CFD Markets Analysis: News and forecasts for 6 January 2025

23:55

GBP/USD extends into a two-day win streak as Pound recovers GBPUSD

GBP/USD caught a bid on Monday, rising 0.7%.
PMI figures came in softer on both sides of the Atlantic.
Easing Greenback flows gave Cable a chance to catch its breath.
GBP/USD extended into its second day of gains in a row, kicking off the new trading week gaining seven-tenths of one percent and dragging bids back above the 1.2500 handle after last week’s bearish plunge below 1.2400. Purchasing Managers Index (PMI) figures missed the mark on both the UK and US sides. However, a general milieu of rising risk appetite kept safe-haven flows into the Greenback at bay.

UK PMI figures for December entirely missed the mark, printing below Wall Street forecasts and falling back but remaining above the 50.0 watermark for contraction expectations. The Composite PMI in particular fell to a 13-month low, easing to 50.4 from the expected hold at 50.5.

Final US S&P Global PMI figures somewhat missed the mark on Monday, with the Composite and Services PMIs for December both climbing from one month to the next, albeit less than analysts expected. Both indicators saw a slight downward revision from their preliminary prints, but still gained ground as the US economy churns on.

The key print for the midweek window will be Tuesday’s US ISM Services PMI for December. Median market forecasts are expecting an upswing to 53.0 from the previous month’s 52.1. Friday’s Nonfarm Payrolls (NFP) print will cast a long shadow over markets this week as investors anticipate a goldilocks print that will help push the Federal Reserve (Fed) toward more rate cuts, but not too weak or strong toward either side.

GBP/USD price forecast

GBP/USD has eased into a two-day rally, a welcome technical turn after the pair plunged to fresh nine-month lows last week below the 1.2400 handle. While selling pressure still has eyes set on the major 1.2000 price level, an exhaustion play could be on the cards as buyers try to muscle price action back up to the 50-day Exponential Moving Average (EMA) falling through the 1.2700 handle.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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.

23:51

Japan Monetary Base (YoY) down to -1% in December from previous -0.3%

23:24

Canadian PM Justin Trudeau is likely to announce resignation - Reuters

Canadian Prime Minister Justin Trudeau is more likely to announce his resignation, but he has yet to make a final decision, a source familiar with Trudeau's thinking said on Sunday.

Reuters reported that they did not know definitely when Trudeau would announce his plans to step down but said it expected it would happen before an emergency meeting of Liberal legislators on Wednesday.

Market reaction

The USD/CAD pair is trading 0.01% higher on the day at 1.4335, as of writing.

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

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.

How do the decisions of the Bank of Canada impact 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.

How does the price of Oil impact the Canadian Dollar?

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.

How does inflation data impact the value of the Canadian Dollar?

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.

How does economic data influence the value of 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.

23:05

NZD/USD posts modest gains near 0.5650 on Trump tariff confusion NZDUSD

NZD/USD trades with mild gains around 0.5640 in Tuesday’s early Asian session.
The USD softens in choppy trade on Trump tariff confusion.
The upbeat economic data and supportive measures from China could support the Kiwi in the near term.

The NZD/USD pair trades on a stronger note around 0.5640 during the early Asian session on Tuesday. The weakening of the US Dollar (USD) on confusion about President-elect Donald Trump’s tariff plans provides some support to the pair. The US ISM Services Purchasing Managers Index (PMI) for December is due later on Tuesday.

The Washington Post reported on Monday that Trump is considering a tariff plan that will narrow the focus to a select set of goods and services. However, Trump denied the report. "The market consensus is that Trump's bark will be worse than his bite, and any news that confirms that concept is fuel for rallying in risk assets and for a decline in the dollar and Treasury yields, but the reality here is that the downside risks remain and there's no clear endpoint for that," said Karl Schamotta, chief market strategist at Corpay in Toronto.

Nonetheless, the hawkish remarks from the US Federal Reserve (Fed) might lift the Greenback and act as a headwind for the pair. On Monday, Fed Governor Lisa Cook said that Fed policymakers could be more cautious with further rate cuts, citing labor market resilience and stickier inflation.

The encouraging Chinese economic data could boost the China-proxy Kiwi. China’s services activity expanded at the fastest pace in seven months in December, Caixin PMI showed on Monday. Additionally, the supportive measures from China might contribute to the NZD’s upside as China is a major trading partner for New Zealand.

New Zealand Dollar FAQs

What key factors drive the New Zealand Dollar?

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.

How do decisions of the RBNZ impact the New Zealand Dollar?

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.

How does economic data influence the value of the New Zealand Dollar?

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.

How does broader risk sentiment impact the New Zealand Dollar?

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.

22:52

USD/JPY roils as markets look for signs of rate moves USDJPY

FOMC Minutes due in the midweek as markets weigh Fed rate cut chances.
BoJ set to begin raising rates, but investors remain unclear about when.
US NFP jobs data dump looms ahead later in the week.

USD/JPY churned near familiar levels on Monday, easing into the new trading week mostly flat. The pair is cycling near recent highs as investors await moves from either the Federal Reserve (Fed) or Bank of Japan (BoJ). Both central banks are expected to make more moves on interest rates in 2025, with the Fed aimed downward and the BoJ expected to to begin raising rates.

BoJ Governor Kazuo Ueda recently reaffirmed the BoJ’s commitment to reaching a neutral rate. What makes the BoJ unique among the rest of the major developed central banks around the planet is the BoJ’s long-running battle to get inflated started rather than trying to stop it. With BoJ reference rates far below the global median, the Japanese Yen took a hard turn in 2024 as rate differentials widened. With the natural rate of interest likely riding much higher than the current BoJ reference rates, BoJ Governor Ueda and company will have to begin adjusting policy rates up at some point or risk sending the Japanese economy back into a tailspin.

The Fed’s latest Meeting Minutes will be dropping on traders on Wednesday, but the key data print this week will be Friday’s upcoming US Nonfarm Payrolls (NFP) report. With one-half of the Fed’s mandate including full employment, markets will be watching this week’s labor figures from the US with renewed interest.

USD/JPY price forecast

USD/JPY continues to churn chart paper near recent highs, however the pair is still down slightly from decades-long peaks set during 2024 when the Yen plummeted across the board. Unless the BoJ caves on its hyperdovish stance and begins to raise interest rates, there isn’t a policy speech or technical scenario that can be presented that will rock the Yen out of its bearish stance. Global markets continue to favor the Greenback, keeping the Dollar-Yen pairing bid into the high side.

USD/JPY daily chart

Japanese Yen FAQs

What key factors drive the Japanese Yen?

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.

How do the decisions of the Bank of Japan impact the Japanese Yen?

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.

How does the differential between Japanese and US bond yields impact the Japanese 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.

How does broader risk sentiment impact the Japanese Yen?

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.

21:09

Silver Price Forecast: XAG/USD shines bright, tests 200-day SMA resistance

Silver prices climb over 1%, hitting the crucial 200-day SMA at $29.87.
Technical forecast suggests resistance at $30.00 and the dual SMA levels of $30.73/77, setting the stage for potential gains to $31.00.
Support levels loom at December's low of $28.74, with further downside risk at the early September low of $27.69.

Silver's price rose over 1% on Monday and faces key resistance at the 200-day Simple Moving Average (SMA) at $29.87. At the time of writing, XAG/USD trades at $29.87 after bouncing off a daily low of $29.41 and reaching a high of $30.34.

XAG/USD Price Forecast: Technical outlook

Silver is facing strong resistance at $29.87, the 200-day SMA, which is crucial for buyers if they want to push spot prices higher. The uptrend remains intact, yet bulls need to clear the latter, followed by the $30.00 mark.

Up next is the confluence of the 50 and 100-day SMAs at $30.73/77, followed by $31.00 a troy ounce.

Conversely, if XAG/USD falls short of clearing the 200-day SMA, sellers could challenge the December monthly low of $28.74, followed by the September 6 low of $27.69.

XAG/USD Price Chart – Daily

Silver FAQs

Why do people invest in Silver?

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.

Which factors influence Silver prices?

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.

How does industrial demand affect Silver 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.

How do Silver prices react to Gold’s moves?

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.

20:07

EUR/USD Price Forecast: Climbs but struggles at 1.0400 EURUSD

EUR/USD ascends over 0.78%, buoyed by potential US tariff implications and a weak Dollar environment.
Technical analysis points to a buyer's market as EUR/USD crosses 1.0400, with eyes set on further resistance levels.
Near-term support and resistance levels defined at 1.0222 and 1.0500, with a critical watch on the 50-day SMA at 1.0558.

The EUR/USD increased over 0.78%, boosted by an article in The Washington Post mentioning three US President-elect Trump aides and saying that tariffs will be applied, focusing on specific sectors. The pair trades at 1.0388, above its opening price.

EUR/USD Price Forecast: Technical outlook

The EUR/USD finished 2024 at around 1.0260, but since then, buyers have stepped in, pushing the exchange rate above 1.0300, hitting a four-day peak of 1.0436 after The Washington Post headline.

Momentum seems to favor buyers, though the Relative Strength Index (RSI), despite edging upwards, remains bearish.

If buyers want to push the EUR/USD higher, they need to decisively clear 1.0400, followed by 1.0500. If surpassed, the next resistance would be the 50-day Simple Moving Average (SMA) at 1.0558, followed by 1.0600.

On the other hand, if bears stepped in, keeping the major below 1.0400, this could exacerbate a pullback toward last year’s low of 1.0222. On further weakness, parity emerges as the next support level.

EUR/USD Price Chart – Daily

Euro PRICE Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.79%	-0.76%	0.24%	-0.79%	-0.39%	-0.40%	-0.58%
EUR	0.79%		0.03%	1.00%	0.06%	0.45%	0.43%	0.24%
GBP	0.76%	-0.03%		0.99%	0.03%	0.42%	0.40%	0.21%
JPY	-0.24%	-1.00%	-0.99%		-1.02%	-0.59%	-0.58%	-0.58%
CAD	0.79%	-0.06%	-0.03%	1.02%		0.33%	0.34%	0.18%
AUD	0.39%	-0.45%	-0.42%	0.59%	-0.33%		-0.01%	-0.20%
NZD	0.40%	-0.43%	-0.40%	0.58%	-0.34%	0.01%		-0.19%
CHF	0.58%	-0.24%	-0.21%	0.58%	-0.18%	0.20%	0.19%

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).

20:00

Gold stagnates amid rising US yields and US Dollar downturn

Gold price holds steady, unfazed by the US Dollar's drop and higher Treasury yields.
US Dollar Index dips to a five-day low, amidst speculation of fiscal policy changes driving inflation fears.
Fed's cautious stance on rate cuts highlighted by Governor Cook in light of ongoing economic slowdown and persistent inflation.

Gold prices remained flat at the beginning of the week even though the Greenback is getting battered. Higher United States (US) Treasury bond yields kept the non-yielding metal pressured while US President-elect Donald Trump grabbed the headlines amid confusion on his tariff plans. The XAU/USD trades at $2,638, virtually unchanged.

Yellow Metal failed to capitalize on the sudden weakness of the US Dollar. Speculation that the upcoming Trump administration agenda could reignite inflation spurred a jump in US Treasury yields amid fears that a Republican-controlled Congress could increase the Government’s budget deficit.

The US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, fell to a five-day low of 107.75 and is down 0.60% at 108.27 at the time of writing.

US data revealed during the day reaffirmed that the economy continues to slow down amid a “timid” reacceleration of inflation. S&P Global reported that business activity in the services segment dipped, while the US Census Bureau announced that Factory Orders plunged in November after hitting a record high in the previous month.

In the central bank space, Federal Reserve (Fed) Governor Lisa Cook said they could adopt a gradual approach to reducing interest rates. She explained that due to the resilience of the labor market and persistent inflation, policymakers can be more cautious.

This week, the US economic docket will feature the ISM Services PMI, the Federal Open Market Committee (FOMC) meeting minutes, Initial Jobless Claims and December’s US Nonfarm Payrolls report.

Daily digest market movers: Gold price steadies at around $2,630

Gold remains pressured as US real yields rise four basis points (bps) up to 2.26%.
The US 10-year T-note yield edges up two and a half bps to 4.628%.
US S&P Global Services PMI in December slowed from 58.5 to 56.8, exceeding estimates of 56.1.
US Factory Orders in November dropped by 0.4% MoM from October’s upwardly revised figures of 0.5%. Economists expected a contraction of -0.3%.
At the time of writing, the CME Fed Watch Tool shows that investors have pushed back the odds of the Fed's first rate cut until the May 7 meeting.
Goldman Sachs modified its forecast to gold prices and doesn’t expect the yellow metal to reach $3,000 an ounce by the end of 2025, based on the expectation that the Fed will make fewer rate cuts.

XAU/USD technical outlook: Gold price set to challenge $2,650

Gold price ended 2024 trapped within the $2,600 - $2,620 range amid a robust US Dollar on fears of Trump’s agenda. Nevertheless, the non-yielding metal has broken the top of that range, which opened the door to XAU/USD to exchange hands at around the $2,630 - $2,650 level, with the 50-day Simple Moving Average (SMA) meandering around $2,652.

If bulls clear the 50-day SMA, the next key resistance level would be $2,700 ahead of challenging the December 12 peak at $2,726. If surpassed, the next stop would be the record high at $2,790.

Conversely, if sellers drag the XAU/USD below the 100-day SMA, look for a test of $2,500 before Gold extends its losses to the 200-day SMA at $2,494.

Gold FAQs

Why do people invest in Gold?

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.

Who buys the most Gold?

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.

How is Gold correlated with other assets?

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.

What does the price of Gold depend on?

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.

19:43

Forex Today: Greenback takes a step back on Monday

The US Dollar eased on Monday, giving other currencies a chance to recover some much-needed ground as markets gear up for another US NFP jobs print due at the end of the week.

Here’s what you need to know heading into Tuesday, January 7:

The US Dollar Index (DXY) eased lower, falling back below the 109.00 handle and shedding around two-thirds of one percent. Broad-market risk sentiment is back on the rise, pushing the safe haven USD lower across the board. US Nonfarm Payrolls (NFP) due on Friday will be the week’s key reading, however US ISM Services Purchasing Managers Index(PMI) figures are due on Tuesday.

EUR/USD bidders found the buy button on Monday, bolstering Fiber back into the 1.4000- handle. Preliminary European Harmonized Index of Consumer Prices (HICP) inflation is due early in the European market session on Tuesday, and markets will be looking for a slight uptick in headline inflation figures. However, even a bump in near-term inflation numbers are unlikely to spark much fear or greed in traders, as underlying inflation pressures appear to continue to cool.

GBP/USD caught a similar ride at the outside of the new trading week, gaining seven-tenths of one percent and getting muscled back above the 1.2500 handle. UK economic data remains decidedly limited this week, and Cable will be getting pushed around by overall market sentiment in the Greenback more than anything else.

AUD/USD tried to spark a bullish recovery on Monday, but bidding efforts fizzled, dragging Aussie bids back below the 0.6300 handle after briefly tapping the major technical level. Australian Purchasing Managers Index (PMI) figures improved slightly over the weekend, but it still wasn’t enough to firmly push the AUD off of its recent lows.

Economic Indicator

Harmonized Index of Consumer Prices (YoY)

The Harmonized Index of Consumer Prices (HICP) measures changes in the prices of a representative basket of goods and services in the European Monetary Union. The HICP, released by Eurostat on a monthly basis, is harmonized because the same methodology is used across all member states and their contribution is weighted. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.

Nonfarm Payrolls FAQs

What are Nonfarm Payrolls?

Nonfarm Payrolls (NFP) are part of the US Bureau of Labor Statistics monthly jobs report. The Nonfarm Payrolls component specifically measures the change in the number of people employed in the US during the previous month, excluding the farming industry.

How does Nonfarm Payrolls influence the Federal Reserve monetary policy decisions?

The Nonfarm Payrolls figure can influence the decisions of the Federal Reserve by providing a measure of how successfully the Fed is meeting its mandate of fostering full employment and 2% inflation. A relatively high NFP figure means more people are in employment, earning more money and therefore probably spending more. A relatively low Nonfarm Payrolls’ result, on the either hand, could mean people are struggling to find work. The Fed will typically raise interest rates to combat high inflation triggered by low unemployment, and lower them to stimulate a stagnant labor market.

How does Nonfarm Payrolls affect the US Dollar?

Nonfarm Payrolls generally have a positive correlation with the US Dollar. This means when payrolls’ figures come out higher-than-expected the USD tends to rally and vice versa when they are lower. NFPs influence the US Dollar by virtue of their impact on inflation, monetary policy expectations and interest rates. A higher NFP usually means the Federal Reserve will be more tight in its monetary policy, supporting the USD.

How does Nonfarm Payrolls affect Gold?

Nonfarm Payrolls are generally negatively-correlated with the price of Gold. This means a higher-than-expected payrolls’ figure will have a depressing effect on the Gold price and vice versa. Higher NFP generally has a positive effect on the value of the USD, and like most major commodities Gold is priced in US Dollars. If the USD gains in value, therefore, it requires less Dollars to buy an ounce of Gold. Also, higher interest rates (typically helped higher NFPs) also lessen the attractiveness of Gold as an investment compared to staying in cash, where the money will at least earn interest.

Sometimes Nonfarm Payrolls trigger an opposite reaction than what the market expects. Why is that?

Nonfarm Payrolls is only one component within a bigger jobs report and it can be overshadowed by the other components. At times, when NFP come out higher-than-forecast, but the Average Weekly Earnings is lower than expected, the market has ignored the potentially inflationary effect of the headline result and interpreted the fall in earnings as deflationary. The Participation Rate and the Average Weekly Hours components can also influence the market reaction, but only in seldom events like the “Great Resignation” or the Global Financial Crisis.

19:32

Fed's Barr to resign early to avert a potential “dispute” over his post

Federal Reserve (Fed) Board Member and Vice Chair for Supervision will be stepping down from his regulatory role. The announcement came from a Federal Reserve press release and is expected to take place at the end of February.

Fed's Barr to step down from bank oversight role effective February 28, or when a successor is chosen. According to reporting by Reuters, incoming President Donald Trump would be seeking to strip Barr of his position powers. A tactical resignation will make it difficult for Trump to select a 'friendlier' regulatory pick as the resignation means the only candidates on offer are already-existing members of the Fed's board.

Despite resigning from the supervision vice chair position, Barr would remain as part of the Board of Governors until the end of his term in 2026.

As noted by Reuters, "Fed Governor Michelle Bowman, who has been regularly critical of Barr's efforts to impose tougher rules on the banking sector, is widely seen by lobbyists and analysts as a candidate to replace him. Christopher Waller, another Fed governor nominated by Trump in his first term, is viewed as another potential candidate by industry officials."

19:21

Canadian Dollar rebounds despite PM Trudeau resignation

The Canadian Dollar gained 0.5% on Monday as the Greenback eases.
Canada’s Prime Minister has resigned from his post amid fierce criticism.
CAD markets have responded positively for the time being.

The Canadian Dollar (CAD) caught some wind in its sales on Monday, lifted from recent lows by a market-wide easing in US Dollar flows. CAD markets were further bolstered following the resignation of Canadian Prime Minister Justin Trudeau, at least for the time being.

Canada’s PM Trudeau announced his decision to vacate his position as party leader of the incumbent Liberal party early Monday, leaving the Canadian government in a bit of a lurch as parliament must now prorogue until the Liberal party is able to choose a successor. Key Canadian economic data is due on Friday, but the actual release window will be eclipsed by the US Nonfarm Payrolls (NFP) jobs report due at the same time.

Daily digest market movers: Canadian Dollar lurches higher post-PM resignation

Canadian Prime Minister Justin Trudeau has resigned as Liberal party leader following over nine years of service as the Prime Minister of Canada.
Pressure on PM Trudeau to resign was exacerbated in December following Canadian Finance Minister Chrystia Freeland’s resignation, citing Canada’s lack of clear pushback to incoming US President Donald Trump’s tariff threats.
The Canadian Parliament will now be prorogued until the end of March.
In their months-long push to oust PM Trudeau, opposition parties within Canada forgot to figure out who would replace him.
The Canadian Dollar added nearly six-tenths of one percent following the announcement.

Canadian Dollar price forecast

The Canadian Dollar’s bullish bounce to kick off the new trading week pushed price action on the USD/CAD pair back to the 1.4300 handle, but invigorated Loonie bulls weren’t able to hang onto the key technical level. The pair is back into the low side of recent congestion, but CAD is managing to hang onto some of its intraday gains.

The Loonie is struggling to find bidders and recover its stance after a plunge to multi-year lows against the Greenback in recent weeks, and bids continue to churn chart paper near the 1.4400 handle.

USD/CAD daily chart

Canadian Dollar FAQs

What key factors drive the Canadian Dollar?

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.

How do the decisions of the Bank of Canada impact 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.

How does the price of Oil impact the Canadian Dollar?

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.

How does inflation data impact the value of the Canadian Dollar?

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.

How does economic data influence the value of 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.

17:45

Dow Jones Industrial Average lurches higher as investors brush off PMI miss

The Dow Jones clambered back over the 43,000 level on Monday.
Market sentiment rose after a report that the Trump team might trim tariff plans.
Final US S&P Global PMIs missed Wall Street forecasts in December but still rose.

The Dow Jones Industrial Average (DJIA) extended into the bullish side to kick off the new trading week, clipping back over the 43,000 handle and lurching 300 points higher after a Washington Post article suggested that incoming President Donald Trump and his team may be considering a more nuanced approach to widespread tariffs the President-elect has threatened to impose shortly after taking office.

Former and returning President Donald Trump was quick to voice resistance to the article, claiming that the Post story was wrong and that the incoming President still intends to impose a sweeping tariff package against most of the US’ closest allies and trading partners. Investors shrugged off the back-and-forth, clinging to the hopes that President Trump will be dissuaded from imposing what amounts to a flat 20% import tax on US consumers.

Final US S&P Global Purchasing Managers Index (PMI) figures somewhat missed the mark on Monday, with the Composite and Services PMIs for December both climbing from one month to the next, albeit less than analysts expected. Both indicators saw a slight downward revision from their preliminary prints, but still gained ground as the US economy churns on.

Dow Jones news

Markets are looking to reignite the tech rally juggernaut in 2025, pushing chipmakers higher and dragging most of the market higher alongside them. Nvidia (NVDA) soared over 4.5%, climbing above $151 per share. A distant second place goes to Goldman Sachs (GS) which rose around 2% to $590 per share.

Dow Jones price forecast

After a tepid start to the new trading year, the bulls are back on the block and the Dow Jones is getting pushed back above the 43,000 handle as bidders try to regain lost ground following the DJIA’s most recent downside plunge. The Dow Jones has rebounded 2.3% from a near-term swing low into the 42,000 region, but bidders still need to drag price action back above the 50-day Exponential Moving Average (EMA) at 43,225 before the bull market can be declared renewed.

Dow Jones daily chart

Dow Jones FAQs

What is the Dow Jones?

The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.

What factors impact the Dow Jones Industrial Average?

Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.

What is Dow Theory?

Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.

How can I trade the DJIA?

There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.

17:41

Mexican Peso rallies, unfazed by Trump tariff comments

Mexican Peso appreciates, pushing USD/MXN down over 1.5% to 20.28 following tariff speculation in The Washington Post.
US services sector decelerates in December, compounding investor caution amidst fluctuating equity markets.
Falling Mexican consumer confidence adds to local economic concerns.

The Mexican Peso begins the week positively, appreciating against the US Dollar on Monday after The Washington Post reported that Trump aides are only considering tariffs on “certain sectors”, a less harsh policy than floated earlier. Nevertheless, US President-elect Trump said the story “incorrectly states that my tariff policy will be pared back.” Despite this, the USD/MXN tumbled over 1.50% to trade at 20.28 at the time of writing.

Market sentiment is upbeat, yet traders remain wary of Trump’s remarks on his social network. US equities wavered after The Washington Post article, yet they are still holding their gains following Trump’s latest remarks.

Recent data revealed that US business activity in the services segment decelerated in December, based on data from S&P Global. Additionally, Factory Orders in November shrank after strong figures in October.

Meanwhile, Federal Reserve Governor Lisa Cook revealed that the US central bank could adopt a cautious approach with additional interest rate cuts, given a solid economy and inflation that is stickier than expected.

Across the south of the border, the Instituto Nacional de Estadistica Geografia e Informatica (INEGI) announced that Mexican consumers turned pessimistic near the end of 2024 as Consumer Confidence fell for the second straight month in December.

Daily digest market movers: Mexican Peso boosted by weak US Dollar

The US Dollar Index (DXY) is falling to a five-day low of 107.75, a headwind for the USD/MXN exotic pair.
The DXY weakness was spurred by The Washington Post's article about Trump’s tariff plans.
US S&P Global Services PMI in December slowed from 58.5 to 56.8, exceeding estimates of 56.1.
US Factory Orders in November dropped by 0.4% MoM from October’s upwardly-revised figures of 0.5%. Economists expected a contraction of -0.3%.
Mexico’s Consumer Confidence in December was 47.1, down from 47.6 in the previous month, according to the national statistics agency on Monday.
S&P Global revealed that the US Services PMI dipped to 56.8 from 58.5, higher than forecasts of 56.1.

USD/MXN technical outlook: Mexican Peso strengthens, testing key level ahead 20.00

The USD/MXN is falling sharply, testing the 50-day Simple Moving Average (SMA) at 20.26. The Relative Strength Index (RSI) turned bearish, opening the door for further Mexican Peso strength. If sellers push prices below the latter, they could challenge the 20.00 figure. On further weakness, the pair could drop to the 100-day SMA at 19.89, followed by the 19.50 figure.

On the other hand, if buyers stepped in and lifted the USD/MXN above 20.50, the next key resistance would be the year-to-date (YTD) high of 20.90 before testing 21.00. A breach of the latter will expose the March 8, 2022 peak of 21.46.

Mexican Peso FAQs

What key factors drive the Mexican Peso?

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

How do decisions of the Banxico impact the Mexican Peso?

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

How does economic data influence the value of the Mexican Peso?

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

How does broader risk sentiment impact the Mexican Peso?

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN 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.

15:00

United States Factory Orders (MoM) came in at -0.4%, below expectations (-0.3%) in November

14:56

GBP/USD swings amid US tariff speculation, Trump comments GBPUSD

GBP/USD fluctuates between 1.2450 and 1.2550 after conflicting reports on US tariff plans by President-elect Trump.
UK services sector momentum slows as December S&P Global Services PMI drops from 51.4 to 51.1.
Federal Reserve Governor Lisa Cook hints at cautious rate cuts amidst persistent inflation and strong labor market.

The Pound Sterling begins the week on the front foot against the US Dollar after news emerged that US President-elect Trump's aides are considering tariffs on “certain sectors,” according to the Washington Post. Nevertheless, recent news headlines suggested that Trump backpedaled, saying the Washington Post story was wrong. The GBP/USD is trading volatile within the 1.2450 – 1.2550 range as market players diggest recent news.

GBP/USD sees volatile trading as markets react to mixed signals from the US and UK economic indicators

According to three people familiar with the matter, a Washington Post story revealed that tariffs are considered but only cover critical imports.

Data-wise, the UK economic docket revealed that British business in the services sector had lost momentum, as shown by the December S&P Global Services PMI, which dipped from 51.4 to 51.1.

The British Chambers of Commerce also revealed on Sunday that confidence fell to its lowest level since former PM Liz Truss's “mini-budget” in 2022. According to Reuters, “Businesses were the least happy about taxation since they started asking about this in 2017, while confidence about sales over the next 12 months was the lowest since late 2022.”

In the meantime, Federal Reserve (Fed) Governor Lisa Cook said they can proceed more cautiously in cutting rates due to stickier inflation and labor market resilience.

Recently, S&P Global revealed that the Services PMI for the US dupped to 56.8 from 58.5, higher than forecasts of 56.1

GBP/USD Price Forecast: Technical outlook

The GBP/USD daily chart suggests further downside is seen unless buyers achieve a daily close above November’s 22 swing low of 1.2486. This would shift the bias to neutral-downwards and open the door to challenge the next key resistance at 1.2607, December’s 30 peak.

Conversely, if GBP/USD remains below 1.2500, the pair could consolidate within the 1.2480 – 1.2500 range before sellers push prices towards 1.2400.

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Japanese Yen.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		-0.83%	-0.72%	0.08%	-0.86%	-0.78%	-0.71%	-0.59%
EUR	0.83%		0.11%	0.87%	0.02%	0.08%	0.15%	0.27%
GBP	0.72%	-0.11%		0.79%	-0.09%	-0.02%	0.05%	0.16%
JPY	-0.08%	-0.87%	-0.79%		-0.91%	-0.80%	-0.72%	-0.41%
CAD	0.86%	-0.02%	0.09%	0.91%		0.01%	0.11%	0.24%
AUD	0.78%	-0.08%	0.02%	0.80%	-0.01%		0.07%	0.19%
NZD	0.71%	-0.15%	-0.05%	0.72%	-0.11%	-0.07%		0.11%
CHF	0.59%	-0.27%	-0.16%	0.41%	-0.24%	-0.19%	-0.11%

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 British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).

14:45

United States S&P Global Composite PMI below forecasts (56.6) in December: Actual (55.4)

14:45

United States S&P Global Services PMI registered at 56.8, below expectations (58.5) in December

14:30

US President-elect Trump: Washington Post story that I'll pare back my tariff policy is wrong

In response to the Washington Post story that said US President-elect Donald Trump's aides are considering tariffs that would be applied to every country but only cover critical imports, Trump said it was wrong.

"The story in the Washington Post, quoting so-called anonymous sources, which don't exist, incorrectly states that my tariff policy will be pared back. That is wrong. The Washington Post knows it's wrong. It's just another example of Fake News," Trump posted on Truth Social.

Market reaction

The US Dollar Index recovered from session lows following this development and was last seen losing 0.6% on the day at 108.25.

14:24

Fed's Cook: Can be more cautious with further cuts given labor market resilience, stickier inflation

Federal Reserve (Fed) Governor Lisa Cook said on Monday that Fed policymakers could be more cautious with further rate cuts, citing labor market resilience and stickier inflation, per Reuters.

Key takeaways

"Risks to Fed’s inflation and employment goals are roughly in balance."

"US starts the year in strong shape, with a solid job market and growth, and inflation likely to fall gradually to 2%."

"Several reasons including strong business starts, AI investment, to believe productivity growth will continue."

"Private credit, AI, among the areas that could impact financial stability and need to be better understood."

"AI could hold benefits in terms of financial innovation, but also pose risks if models share biases or errors."

Market reaction

The US Dollar Index recover from session lows but remains in negative territory. At the time of press, the index was down 0.5% on the day at 108.38.

13:48

EUR/USD: Firm data check ECB rate cut expectations – Scotiabank EURUSD

The Euro (EUR) is extending gains in early trade, rising more than 1% on the day, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR outperforms on the day

“After steadying late last week following a test of the mid-1.02 area, EUR gains are pushing on strongly today. Final Eurozone Composite and Services PMI data were revised higher for December on solid upgrades to both French and German reports.”

“Initial German state CPI for December are coming in hotter than forecast, meanwhile, adding to EUR support as markets trim ECB easing bets. EURUSD could push on to the 1.0500/50 range.”

“Solid EUR gains on the intraday and daily charts today suggest a little more upside potential in the EUR in the short run at least. Chart signals are not obviously bullish and the broader downtrend persists. But an oversold EUR might be able to extend gains through 1.0460 resistance to test stronger technical resistance at 1.0500/50. Support is 1.0375.”

13:45

CAD: PM may resign this week – Scotiabank

The Canadian Dollar (CAD) perked up notably overnight on news that PM Trudeau may resign this week. Reports suggesting President-elect Trump might moderate plans for a broad application of tariffs have added to gains, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

Spot losses need to hold this break below 1.4335

“Clarity on the domestic political front would be welcome but if the PM does step down, a lengthy leadership contest for the Liberals would presumably follow. Estimates have indicated that this could take up to three months. Parliament might be suspended while all that is taking place. Opposition parties will press for an election, which will also take time to organize.”

“The CAD is getting some welcome relief from the headlines in the short run but it may yet be some time before the political fog clears at home. On Friday, I noted that the charts were showing no obvious sign of the USD bull trend relenting. The technical outlook has changed dramatically so far today, however.”

“After consolidating around the 1.44 point over the turn of the year, spot is triggering a (1.4465) double top pattern on the daily chart. The break (so far) under the intervening low at 1.4335 suggests a potential drop in the USD back to the 1.4200/10 area in the next 1-2 weeks. Spot losses need to hold this break below 1.4335 though.”

13:38

USD drops as Trump moderates tariff threat – Scotiabank

The US Dollar (USD) is down for a second trading session in a row. I noted last week that broad dollar gains were looking stretched, with the DXY trading some two standard deviations above its estimated fair value, based on short-term rate spreads, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD dips to remain well supported in the weeks ahead

“That situation persists and may be acting as a restraint on the USD. The week ahead is likely to reaffirm the US exceptionalism narrative surrounding the USD’s recent strength, however, so scope for losses may be limited. Key calendar risks this week take the form of Wednesday’s December FOMC minutes—a ‘closer call’ on the policy hike decision where one policymaker dissented should make for a somewhat hawkish read on the outlook— and Friday’s NFP data should reflect a still resilient US labor market.”

“USD losses are picking up in early trade, however, following reports in the Washington Post that President Trump is mulling a ‘universal tariff’ only on ‘critical imports’. That represents something of a downgrade—perhaps– on the pre-election threat of broad-based tariffs. The CAD was a top-performer in overnight trade but has ceded that spot to the MXN following the tariff report headlines. Stocks have welcomed signs that trade risks might be dialed back. European automakers’ share prices are rising.”

“‘Rightsizing’ the USD’s value to its estimated fair value (105 currently) would reflect a decent correction in the DXY’s late 2024/early 2025 rally (retracement supports sit at 105.95/104.85). Healthy yield spreads, USD-positive seasonals through Q1 and other USD-supportive aspects of the Trump 2.0 platform suggest that USD dips will remain well supported on dips in the weeks ahead.”

13:05

Germany annual CPI inflation rises to 2.6% in December vs. 2.4% expected

Annual inflation in Germany rose more than expected in December.
EUR/USD clings to strong daily gains above 1.0400 after the data.

Inflation in Germany, as measured by the change in the Consumer Price Index (CPI), rose to 2.6% on a yearly basis in December from 2.2% in November, Destatis' flash estimate showed on Monday. This reading came in above the market expectation of 2.4%.

On a monthly basis, the CPI rose 0.4% after declining 0.2% in November.

The Harmonized Index of Consumer Prices in Germany, the European Central Bank's preferred gauge of inflation, increased 2.9% on a yearly basis, surpassing the market expectation for an increase of 2.6%.

Market reaction

EUR/USD preserves its bullish momentum after German inflation data and was last seen gaining 1.05% on the day at 1.0415.

Inflation FAQs

What is inflation?

Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.

What is the Consumer Price Index (CPI)?

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.

What is the impact of inflation on foreign exchange?

Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

How does inflation influence the price of Gold?

Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.