive, we’d need a U-turn in that narrative that has kept the dollar strong into year-end. We are not expecting any rapid deterioration in the labour market, but rather a gradual one that is consistent with the Federal Reserve staying cautious on easing.”
“The President-elect has already been quite vocal on some policy promises since his electoral triumph, and markets are pricing a good deal of macro implications. Unless he softens his tone on protectionism and/or fiscal stimulus into inauguration day (20 January), the dollar should count on a solid floor at the start of this month. The tail risk for USD remains any serious talk about a Plaza Accord 2.0 to artificially devalue the dollar.”
“Turning back to the US calendar, jobless claims surprisingly slowed to 211k in the last week of 2024. Meanwhile, the ISM releases its manufacturing index for December this afternoon. This gauge has been in contraction territory in every month but one since late 2022. Today’s print will tell us whether the modest optimism from November’s above-consensus 48.4 was justified or just a fluke. Consensus is leaning toward the latter (expecting 47.5 today). The USD was immune to the New Year’s Eve rally in Treasuries and probably has some modest room to catch up on the downside once liquidity is fully reestablished. That said, growth concerns and rising gas prices remain a bearish argument for European FX – as discussed below – and we expect strong buying of the dollar on any dips in the event of a short-term correction. The macro and political story continues to point to 110.0 in DXY.”
- EUR/USD finds interim support near 1.0220; however, more downside looks likely.
- The Fed is expected to cut interest rates two times this year.
- Investors await the US ISM Manufacturing PMI and the German HICP data for December.
EUR/USD finds temporary support in Friday’s European session after diving to near 1.0220 on Thursday, the lowest level seen in over two years. Market experts see the major currency pair falling further to parity on Federal Reserve (Fed) – European Central Bank’s (ECB) divergent views on the monetary policy outlook.
On the left side of the Atlantic, Fed officials have guided less interest rate cuts in 2025, while on the right, ECB policymakers see the continuation of the policy-easing cycle at the current pace.
According to the latest dot plot in the Fed’s Summary of Economic Projections, Fed officials see Federal fund rates heading to 3.9% by year-end. This indicates that policymakers expect two interest rate cuts this year, compared to four forecasted in September.
Market participants have also trimmed Fed dovish bets. They expect policies under President-elect Donald Trump's administration, such as tight immigration, higher import tariffs, and lower taxes, to boost the growth rate and inflationary pressures in the United States (US) economy.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges down on Friday but is still close to its highest level in two years, above 109.00.
Going forward, investors will pay close attention to a slew of US labor market-related economic indicators, which will influence Fed interest rate expectations. Currently, the Fed is almost certain to keep interest rates steady in the range of 4.25%-4.50% in January’s policy meeting.
In Friday’s session, the US Dollar will be guided by the US ISM Manufacturing Purchasing Managers Index (PMI) data for December, which will be published at 15:00 GMT. The PMI is expected to remain at 48.4, suggesting that manufacturing sector activities contracted at a steady pace.
Daily digest market movers: EUR/USD is prone to more downside amid heavy ECB dovish bets
- EUR/USD is unlikely to hold the immediate support of 1.0220 as traders have priced in 113 basis points (bps) interest rate reduction by the ECB this year, according to xxxxx. This suggests that there will be at least four interest rate cuts of 25 bps on the backdrop of deepening risks of Eurozone inflation undershooting the central bank’s target of 2%.
- ECB officials are also comfortable with market pricing in four interest rate cuts. On Thursday, ECB Governing Council member and Governor of Bank of Greece Yannis Stournaras said in an interview on Skai Radio that the base interest rates of the central bank should fall to “around 2%” near the “autumn of this year”. This indicates that the ECB will cut its Deposit Facility rate in each of its next four policy meetings.
- Apart from the risks of inflation remaining persistently lower, weak economic activity and the likely impact of a trade war with the US on the Eurozone’s exports sector have also boosted the ECB's dovish bets. On Thursday, the HCOB Manufacturing PMI for December, compiled by S&P Global, showed that manufacturing sector activity contracted at a slightly faster pace than the preliminary reading. The Manufacturing PMI came in at 45.1, compared to the flash estimate of 45.2.
- Going forward, investors will focus on the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for December, which will be released on Monday and Tuesday, respectively.
Technical Analysis: EUR/USD sees more downside to near 1.0100
EUR/USD faced a sharp sell-off after breaking below the two-year low of 1.0330 on Thursday. The outlook of the major currency pair is broadly bearish as the 20-week Exponential Moving Average (EMA) at 1.0620 is declining.
The 14-week Relative Strength Index (RSI) slides to near 30.00, indicating a strong downside momentum. However, a slight recovery cannot be ruled out as the momentum oscillator has turned oversold.
Looking down, the pair could find support near the round-level support of 1.0100. Conversely, the weekly high of 1.0458 will be the key barrier for the Euro bulls.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- EUR/JPY stays in tight range below 162.00, with investors focusing on the flash German and Eurozone HICP data for December.
- The ECB is almost certain to cuts its Deposit Facility rate by 25 bps in the policy meeting this month.
- Japanese markets are closed on account of New Year celebrations.
The EUR/JPY pair trades in a tight range below the key resistance of 162.00 in Friday’s European session. The cross consolidates as investors await the preliminary German and Eurozone Harmonized Index of Consumer Prices (HICP) data for December, which will be released on Monday and Tuesday, respectively.
The inflation data will significantly influence market expectations for the likely European Central Bank (ECB) interest rate action in the policy meeting this month. Currently, traders have priced in 25 basis points (bps) interest rate reduction that will push the Deposit Facility rate lower to 2.75%. Signs of a sharp slowdown in inflationary pressures would accelerate expectations of a larger-than-usual interest rate cut of 50 bps.
Meanwhile, almost all ECB policymakers are comfortable with market expectations of continuation in policy-easing at a steady pace due to growing risks to Eurozone economic risks.
Broadly, the Euro (EUR) will be guided by market speculation for how much United States (US) President-elect Donald Trump will raise import tariffs on the shared continent when he will take administration on January 20. In the election campaign, Trump threatened to raise import tariffs on the Eurozone for not buying significant American goods.
In the Asia-Pacific region, volatility in the Japanese Yen (JPY) remains low as markets are closed in Japan on account of New Year celebrations. However, traders are worried about Japan’s stealth intervention in the FX domain against excessive foreign exchange moves. Japan Finance Minister Katsunobu Kato said last week that authorities are watching FX moves closely and will act to stabilize faltering Yen.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Silver prices (XAG/USD) rose on Friday, according to FXStreet data. Silver trades at $29.66 per troy ounce, up 0.35% from the $29.56 it cost on Thursday.
Silver prices have increased by 2.67% since the beginning of the year.
| Unit measure | Silver Price Today in USD |
|---|---|
| Troy Ounce | 29.66 |
| 1 Gram | 0.95 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 89.49 on Friday, down from 89.97 on Thursday.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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Average official manufacturing and non-manufacturing PMIs edged up above 50 in Q4. IP and services production index growth likely remained resilient in December on improved demand. We raise our Q4-2024 GDP growth forecast to 5.3% y/y from 4.8% and 2024 forecast to 5% from 4.8%, Standard Chartered’s economists note.
Growth momentum continued in December
“China’s official manufacturing PMI edged down 0.2pts to 50.1 in December, as production expansion moderated. Meanwhile, the new orders PMI edged up to an eight-month high, suggesting improved demand. The average manufacturing PMI returned to expansionary territory in Q4, the first time since Q1-2023. The non-manufacturing PMI edged up to a nine-month high of 52.2 in December on a rebound in both services and construction activity. The average non-manufacturing PMI edged up in Q4. Seasonally-adjusted GDP growth likely accelerated from Q3’s 0.9% q/q and expanded faster than Q1’s 1.5% q/q, on our estimate.”
“We expect industrial production (IP) and services production index growth to have remained robust in December on improved demand. New and used home sales jumped m/m, according to interim data, sending a positive signal on housing market stabilization. The decline in real-estate investment likely eased. Net exports likely remained the key growth contributor in Q4. The quarterly goods trade surplus likely reached a record-high USD 280bn in Q4 as exports continued to outperform imports. We expect annual average CPI inflation to have stayed at 0.2% in 2024 (versus our previous forecast of 0.3%).”
“We expect CNY loan growth to have slowed further to 7.5% y/y in December. The impact of the debt-to-bond swap programme on corporate loans outstanding likely more than offset an improvement in household loan growth. Meanwhile, total social financing (TSF) growth likely picked up on sustained strong government bond issuance.”
- The Pound Sterling seems vulnerable near 1.2400 against the US Dollar as the Fed has signaled fewer interest rate cuts this year.
- Lower US Initial Jobless Claims have signaled an improvement in labor market conditions.
- The BoE is expected to cut interest rates by 60 bps this year.
The Pound Sterling (GBP) trades near a more-than-eight-month low around 1.2400 against the US Dollar (USD) in Friday’s European session. The GBP/USD pair is under pressure while the US Dollar has extended its bull run as market participants expect fewer interest rate cuts from the Federal Reserve this year.
The latest dot plot at the Fed's Summary of Economic Projections showed that policymakers collectively see Federal Fund rates heading to 3.9% by the end of 2025, higher than the 3.4% forecasted in September.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades nearly a fresh two-year high above 109.00 recorded on Thursday. The positive move was backed partly by lower United States (US) Initial Jobless Claims and optimism about the economic outlook from the incoming policies, such as tighter immigration, higher import tariffs, and lower taxes, under the administration of President-elect Donald Trump.
The number of individuals applying for initial jobless benefits was 211K for the week ending December 27, the lowest in eight months, which indicates a healthy labor market.
In Friday’s session, investors will focus on the US ISM Manufacturing Purchasing Managers Index (PMI) data for December, which will be published at 15:00 GMT. Economists expect the PMI to remain unchanged at 48.4, suggesting that activity in the manufacturing sector contracted at a steady pace.
Daily digest market movers: Pound Sterling trades with caution on slight acceleration in BoE dovish bets
- The Pound Sterling trades cautiously against its major peers on Friday and faces pressure from weak United Kingdom (UK) S&P Global/CIPS Manufacturing PMI data for December. On Thursday, the final PMI report showed that activity in the manufacturing sector contracted at a faster pace to 47.0 compared to the preliminary reading of 47.3. The report showed that the downturn was widespread in nature, with similarly sharp rates of decline across the consumer, intermediate, and investment goods industries.
- Rob Dobson, Director at S&P Global Market Intelligence said, "Business sentiment is now at its lowest for two years, as the new Government's rhetoric and announced policy changes dampen confidence and raise costs at UK factories and their clients alike. SMEs are being especially hard hit during the latest downturn."
- Meanwhile, rising Bank of England (BoE) dovish bets have also bruised the Pound Sterling. Traders price in roughly 60 basis points (bps) interest rate reduction by the BoE this year, up from 53 bps recorded in the last week of December.
Technical Analysis: Pound Sterling stays bearish as all short-to-long EMAs slope downwards
The Pound Sterling plunged below 1.2400 against the US Dollar on Thursday. The outlook of the GBP/USD pair was already vulnerable as the pair trades below the upward-sloping trendline around 1.2600, which is plotted from the October 2023 low of 1.2035.
All short-to-long-term Exponential Moving Averages (EMAs) are sloping down, suggesting a strong bearish trend in the long run.
The 14-day Relative Strength Index (RSI) oscillates below 40.00, signaling a strong downside momentum.
Looking down, the pair is expected to find a cushion near the April 22 low at around 1.2300. On the upside, the psychological level of 1.2500 will act as key resistance.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Here is what you need to know on Friday, January 3:
The US Dollar (USD) gathered strength to start the new year as trading conditions normalized following the holiday season. The US economic calendar will feature the ISM Manufacturing Purchasing Managers Index (PMI) data for December later in the day. Investors will also keep a close eye on comments from central bank officials.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.36% | 1.44% | -0.31% | -0.14% | 0.07% | 0.45% | 0.94% | |
| EUR | -1.36% | 0.07% | -1.70% | -1.53% | -1.35% | -0.94% | -0.47% | |
| GBP | -1.44% | -0.07% | -1.75% | -1.60% | -1.42% | -1.02% | -0.54% | |
| JPY | 0.31% | 1.70% | 1.75% | 0.18% | 0.45% | 0.93% | 1.35% | |
| CAD | 0.14% | 1.53% | 1.60% | -0.18% | 0.20% | 0.66% | 1.07% | |
| AUD | -0.07% | 1.35% | 1.42% | -0.45% | -0.20% | 0.41% | 0.90% | |
| NZD | -0.45% | 0.94% | 1.02% | -0.93% | -0.66% | -0.41% | 0.48% | |
| CHF | -0.94% | 0.47% | 0.54% | -1.35% | -1.07% | -0.90% | -0.48% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The USD Index gained more than 0.7% on Thursday and reached its highest level since November 2022 above 109.50. Early Friday, the index retreats toward 109.00. The risk-averse market atmosphere helped the USD outperform its rivals on the first trading day of the year. Additionally, the data published by the Department of Labor showed that the weekly Initial Jobless Claims declined to 211,000 from 220,000 in the previous week, further supporting the USD.
During the Asian trading hours, the People's Bank of China (PBOC) said that it is likely to cut interest rates from the current level of 1.5% "at an appropriate time" in 2025. "The PBOC will pay more attention to the role of interest rate control and improve the formation and transmission of market-orientated interest rates," the PBOC added. Meanwhile, the National Development and Reform Commission (NDRC), China’s state planner, said in a statement on Friday that it is “fully confident in achieving continued economic recovery in 2025.” Following Thursday's sharp decline, Hong Kong's Hang Seng Index is up around 0.5% on the day, while Shanghai Composite Index is down 1.5%. After posting small gains on Thursday, AUD/USD continues to edge higher and was last seen trading above 0.6200.
In the meantime, US President-elect Donald Trump reiterated his willingness to ramp up tariffs. "The tariffs, and tariffs alone, created this vast wealth for our country," Trump said on X. "Then we switched over to income tax. We were never so wealthy as during this period. Tariffs will pay off our debt and make America wealthy again." In the European morning on Friday, US stock index futures trade marginally higher and the 10-year US Treasury bond yield holds comfortably above 4.5%.
EUR/USD lost nearly 1% on Thursday and slumped to its weakest level in over two years below 1.0250. The pair corrects higher but remains below 1.2300 in the European morning on Friday.
GBP/USD dropped to its lowest level since April near 1.2350 on Thursday, pressured by the persistent USD strength. The pair holds its ground early Friday and trades near 1.2400.
USD/JPY registered small gains on Thursday but lost its traction early Friday. At the time of press, the pair was fluctuating in a tight channel above 157.00.
Gold benefited from the risk-averse atmosphere and rose more than 1% on Thursday. XAU/USD struggles to build on its recent gains but holds comfortably above $2,650.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- USD/CAD edges lower as the commodity-linked CAD receives support from improved Oil prices.
- WTI price extends its gains due to optimism surrounding the policy support to revive economic growth worldwide.
- The US Dollar Index reached a fresh multi-year high of 109.56 following the US Initial Jobless Claims on Thursday.
USD/CAD halts its three-day winning streak, trading around 1.4390 during the early European hours on Friday. The rise in crude Oil prices provides support to the commodity-linked Canadian Dollar (CAD), given Canada is the largest Oil exporter to the United States (US).
West Texas Intermediate (WTI) Oil price continues its winning streak for the sixth consecutive day, trading around $73.00 per barrel at the time of writing. WTI price reached two and a half-month high at $73.39 on Thursday. Crude Oil prices were buoyed by optimism that governments worldwide would ramp up policy support to revive economic growth, potentially boosting fuel demand.
However, factory activity in Asia, Europe, and the US ended 2024 on a weak note, as expectations for the new year dimmed due to growing trade risks associated with the incoming Donald Trump presidency and China's fragile economic recovery.
Data released by S&P Global on Thursday showed that Canada’s Manufacturing PMI increased to 52.2 in December, up from 52.0 in November, marking its highest level since February 2023. This figure exceeded expectations, which had projected a reading of 51.9.
The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, trades around 109.10 at the moment of writing. The DXY corrects slightly downwards after climbing to a fresh multi-year high of 109.56 following the Jobless Claims in the United States (US) release on Thursday.
The US Initial Jobless Claims for the week ending December 27 have come in lower than expected. Individuals claiming jobless benefits for the first time were 211K, lower than estimates of 222K and the former release of 220K.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- EUR/USD may appreciate further as the 14-day RSI indicates an upward correction soon.
- The initial barrier appears around the nine-day EMA at 1.0350.
- The pair may navigate the support region around the psychological level of 1.0000.
The EUR/USD pair pauses its four-day losing streak, trading near 1.0270 during the Asian session on Friday. A review of the daily chart suggests a persistent bearish bias, with the pair moving downward within a descending channel pattern.
The 14-day Relative Strength Index (RSI), a crucial momentum indicator, hovers near the 30 level, indicating an oversold condition and the possibility of an upward correction in the near term. However, the nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, signaling weaker short-term price momentum and reinforcing the overall bearish sentiment.
The EUR/USD pair could find the primary resistance level around the nine-day Exponential Moving Average (EMA) at 1.0350, followed by the 14-day EMA at 1.0379. If the pair breaks above these levels, it could aim for the descending channel's upper boundary at 1.0470, with further gains potentially extending to the seven-week high of 1.0630.
On the downside, the EUR/USD pair may navigate the region around the psychological support level of 1.0000, followed by the lower boundary of the descending channel at 0.9970. A decisive break below 0.9970 could intensify the bearish bias, potentially driving the pair further down to test 0.9730, the lowest level seen since November 2022.
EUR/USD: Daily Chart
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.16% | -0.20% | -0.28% | -0.11% | -0.25% | -0.30% | -0.21% | |
| EUR | 0.16% | -0.04% | -0.15% | 0.05% | -0.09% | -0.14% | -0.04% | |
| GBP | 0.20% | 0.04% | -0.06% | 0.09% | -0.05% | -0.10% | -0.01% | |
| JPY | 0.28% | 0.15% | 0.06% | 0.18% | 0.03% | -0.01% | 0.08% | |
| CAD | 0.11% | -0.05% | -0.09% | -0.18% | -0.15% | -0.19% | -0.12% | |
| AUD | 0.25% | 0.09% | 0.05% | -0.03% | 0.15% | -0.05% | 0.06% | |
| NZD | 0.30% | 0.14% | 0.10% | 0.01% | 0.19% | 0.05% | 0.09% | |
| CHF | 0.21% | 0.04% | 0.01% | -0.08% | 0.12% | -0.06% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
- USD/CHF trades on a softer note around 0.9110 in Friday’s early European session.
- The expectations of fewer rate cuts by the Fed in 2025 might lift the USD.
- Geopolitical risks could boost the safe-haven flows and cap the upside for the pair.
The USD/CHF pair weakens to near 0.9110, snapping the four-day winning streak during the early European session on Friday. The safe-haven flows demand amid the persistent geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict boosts the Swiss Franc (CHF) against the Greenback.
On Thursday, Joe Biden reportedly discussed plans to attack Iran’s nuclear facilities in the event Tehran moved closer to building a nuclear bomb before Donald Trump’s inauguration on January 20, three sources with knowledge of the issue tell Axios. Investors will closely monitor the development surrounding the geopolitical risks. Any signs of escalation could lift the CHF and create a headwind for USD/CHF.
Meanwhile, inflation in the U.S. remains stubbornly above the Federal Reserve’s (Fed) 2% target, suggesting that the US central bank will likely leave interest rates here higher for longer compared to other major central banks. The Fed has now indicated only two interest rate reductions for this year, down from an earlier projection of four rate cuts. The projection of fewer interest rate cuts by the Fed this year could strengthen the USD further.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
FX option expiries for Jan 3 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
- 1.0200 1.7b
- 1.0250 1.9b
- 1.0300 3.4b
- 1.0425 633m
- 1.0575 759m
USD/JPY: USD amounts
- 154.50 400m
USD/CAD: USD amounts
- 1.4220 1.8b
- 1.4250 630m
NZD/USD: NZD amounts
- 0.5650 681m
- Silver price receives support from safe-haven demand amid increased geopolitical tensions.
- US President Joe Biden reportedly explored contingency plans to target Iran’s nuclear facilities
- The industrial use of grey metal could advance as traders expect an economic recovery in China.
Silver price (XAG/USD) extends its gains for the third successive day, trading around $29.60 per troy ounce during the Asian hours on Friday. This sustained rally is attributed to strong safe-haven demand amid persistent geopolitical tensions in the Middle East and the prolonged Russia-Ukraine conflict.
Axios referenced three sources, indicating that US President Joe Biden reportedly explored contingency plans to target Iran’s nuclear facilities if Tehran advanced significantly in developing a nuclear bomb before Donald Trump's inauguration on January 20. These talks underscore the growing concerns over Iran’s nuclear aspirations during the transition between administrations.
Reuters cited that Russia launched a drone strike on Ukraine's capital, Kyiv, on New Year's Day early Wednesday, resulting in two deaths, at least six injuries, and damage to buildings in two districts. Meanwhile, the Israeli military maintained pressure on northern Gaza, and carried out strikes in a suburb of Gaza City on Wednesday, according to medics. Airstrikes in Shejaia, a suburb of Gaza City, killed at least eight Palestinians.
A Financial Times report noted that the People's Bank of China (PBoC) anticipates an interest rate cut this year at an appropriate time. Traders are closely monitoring the potential recovery in China’s economy and its effect on the industrial demand for Silver. President Xi Jinping reaffirmed his commitment on Tuesday to prioritizing economic growth, promising more proactive policies to bolster China's economy in 2025.
While China's manufacturing activity showed minimal growth in December, services and construction sectors have recovered. The data indicates that policy stimulus is beginning to impact certain sectors, as China prepares for new trade risks stemming from tariffs proposed by US President-elect Donald Trump.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
The People's Bank of China (PBOC) said on Friday that it is likely to cut interest rates from the current level of 1.5% "at an appropriate time" in 2025, per Reuters.
The Chinese central bank further stated that it would prioritize the role of interest rate adjustments and move away from “quantitative objectives” for loan growth.
"The PBOC will pay more attention to the role of interest rate control and improve the formation and transmission of market-orientated interest rates," the PBOC added.
Market reaction
At the press time, the AUD/USD pair was up 0.28% on the day to trade at 0.6220.
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.
US President-elect Donald Trump took to X (formerly known as Twitter) to note that "the Tariffs, and Tariffs alone, created this vast wealth for our Country. Then we switched over to Income Tax. We were never so wealthy as during this period. Tariffs will pay off our debt and MAKE AMERICA WEALTHY AGAIN!"
He also spoke about border control in his following tweets, saying "with the Biden “Open Border’s Policy” I said, many times during Rallies, and elsewhere, that Radical Islamic Terrorism, and other forms of violent crime, will become so bad in America that it will become hard to even imagine or believe. That time has come, only worse than ever imagined. Joe Biden is the WORST PRESIDENT IN THE HISTORY OF AMERICA, A COMPLETE AND TOTAL DISASTER. What he and his group of Election Interfering “thugs” have done to our Country will not soon be forgotten! MAGA."
Market reaction
The US Dollar pays a little heed to these tweets from the Tariff man, trading 0.09% lower on the day at 109.15 against its major currency rivals.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.49% | 1.46% | -0.30% | -0.21% | -0.05% | 0.31% | 1.09% | |
| EUR | -1.49% | -0.03% | -1.78% | -1.72% | -1.59% | -1.21% | -0.44% | |
| GBP | -1.46% | 0.03% | -1.75% | -1.69% | -1.56% | -1.18% | -0.41% | |
| JPY | 0.30% | 1.78% | 1.75% | 0.08% | 0.30% | 0.77% | 1.47% | |
| CAD | 0.21% | 1.72% | 1.69% | -0.08% | 0.15% | 0.59% | 1.30% | |
| AUD | 0.05% | 1.59% | 1.56% | -0.30% | -0.15% | 0.39% | 1.16% | |
| NZD | -0.31% | 1.21% | 1.18% | -0.77% | -0.59% | -0.39% | 0.77% | |
| CHF | -1.09% | 0.44% | 0.41% | -1.47% | -1.30% | -1.16% | -0.77% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- NZD/USD rebounds to near 0.5605 in Friday’s early European session, adding 0.26% on the day.
- PBoC signalled potential rate cuts this year, supporting the China-proxy Kiwi.
- Trump’s tariff threat and the cautious stance of the Fed might cap the pair’s upside.
The NZD/USD pair recovers some lost ground to around 0.5605 during the early European session on Friday. The prospect that the People's Bank of China (PBoC) will likely cut its main rate this year provides some support to the China-proxy New Zealand Dollar (NZD).
The Chinese central bank is reportedly planning to cut interest rates “at an appropriate time” this year, per the Financial Times. Additionally, the National Development and Reform Commission of the People's Republic of China (NDRC) noted that there is ample room for macro policies in 2025, adding that it’s fully confident in achieving continued economic recovery in 2025. The supportive measures from China boost the Kiwi, as China is a major trading partner for New Zealand.
On the other hand, US President-elect Donald Trump’s tariff threat could drag the Kiwi lower against the USD. In December, Trump promised new tariffs of 25% on all goods coming from Mexico and Canada and 10% on China. Analysts expect that it would hit an already weak Chinese economy, which would have spillover effects on New Zealand.
The expectation of fewer Federal Reserve (Fed) interest rate cuts in 2025 might underpin the Greenback and create a headwind for the pair. The Fed hinted that it will be more cautious in rate reductions as inflation remains stubbornly above its 2% target and the economy remains strong. The US central bank indicated that it probably would only lower twice more this year, according to the Summary of Economic Projections, or dot plot.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- WTI prices continue to rise as governments worldwide are expected to increase policy support to revive economic growth.
- China's state planner, the NDRC, outlined plans to significantly boost funding through ultra-long treasury bonds to support "two new" programs.
- EIA Crude Oil Stocks decreased by 1.178 million barrels, marking the sixth consecutive drop in crude Oil stocks.
West Texas Intermediate (WTI) Oil price continues its winning streak for the sixth consecutive day, trading around $73.00 per barrel during the Asian session on Friday. WTI price reached two and a half-month high at $73.39 on Thursday. Crude Oil prices were buoyed by optimism that governments worldwide would ramp up policy support to revive economic growth, potentially boosting fuel demand.
However, factory activity in Asia, Europe, and the US ended 2024 on a weak note, as expectations for the new year dimmed due to growing trade risks associated with the incoming Donald Trump presidency and China's fragile economic recovery.
The National Development and Reform Commission (NDRC), China's state planner, expressed confidence in achieving continued economic recovery in 2025. In a statement on Friday, it highlighted plans to significantly increase funding from ultra-long treasury bonds to support "two new" programs, with expectations for steady consumption growth throughout the year.
Additionally, a Financial Times report noted that the People's Bank of China (PBoC) anticipates an interest rate cut this year at an appropriate time. Traders are closely monitoring the potential recovery in China’s economy and its effect on Oil demand. In a New Year’s address on Tuesday, President Xi Jinping reaffirmed his commitment to prioritizing economic growth in the world's largest oil-importing nation, promising more proactive policies to bolster China's economy in 2025.
Analysts at Capital Economics said in a note, referencing the purchasing managers' indexes data released on Thursday, "December PMIs for Asia were a mixed bag, but we continue to expect manufacturing activity and GDP growth in the region to remain subdued in the near term."
Meanwhile, the Energy Information Administration (EIA) reported a decline in crude Oil stocks for the week ending December 27. EIA Crude Oil Stocks Change reported a 1.178 million-barrel decline, a smaller decrease than the market’s expectation of a 2.75 million-barrel drop. This marked the sixth consecutive drop in crude oil stocks. Additionally, crude stocks at the Cushing, Oklahoma, delivery hub decreased by 0.142 million barrels.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
Gold prices rose in India on Friday, according to data compiled by FXStreet.
The price for Gold stood at 7,342.11 Indian Rupees (INR) per gram, up compared with the INR 7,331.93 it cost on Thursday.
The price for Gold increased to INR 85,636.88 per tola from INR 85,518.23 per tola a day earlier.
| Unit measure | Gold Price in INR |
|---|---|
| 1 Gram | 7,342.11 |
| 10 Grams | 73,421.06 |
| Tola | 85,636.88 |
| Troy Ounce | 228,365.20 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly. Related news
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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- The Australian Dollar rises as the Financial Times reported that the PBoC is signaling potential rate cuts this year.
- The AUD recovered from two-year lows as stronger commodity prices provided support, particularly Oil and Gold.
- The US Dollar Index surged to a new multi-year high of 109.56 following the release of Jobless Claims on Thursday.
The Australian Dollar (AUD) extends its gains for the second successive session against the US Dollar (USD) on Friday. The AUD gained support following a Financial Times report stating that the People's Bank of China (PBoC) expects an interest rate cut this year at an appropriate time. As close trade partners, any fluctuations in China's economy tend to impact Australian markets.
The AUD/USD pair appreciates as the Australian Dollar recovers from two-year lows as stronger commodity prices provide support, particularly Oil and Gold, benefiting Australia’s position as a major exporter of these key resources. Oil and Gold stocks saw notable gains including Woodside Energy and Northern Star Resources.
The Aussie Dollar received support after the Caixin Manufacturing Purchasing Managers’ Index (PMI) from China was released on Thursday. Wang Zhe, an economist at Caixin Insight Group, commented, “Supply and demand expanded. Manufacturers’ output and demand continued to grow as the market improved. The gauge for output remained in expansionary territory for the 14th consecutive month, while total new orders increased for the third straight month.”
Daily Digest Market Movers: Australian Dollar strengthens despite Fed's hawkish policy shift
- The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, climbed to a fresh multi-year high of 109.56 following the Jobless Claims in the United States (US) on Thursday before easing slightly to trade around 109.20 at the moment of writing.
- The US Initial Jobless Claims for the week ending December 27 have come in lower than expected. Individuals claiming jobless benefits for the first time were 211K, lower than estimates of 222K and the former release of 220K.
- Traders are cautious regarding President-elect Trump’s economic policies, fearing that tariffs could increase the cost of living. These concerns were compounded by the Federal Open Market Committee’s (FOMC) recent projections, which indicated fewer rate cuts in 2025, reflecting caution amid persistent inflationary pressures.
- Escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war are likely to support the USD, a traditional safe-haven currency, in the near term. Analysts at Action Economics observed, “The greenback has been boosted by rising growth concerns elsewhere against the backdrop of geopolitical risk.”
- China's Caixin Manufacturing PMI unexpectedly dropped to 50.5 in December, down from 51.5 in November. The market had anticipated a reading of 51.7 for the month.
- The RBA board noted that if future data aligns with or falls below forecasts, it would bolster confidence in inflation and make it appropriate to start easing policy restrictions. However, stronger-than-expected data could require maintaining restrictive policies for a longer period.
- Reserve Bank of Australia Governor Michele Bullock highlighted the continued strength of the labor market as a key reason the RBA has been slower than other nations to commence its monetary easing cycle.
Technical Analysis: Australian Dollar holds position above 0.6200 near nine-day EMA
AUD/USD trades near 0.6210 on Thursday, maintaining a bearish outlook as it remains within a descending channel on the daily chart. However, the 14-day Relative Strength Index (RSI) has bounced back above the 30 level, suggesting the potential for a near-term upward correction despite the prevailing downtrend.
The AUD/USD pair may find immediate resistance at the nine-day Exponential Moving Average (EMA) at 0.6220, with the next obstacle at the 14-day EMA at 0.6244. A key resistance level is the descending channel’s upper boundary, around the psychological mark of 0.6300.
Regarding its support, the AUD/USD pair could navigate the region around the lower boundary of the descending channel, around 0.6020.
AUD/USD: Daily Chart
Australian Dollar PRICE Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.10% | -0.12% | -0.16% | -0.12% | -0.13% | -0.20% | -0.11% | |
| EUR | 0.10% | -0.02% | -0.08% | -0.02% | -0.03% | -0.09% | -0.01% | |
| GBP | 0.12% | 0.02% | -0.02% | 0.00% | -0.01% | -0.07% | 0.01% | |
| JPY | 0.16% | 0.08% | 0.02% | 0.05% | 0.03% | -0.03% | 0.07% | |
| CAD | 0.12% | 0.02% | -0.01% | -0.05% | -0.02% | -0.08% | 0.00% | |
| AUD | 0.13% | 0.03% | 0.01% | -0.03% | 0.02% | -0.06% | 0.03% | |
| NZD | 0.20% | 0.09% | 0.07% | 0.03% | 0.08% | 0.06% | 0.09% | |
| CHF | 0.11% | 0.00% | -0.01% | -0.07% | -0.01% | -0.03% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
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.
- USD/JPY weakens to around 157.30 in Friday’s Asian session, losing 0.21% on the day.
- Japanese authorities warned about intervention against excessive FX moves.
- Fed signalled a slower pace of rate cuts, which might lift the USD in the near term.
The USD/JPY pair edges lower to near 157.30 during the Asian trading hours on Friday. The verbal intervention from the Japanese authorities provides some support to the Japanese Yen (JPY). However, the uncertainty surrounding the Bank of Japan's (BoJ) policy outlook might cap the JPY’s upside. Markets in Japan are closed for the rest of the week. Traders brace for the US ISM Manufacturing PMI for December, which is due later on Friday.
Traders will closely monitor any potential foreign exchange (FX) intervention by Japanese officials to prevent the JPY from depreciating. Japan Finance Minister Katsunobu Kato last week reiterated concerns over a sliding yen, repeating his warning to take suitable measures against excessive foreign exchange movements.
The BOJ will publish its quarterly report on regional economic conditions next week, which will most likely include an assessment of whether wage hikes are spreading throughout the nation. This report might provide some insight into the BoJ's next policy decision on January 24.
On the other hand, the speculation of fewer Federal Reserve (Fed) interest rate cuts in 2025 and optimism around the US economy could lift the US Dollar (USD) broadly. The US central bank indicated that it will be more cautious in rate reductions as inflation remains stubbornly above its 2% annual target and the economy remains strong. Furthermore, policies by the US. president-elect Donald Trump are also expected to boost growth and potentially trigger inflation, which might slow the pace of Fed rate cuts.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
The National Development and Reform Commission (NDRC), China’s state planner, said in a statement on Friday that it is “fully confident in achieving continued economic recovery in 2025.”
Additional takeaways
Will sharply increase funding from ultra-long treasury bonds this year to support "two new" programmes.
Expect consumption to maintain steady growth in 2025.
China's economy facing many new difficulties and challenges in 2025.
There is ample room for macro policies in 2025.
2025 economic growth target will consider both needs and possibility, as well as medium- and long-term plans.
Allocated 100 bln yuan in 2025 for two "new" and two "major" projects in advance.
Will push major reforms in 2025 to stabilize expectations, boost confidence and promote development.
Market reaction
At the time of writing, AUD/USD is trading 0.15% higher on the day at around 0.6215, holding the rebound from over two-year lows.
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.
- The Indian Rupee attracts some sellers in Friday’s Asian session.
- The ongoing USD strength and worries about India's economic slowdown continue to undermine the INR.
- The US December ISM Manufacturing PMI will be closely monitored.
The Indian Rupee (INR) extends the decline on Friday after closing at its weakest level on record for the eighth consecutive session. The local currency remains under pressure as the heavy US Dollar (USD) demand in the non-deliverable forward (NDF) market has widened the arbitrage with the Indian onshore market. Additionally, the discouraging growth rate in India, a wider trade deficit, and a slowdown in capital inflows contribute to the INR’s downside.
Nonetheless, the Reserve Bank of India (RBI) might intervene to sell the USD and offer short-term relief for the INR. Traders await the US December ISM Manufacturing Purchasing Managers Index (PMI) for fresh impetus, which is due on Friday. Also, the Federal Reserve Bank of Richmond President Thomas Barkin is set to speak later in the day.
Indian Rupee further weakens despite RBI’s intervention
- The Rupee is likely to experience slight depreciation in 2025, driven by volatile foreign portfolio investment(FPI) flows and a potentially stronger US dollar, per the Bank of Baroda report.
- State-run banks were spotted selling USD to the tune of $800 million to $1 billion, traders said.
- The Indian HSBC Manufacturing PMI hit a 2024 low in December, falling to 56.4 from 57.4 in November. This figure came in weaker than the 57.8 expected.
- "India's manufacturing activity ended a strong 2024 with a soft note amid more signs of a slowing trend, albeit moderate, in the industrial sector. The rate of expansion in new orders was the slowest in the year, suggesting weaker growth in future production," said Ines Lam, economist at HSBC.
- The US Initial Jobless Claims for the week ending December 28 declined to 211K, compared to the previous week's print of 220K (revised from 219K), according to the US Department of Labor (DOL) on Thursday. This reading came in below the market consensus of 222K.
USD/INR keeps firm tone, overbought RSI warrants caution for bulls
The Indian Rupee trades with a negative bias on the day. According to the daily chart, the strong uptrend of the USD/INR pair remains intact since the pair broke above the ascending trend channel over the past week. The path of least resistance is to the upside as the pair holds above the key 100-day Exponential Moving Average (EMA).
However, the 14-day Relative Strength Index (RSI), with a reading above 70, suggests an overbought condition and signals that further consolidation cannot be ruled out before positioning for any near-term USD/INR appreciation.
In the bullish event, the first upside barrier emerges at the all-time high of 85.81. Sustained trading above the mentioned level could pave the way to the 86.00 psychological mark.
On the downside, the initial support level for USD/INR is located at the resistance-turned-support level of 85.54. A breach of this level could see a drop to 85.00, the round figure. The next contention level to watch is the 100-day EMA at 84.40.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
| Raw materials | Closed | Change, % |
|---|---|---|
| Silver | 29.547 | 2.06 |
| Gold | 2657.18 | 1.22 |
| Palladium | 911.06 | -0.05 |
- Gold price receives support from safe-haven flows as Joe Biden discussed contingency plans to strike Iran’s nuclear facilities.
- The dollar-denominated Gold could struggle as the US Dollar Index trades around its multi-year high of 109.56, reached on Thursday.
- The non-yielding Gold could receive support as yields on US Treasury bonds remained subdued.
Gold prices (XAU/USD) edges higher for the fourth consecutive session on Friday, building on a stellar performance in 2024 with gains exceeding 27%, the metal’s best annual return since 2010. This sustained rally is attributed to strong safe-haven demand amid persistent geopolitical tensions in the Middle East and the prolonged Russia-Ukraine conflict.
According to three sources cited by Axios, US President Joe Biden reportedly discussed contingency plans to strike Iran’s nuclear facilities if Tehran made significant progress toward developing a nuclear bomb before Donald Trump’s inauguration on January 20. These discussions highlight heightened concerns over Iran’s nuclear ambitions during the transitional period between administrations.
Traders remain vigilant about a possible recovery in China’s economy and its impact on Gold demand. In a New Year’s address on Tuesday, President Xi Jinping pledged to prioritize economic growth, promising more proactive policies to bolster China’s economy in 2025, according to Reuters.
Daily Digest Market Movers: Gold price gains support due to safe-haven flows
- The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, climbed to a fresh multi-year high of 109.56 on Thursday before easing slightly to trade around 109.20 at the moment of writing. The strength of the Greenback may have limited the upside potential of dollar-denominated Gold, as a stronger USD makes Gold more expensive for buyers using other currencies.
- Gold, a non-yielding asset, may have found support as yields on 2-year and 10-year US Treasury bonds remained subdued at 4.24% and 4.56%, respectively. Lower bond yields reduce the opportunity cost of holding Gold, making it more attractive to investors.
- The non-yielding Gold could face challenges as the Federal Reserve (Fed) signals a more cautious stance on rate cuts for 2025, suggesting a shift toward tighter monetary policy. This hawkish approach is shaped by uncertainties surrounding the potential economic policies of the incoming Trump administration.
- Record central bank purchases have bolstered the demand for the yellow metal. A World Gold Council survey suggests that major central banks will likely increase Gold purchases in 2025, further boosting demand for the precious metal.
- While China's manufacturing activity showed minimal growth in December, services and construction sectors have recovered. The data indicates that policy stimulus is beginning to impact certain sectors, as China prepares for new trade risks stemming from tariffs proposed by US President-elect Donald Trump.
- Reuters cited that Russia launched a drone strike on Ukraine's capital, Kyiv, on New Year's Day early Wednesday, resulting in two deaths, at least six injuries, and damage to buildings in two districts. Explosions echoed across the morning sky as Ukraine's air force issued warnings of incoming drones.
- Meanwhile, the Israeli military maintained pressure on northern Gaza, carrying out strikes in a suburb of Gaza City on Wednesday, according to medics. Airstrikes in Shejaia, a suburb of Gaza City, killed at least eight Palestinians. The Israeli military has not yet commented, and the identities of those killed in the attack remain unclear.
Gold price rises above nine-day EMA, reinforcing an up-leg scenario
Gold price trades near $2,660.00 per troy ounce on Friday, with the daily chart signaling an emergence of a bullish bias. The metal price has climbed above the nine- and 14-day Exponential Moving Averages (EMAs), indicating a strengthening bullish momentum in the short term. Moreover, the 14-day Relative Strength Index (RSI) has risen above the 50 level, further supporting the development of a bullish bias.
On the upside, the XAU/USD pair may explore the area around the psychological resistance of $2,700.00, followed by the next barrier at its monthly high of $2,726.34, reached on December 12.
The XAU/USD pair may test initial support around the nine- and 14-day EMAs at $2,635.00 and $2,633.00, respectively. Further support appears around its monthly low of $2,583.39, recorded on December 19.
XAU/USD: Daily Chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Friday at 7.1878, as compared to the previous day's fix of 7.1879 and 7.2868 Reuters estimates.
- USD/CAD trades in negative territory around 1.4395 in Friday’s Asian session.
- The upbeat Canadian PMI and rising crude oil prices support the Loonie.
- A slow and cautious approach of the Fed might help limit the pair’s losses.
The USD/CAD pair softens to near 1.4395 on Friday during the Asian trading hours. The rise in crude oil prices provides some support to the commodity-linked Canadian Dollar (CAD) against the Greenback.
Data released by S&P Global on Thursday revealed that the Canadian Manufacturing PMI rose to 52.2 in December from 52.0 in November, its highest level since February 2023. This reading was better than the estimation of 51.9.
Meanwhile, higher crude oil prices contribute to the CAD’s upside. It's worth noting that Canada is the largest oil exporter to the United States (US), and higher crude oil prices tend to have a positive impact on the CAD value.
However, the potential threat of US tariffs and domestic political uncertainty might drag the Loonie lower and act as a tailwind for USD/CAD. President-elect Donald Trump said in December that he planned to impose 25% tariffs against Canada and Mexico unless the countries reduce the flow of migrants and fentanyl into the United States.
The Federal Reserve (Fed) lowered the target federal funds rate by 25 basis points (bps) from 4.50%-4.75% to 4.25%-4.50% in the December meeting. Nonetheless, the signal of slower Fed rate cuts this year might lift the Greenback in the near term. In the final monetary policy meeting on December 18, Fed officials pencilled in only two rate cuts in 2025, down from the four it had forecast in September.
Traders will take more cues from the slew of US economic data that will give a clear picture of the US economy and a certain conviction about the US Fed rate cut this year. The US Manufacturing Purchasing Managers Index (PMI) for December will be the highlight later on Friday.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
| Index | Change, points | Closed | Change, % |
|---|---|---|---|
| Hang Seng | -436.63 | 19623.32 | -2.18 |
| KOSPI | -0.55 | 2398.94 | -0.02 |
| ASX 200 | 42.1 | 8201.2 | 0.52 |
| DAX | 115.52 | 20024.66 | 0.58 |
| CAC 40 | 13.02 | 7393.76 | 0.18 |
| Dow Jones | -151.95 | 42392.27 | -0.36 |
| S&P 500 | -13.08 | 5868.55 | -0.22 |
| NASDAQ Composite | -30 | 19280.79 | -0.16 |
South Korean investigators were reportedly involved in a standoff with a military unit inside the presidential residence as they attempted to arrest the country’s suspended leader, Yoon Suk Yeol, weeks after his botched attempt to declare martial law on December 3, per Reuters.
“The execution of the arrest warrant for President Yoon Suk Yeol has begun,” the office said in a statement.
Market reaction
At the press time, the USD/KRW pair was down 0.39% on the day to trade at 1467.32.
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.62016 | 0.35 |
| EURJPY | 161.732 | -0.55 |
| EURUSD | 1.02662 | -0.8 |
| GBPJPY | 195.021 | -0.81 |
| GBPUSD | 1.23795 | -1.02 |
| NZDUSD | 0.55935 | 0.23 |
| USDCAD | 1.44044 | 0.19 |
| USDCHF | 0.91234 | 0.8 |
| USDJPY | 157.533 | 0.23 |
- EUR/USD fell 0.8% on the first trading day of the new year.
- Bearish sentiment looms large over the battered Euro.
- Rate differential set to widen further, analysts expect parity in 2025.
EUR/USD took another leg lower to kick off the 2025 trading season, falling eight-tenths of one percent and tapping the 1.0250 level for the first time since November of 2022, a nearly 26-month low. European Manufacturing Purchasing Managers Index (PMI) data missed the mark on Thursday, only adding to Euro traders’ woes following a dovish appearance from European Central Bank (ECB) policymaker Yannis Stournaras later in the day.
According to ECB Governing Council member Yannis Stournaras, the ECB is on pace to trim interest rates in a steady decline through 2025. The ECB is expected to land somewhere in the neighborhood of 2% later this year, according to the ECB’s Stournaras. With the Federal Reserve (Fed) on pace to trim interest rates at a much slower pace than previous expected in 2025, the Euro’s interest rate differential is set to widen significantly through the rest of the year, which will keep downward pressure on EUR/USD in the long run. This falls in line with expectations from some analysts who are calling for the Euro to hit parity with the Greenback sometime this year.
Pan-European PMI survey results fell slightly in December, ticking down to 45.1 versus the expected hold at 45.2. While the data itself had a relatively low impact, it helped to highlight the increasing likelihood that the European Central Bank (ECB) would accelerate rate cuts to bolster the European economy, even as petrol prices hit their own two-year highs, further flummoxing the European economic outlook.
The only meaningful data of note on Friday’s economic calendar is US ISM Manufacturing PMI survey results, which are expected to hold steady at a contractionary 48.4 for December.
EUR/USD price forecast
EUR/USD is down 8.82% top-to-bottom from September’s peak bids just above the 1.1200 handle, though short-sellers remain unable to pierce 1.0200 for now. A bearish divergence on the Moving Average Convergence-Divergence (MACD) indicator is getting hard to ignore, implying further technical losses on the horizon.
Fiber bids are getting pushed further down by a descending 50-day Exponential Moving Average (EMA) falling into 1.0550. If bidders are able to stage a comeback beyond this point, the 200-day EMA will be waiting just above at 1.0760.
EUR/USD daily chart
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the 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.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Joe Biden reportedly discussed plans to attack Iran’s nuclear facilities in the event Tehran moved closer to building a nuclear bomb before Donald Trump’s inauguration on January 20, three sources with knowledge of the issue tell Axios.
Market reaction
At the time of press, the XAU/USD pair was up 0.05% on the day at $2,660.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
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