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CFD Markets News and Forecasts — 07-01-2025
- NZD/USD softens to around 0.5635 in Wednesday’s early Asian session.
- The stronger US data suggested the Fed is likely to slow the easing cycle.
- Investors will monitor how aggressive Trump's tariff plans could be when he takes office.
The NZD/USD pair trades with mild losses near 0.5635 during the early Asian session on Wednesday. The upbeat US Services Purchasing Managers Index (PMI) for December suggested that the Federal Reserve (Fed) will likely slow the pace of its easing cycle, supporting the US Dollar (USD). Later on Wednesday, the Minutes of the Federal Open Market Committee (FOMC) will be in the spotlight.
The services sector activity in the United States accelerated in December. Data released by the Institute for Supply Management (ISM) showed that Services PMI increased to 54.1 in December from 52.1 in November. This reading came in stronger than the estimation of 53.3.
Meanwhile, US job openings unexpectedly increased in November, although hiring slowed during the month. US JOLTS Job Openings rose to 8.09 million in November versus 7.83 million prior and came in above the market consensus of 7.7 million.
The reports indicated a generally stable jobs market and a still robust services sector, which might convince the Fed to slow the pace of rate cuts, lifting the Greenback. According to the CME FedWatch tool, the US rate futures market has priced in a 93.5% chance of a pause in rate cuts this month.
Investors will monitor how aggressive President-elect Donald Trump's tariff policies could be when he takes office. Analysts believe that if US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at "critical" sectors, then the outlook for global growth should improve and the USD should weaken. Additionally, the supportive measures from China could boost the Kiwi as China is a major trading partner for New Zealand.
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.
- EUR/USD failed to extend a near term technical recovery, sheds 0.4% on Tuesday.
- German Retail Sales, EU PPI inflation, US ADP jobs preview on the docket for Wednesday.
- Another NFP Friday looms ahead, crimping market momentum as Fed rate cut fears weigh.
EUR/USD turned tail and swooned against the Greenback on Tuesday, shedding four-tenths of one percent after a failed recovery of the 1.0400 handle fizzled out completely. The pair is still trading up from last week’s 26-month low, but not by much. Euro bulls are in desperate need of a turnaround as Fiber continues to grind its way back toward 1.0200.
European Harmonized Index of Consumer Prices (HICP) inflation came in about as expected, with annualized HICP for the year ended in December ticking upwards slightly to 2.4% YoY from the previous 2.2%. However, most of the upward pressure in European inflation figures appears to be either baked into older numbers, or is non-structural ticket items, giving Euro traders some hope that things will continue to improve.
On the US side, ISM Services Purchasing Managers Index (PMI) business activity survey results came in much hotter than expected, as did ISM Services Prices Paid. Both figures were for the month of December, igniting fresh market concerns that the Federal Reserve (Fed) may not be able to deliver near as many rate cuts in 2025 as investors had initially hoped.
Early Wednesday, German Retail Sales and pan-EU Producer Price Index (PPI) inflation data are set to be released, with market forecasts indicating a robust rebound in both metrics. Meanwhile, in the US, December ADP Employment Change figures and the latest Meeting Minutes from the Fed are scheduled for release during the upcoming trading session. The ADP employment figures are seen as an unreliable predictor of what Friday’s Nonfarm Payrolls (NFP) data may reveal, but traders won’t let that stop them from overreacting to large deviations from forecasts. Investors will be looking for any signs that could point to a potential rate cut before June, which would include a pronounced, but not too severe, softening in the labor market.
EUR/USD price forecast
EUR/USD continues to churn on the low side as the US Dollar remains the market’s favored jumping-in point. The pair has shed a little over 6.5% since peaking just above 1.0900 in early November, chalking in a clean technical rejection from the 200-day Exponential Moving Average (EMA) which is now grinding its way down into the 1.0700 handle. Fiber bulls hoping to cement in a fresh bull run from multi-year lows will need to first contend with the 50-day EMA, which is descending into 1.0500.
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.
- GBP/USD hesitates before falling back below 1.2500 on Tuesday.
- A light UK data docket will leave markets focusing on US jobs data.
- Another NFP labor dump looms ahead later this week.
GBP/USD caught a mild bid early on Tuesday before turning south once again and shedding roughly one-third of one percent to end the day on the low side of the 1.2500 handle. Cable bidders continue to struggle to find reasons to hit the bids as a technical recovery falters after a tepid two-day bull run from 9-month lows near 1.2350.
It’s been a wobbly start to the new year on the Pound Sterling charts after ending 2024 with a three-month losing streak, and bidding momentum is hobbled near medium-term lows with a light data docket on the cards for Cable traders. UK Like-For-Like Retail Sales surged to 3.1% for the year ended in December, but GBP flows were unable to overcome a fresh bout of risk aversion after US Purchasing Managers Index (PMI) activity and business costs survey results shredded near-term hopes for continued rate cuts from the Federal Reserve (Fed) in early 2025.
US data releases will again rule the calendar on Wednesday, with ADP Employment Change numbers for December and the Fed’s latest Meeting Minutes both slated to release during the upcoming US trading session. ADP jobs figures serve as a wobbly forecast of what Friday’s Nonfarm Payrolls (NFP) jobs numbers might look like, and investors will be hoping to glean some glimmer of hope for any signs of a rate cut before June.
GBP/USD price forecast
GBP/USD is once again trading on the south side of the 1.2500 handle after this week’s bullish momentum fizzled early. The pair is trading into a familiar near-term technical floor as the 50-day Exponential Moving Average (EMA) descends into 1.2650.
Cable bidders have their work cut out for them as they can expect little support from broader markets unless buying pressure behind the Greenback finally eases, and a fresh higher low can get baked into the GBP/USD chart.
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 Bank of Atlanta President Raphael Bostic said on Tuesday that Fed officials should be cautious with policy decisions given uneven progress on lowering inflation and err on the side of keeping interest rates elevated to achieve their price stability goals, per Bloomberg.
Key quotes
Given that kind of bumpiness in the measures, I think that will call for our policy approach to be more cautious.
I want to make sure we get the right signal, and make sure that our policy is calibrated to that right signal. And if we’ve got to err, I would err on the upside.
I would want to make sure — for sure — that inflation gets to 2%, which means we may have to keep our policy rate higher longer than people might expect.
Inflation trends might show periods of stalling or more aggressive movement, reflecting variability in the data.
Ensuring policy aligns with reliable signals, even amid variability, is a key focus.
Preference to err on maintaining higher rates longer to ensure inflation reaches the 2% target.
Policy rate reductions may be slower or delayed to ensure consistent progress toward inflation goals.
Rates will likely remain elevated longer than originally anticipated to achieve the inflation target.
Market reaction
The US Dollar Index (DXY) is trading 0.02% lower on the day at 108.68, as of writing.
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named 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 during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
President-elect Donald Trump said on Tuesday that he will impose tariffs on hundreds of billions of dollars worth of goods from Mexico and Canada to pressure both countries to stop the flow of illegal immigration and cross-border fentanyl shipments, per Reuters.
Key quotes
We're gonna try and have a policy where no windmills are being built.
We will have very serious tariffs on Mexico and Canada.
We're going to make up for that by putting substantial tariffs on Mexico and Canada.
Market reaction
The USD/CAD pair is trading 0.06% higher on the day at 1.4368, as of writing.
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.
- NZD/JPY inches up to 88.90 on Tuesday, maintaining its recent positive streak.
- RSI climbs to 55, signaling improving sentiment, while MACD prints flat green bars.
- The 100-day SMA stands as a key hurdle, challenging further upside progress.
NZD/JPY extended its mild gains on Tuesday, nudging higher to 88.90 and building on the tentative recovery seen earlier in the week. Despite this constructive move, the pair appears to be stalling around the 100-day Simple Moving Average (SMA), underscoring a critical barrier that may temper the overall bullish momentum.
From a technical standpoint, the Relative Strength Index (RSI) has risen to 55, placing it in positive territory and suggesting moderate buying interest. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains flat and green, indicating that bullish momentum is present but not overwhelming. Until NZD/JPY clears the 100-day SMA with conviction, traders may remain cautious about chasing further upside.
NZD/JPY daily chart
- The AUD/USD trimmed gains and turned to negative territory towards 0.6230.
- Slower Fed rate cuts keep the US Dollar in check.
- US-China trade war fears also cap Aussie gains.
- Australian inflation data to be released in Wednesday’s session will be key.
The Australian Dollar failed to hold gains against the US Dollar and retreated towards 0.6230 on Tuesday. Expectations of slower Federal Reserve (Fed) rate cuts and firm Treasury yields favor USD bulls while the Reserve Bank of Australia’s (RBA) dovish lean weighs on the Aussie’s upside. The Aussie trims daily gains after the Greenback recovers on strong US data, while traders await Australian inflation data on Wednesday for further direction.
Daily digest market movers: Aussie trims gains after robust US data sparks Dollar recovery
- The USD Index (DXY) hovers near a one-week low as uncertainty surrounds potential sector-specific tariffs under the Trump administration.
- Fed officials maintain a more hawkish stance, slowing the pace of 2025 rate cuts, boosting US Treasury yields.
- Heightened US-China trade war fears and the RBA’s dovish pivot challenge the Australian Dollar’s attempt to extend gains.
- Investors monitor upcoming Federal Open Market Committee (FOMC) minutes and US Nonfarm Payrolls (NFP) for fresh policy clues.
- US JOLTS data revealed 8.09 million job openings in November, surpassing estimates and reflecting a healthy labor market.
- ISM Services PMI climbed to 54.1, beating forecasts of 53.3, while the Prices Paid Index rose sharply, signaling persistent inflation pressures.
- Aussie traders focus on inflation data due Wednesday, which could offer new insight into domestic economic trends and RBA policy expectations.
AUD/USD technical outlook: Aussie eyes 20-day SMA for sustained recovery
The Relative Strength Index (RSI) at 44 shows mild improvement out of oversold territory, while the Moving Average Convergence Divergence (MACD) histogram prints rising green bars. Indicators suggest a nascent recovery, but the pair must confidently break above its 20-day Simple Moving Average (SMA) to confirm a sustained upward move. Without this validation, lingering trade and policy risks may keep bullish momentum in check.
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.
- Silver rebounds from the 200-day SMA at $29.89, breaking past the $30 mark.
- A tweezers-top formation observed at the day’s high of $30.38, suggests potential pullback.
- Resistance and support are set at $30.40 and $28.78, respectively, with eyes on movements toward $31.00.
Silver price posts solid gains as it bounces off the 200-day Simple Moving Average (SMA) of $29.89 and climbs past the $30.00 threshold, up by 0.43% at the time of writing. Although US economic data boosted the US dollar and has kept US yields higher, the grey metal has extended its uptrend.
XAG/USD Price Forecast: Technical outlook
From a technical perspective, Silver buyers are struggling to remain above the $30.00 figure for the second straight day. Although they reached a daily high of $30.38, a ‘tweezers-top’ candle chart pattern could pave the way for a pullback.
The Relative Strength Index (RSI) shifted bullishly but remained at around the 50 neutral levels. This suggests that neither buyers nor sellers are in charge.
For a bullish continuation, XAG/USD must clear the $30.40 an ounce barrier. Once surpassed, the next key resistance level would be the 50-day SMA at $30.64, followed by the 100-day SMA at $30.78. On further strength, the $31.00 would be exposed.
Conversely, If XAG/USD drops below the 200-day SMA, sellers could push the grey’s metal price lower. Key support levels would be the December 31 swing low of $28.78, followed by the September 6 daily low of $27.69.
XAG/USD Price Chart – Daily
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.
- Gold climbs to $2,664 but faces pressure from a strong US labor market and Trump's assertive tariff plans.
- Trump’s unexpected remarks on reclaiming the Panama Canal and imposing tariffs on neighbors bolster the US Dollar.
- People's Bank of China boosts gold reserves, signaling increased demand as global economic uncertainties persist.
Gold price advanced late in the North American session on Tuesday yet retreated from daily highs on solid United States (US) economic data and US President-elect Donald Trump’s press conference remarks. The XAU/USD trades at $2,648, gains 0.50%.
In the United States, the schedule revealed a strong jobs report amid an increase in job openings, reassuring investors that the labor market is solid. Furthermore, business activity in the services sector improved sharply, weighing on expectations for further easing by the Federal Reserve (Fed).
In the meantime, US President-elect Donald Trump crossed the wires, said he would like to take back control of the Panama Canal and reiterated that he would impose tariffs on Canada and Mexico. This boosted the US Dollar (USD) and capped Gold’s advance.
Earlier, Bullion rose to a two-day peak of $2,664 after China’s central bank increased its Gold reserves for the second straight month by 300K ounces to 73.3 million, an indication that the People’s Bank of China (PBoC) resumed its purchases after a six-month pause.
US Treasury bond yields remained high, bolstering the Greenback. According to the Fed funds futures interest rate contract at the Chicago Board of Trade (CBOT), investors estimate 51 basis points (bps) of easing or two 25 bps interest rate cuts by the Fed toward the end of the year.
Ahead this week, the US economic docket will feature the ADP Employment Change, Initial Jobless Claims figures, the Fed’s last meeting minutes and December’s US Nonfarm Payrolls report.
Daily digest market movers: Gold price climbs amid high US yields, underpinned by PBoC purchases
- Gold remains pressured as US real yields rise two bps up to 2.28%.
- The US 10-year T-note yield soars six and a half bps to 4.691%.
- The US Dollar Index (DXY), which tracks the buck’s performance against a basket of six currencies, edges up by 0.26% at 108.55 after bouncing from a weekly low of 107.75.
- The ISM Services PMI in December increased by 54.1, exceeding forecasts of 53.3 and November’s 52.1 reading.
- The Job Labor and Turnover Survey (JOLTS) revealed that work openings increased from 7.839 million to 8.098 million in November.
- The US trade deficit widened in November, according to the US BEA, reaching $78.2 billion compared to $73.6 billion in October.
- Imports climbed by 3.4% MoM to $351.6 billion from $339.9 billion, while exports increased by 2.7%MoM to $273.4 billion from $266.3 billion.
XAU/USD technical outlook: Gold price advances but remains below $2,650
Gold prices have advanced above $2,640, opening the door to exchange hands at around the $2,640 - $2,650 range. Nonetheless, the yellow metal cannot decisively clear the 50-day Simple Moving Average (SMA) at around $2,651, which could pave the way for further upside.
In that outcome, the next ceiling 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 of $2,627, look for a test of $2,500 before Gold extends its losses to the 200-day SMA at $2,494.
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.
Broad-market hopes for more rate cuts from the Fed were pushed further out on Tuesday after US business activity survey results hinted at inflationary pressures still simmering in the background. Key consumer activity metrics as well as a preview of Friday’s upcoming US NFP jobs data dump will feature on Wednesday.
Here’s what you need to know heading into Wednesday, January 8:
The US Dollar Index (DXY) caught a risk-off bid on Tuesday, bolstered by safe haven flows after US ISM Services PMI figures widely outpaced median market forecasts. With US price pressures still running on the too-hot side and threatening to keep inflation at a higher level than investors have been hoping, the too-good print clipped market sentiment. Coming up on Wednesday, US ADP Employment Change numbers in December will serve as a potential, albeit volatile and untrustworthy, preview of Friday’s NFP jobs print. The Federal Reserve’s (Fed) latest Meeting Minutes will also be released tomorrow.
EUR/USD bullish momentum evaporated on Tuesday, with Fiber falling back below the 1.4000 handle as the Euro continues to struggle to develop bullish momentum. German Retail Sales, alongside pan-European Produce Price Index figures (PPI), will be the key figures to watch on Wednesday.
AUD/USD Went nowhere quickly on Tuesday, testing the high end but remaining hobbled just south of the 0.6300 handle. Monthly Australian Consumer Price Index (CPI) inflation will be releasing early in Wednesday’s Antipodean market segment, and investors are looking for a slight uptick.
USD/JPY continues to grind its way back toward the 160.00 handle as markets bid the Greenback up further. Most of the gains from the Japanese Yen’s technical recovery in 2024 have been fully pared away, and USD/JPY could be knocking on fresh multi-decade highs in short order. Japanese Labor Cash Earnings for the year ended November are expected late Wednesday or early Thursday, and are expected to accelerate slightly, helping to apply pressure to the Bank of Japan (BoJ) to finally increase interest rates.
Economic Indicator
ADP Employment Change
The ADP Employment Change is a gauge of employment in the private sector released by the largest payroll processor in the US, Automatic Data Processing Inc. It measures the change in the number of people privately employed in the US. Generally speaking, a rise in the indicator has positive implications for consumer spending and is stimulative of economic growth. So a high reading is traditionally seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
Read more.Next release: Wed Jan 08, 2025 13:15
Frequency: Monthly
Consensus: 140K
Previous: 146K
Source: ADP Research Institute
Traders often consider employment figures from ADP, America’s largest payrolls provider, report as the harbinger of the Bureau of Labor Statistics release on Nonfarm Payrolls (usually published two days later), because of the correlation between the two. The overlaying of both series is quite high, but on individual months, the discrepancy can be substantial. Another reason FX traders follow this report is the same as with the NFP – a persistent vigorous growth in employment figures increases inflationary pressures, and with it, the likelihood that the Fed will raise interest rates. Actual figures beating consensus tend to be USD bullish.
- The Canadian Dollar froze on Tuesday, crimping the week’s early recovery.
- Canada’s Ivey PMI slumped in December, missing expectations.
- Canadian labor figures due this week set to be eclipsed by looming US NFP print.
The Canadian Dollar (CAD) crimped a recent bullish recovery, halting in place on the charts and cycling familiar levels against the Greenback on Tuesday. The Loonie has recovered some ground after tumbling to multi-year highs at the tail-end of 2024, but bullish momentum remains elusive.
Canada’s Ivey Purchasing Managers Index (PMI) figures disappointed CAD traders that were looking for a reason to buy. Business activity survey results continue to miss the mark, and a low-impact upswing in trade figures in November was too low-tier to produce an upshot in market flows.
Daily digest market movers: CAD waffles as markets await further signs
- Canadian Exports and Imports both rose last November, but the data was too long-dated and low-impact to meaningfully direct CAD moves.
- Canada’s headline Ivey PMI for December fell to a 12-month low of 44.3 compared to November’s 49.7 as business activity expectations contract sharply.
- Despite the headline crunch, the seasonally-adjusted Ivey PMI rose to 54.7 from 52.3, but still missed the forecast print of 55.4, a decidedly lofty expectation.
- US business activity survey results took center stage on Tuesday as the ISM Services PMI for December surged to 54.1 versus the expected 53.3 and previous 52.1.
- Rising business activity and production costs in the US are reigniting fears of a lack of Federal Reserve (Fed) rate cuts in 2025, cooling risk appetite.
- Friday’s upcoming Nonfarm Payrolls (NFP) print will take on renewed interest as investors look for reasons to continue hoping for fresh rate cuts.
Canadian Dollar price forecast
USD/CAD rose to multi-year highs in December, clipping north of the 1.4400 handle before price action settled into a rough sideways grind, keeping bids just south of the key price level. Loonie markets have finally plugged the slow bleed that dragged the Canadian Dollar to its lowest prices against the Greenback since the pandemic, but a firm bullish recovery remains elusive.
1.4300 is firming up as an immediate technical floor. Even if CAD flows are able to generate enough momentum to pierce the key level, a rising 50-day Exponential Moving Average (EMA) will pose the next immediate risk rising into 1.4200.
USD/CAD daily chart
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.
- DXY holds near 108.40 on Tuesday with gains.
- Fed’s hawkish shift in December underpins higher yields.
- Markets digest strong JOLTS and ISM data.
The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, trades with gains on Tuesday after two days of losses. The Federal Reserve’s (Fed) hawkish tilt supports elevated US bond yields, favoring the USD bulls. Strong labor market and Services PMI figures helped the USD trim losses ahead of December’s Nonfarm Payrolls.
Daily digest market movers: US Dollar recovers after strong data
- US yields keep climbing, with the 10-year note near 4.64% and the 30-year at 4.87%, driven by heavy Treasury auctions this week.
- Fed Vice Chair for Supervision Michael Barr announced an early resignation effective February 28, potentially avoiding legal battles under the next administration.
- December ISM Services Purchasing Managers Index rose to 54.1 from 52.1, beating 53.3 forecasts. Prices Paid jumped to 64.4, stoking inflation concerns.
- Job Openings & Labor Turnover Survey (JOLTS) showed openings at 8.09 million in November, above both October’s 7.83 million and the 7.7 million estimate.
- ADP private payrolls, Challenger job cuts, and weekly jobless claims will round out this week’s labor market data before December Nonfarm Payrolls.
- Geopolitical tensions and potential trade war flare-ups keep safe-haven demand intact, limiting the US Dollar’s downside despite profit-taking.
DXY technical outlook: Indicators stay firm above key support
The US Dollar Index maintains an overall bullish structure, with technical indicators retaining upward momentum. Despite intraday softness, the DXY has successfully defended its 20-day Simple Moving Average (SMA), reflecting solid underlying support.
While near-term overbought signals could prompt modest pullbacks, ongoing demand for US assets and higher yields may keep the index elevated, barring any major risk reversals.
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.
- The Dow Jones was mired in congestion near 43,000 on Tuesday.
- US ISM PMI figures came in much hotter than expected in December.
- Above-forecast business survey results are reigniting fresh fears of fewer Fed cuts.
The Dow Jones Industrial Average (DJIA) churned on Tuesday as tech stocks pared back recent gains, with investors pushed further off their Goldilocks stance after a hotter-than-expected print in December’s ISM Purchasing Managers Index (PMI) crimped rate cut hopes heading into 2025.
Equity markets hoping to extend last year’s AI-fueled tech bull run into the new year ran into a hard wall on Tuesday, with key darlings of the tech space giving back recent gains. Profit-focused shareholders bluntly want their preferred silicon wafer-punching companies to lean further into demand from the AI tech space, even as the segment of that sector that deals with actually selling AI solutions to consumers and businesses struggle to develop stable methods of generating profit.
ISM’s Services PMI print for December came in well above median market forecasts, clocking in at 54.1 versus the expected 53.3 and rebounding firmly from the previous month’s 52.1. ISM Services Priced Paid survey results also accelerated to a 22-month high of 64.4 in December compared to November’s 58.2.
With business activity outlooks broadly rising faster than expected, as well as prices paid by those businesses appearing to be back on the rise, investors are balking at the prospect of inflation remaining stickier than previously expected. Firm business activity growth plus rising producer prices will make it more difficult for the Federal Reserve (Fed) to deliver as many rate cuts as traders were hoping.
According to the CME’s FedWatch Tool, rate traders now expect the Fed to hold off on any further rate cuts until June. The Fed is expected to stand pat on rates through most of the first half of 2025.
Dow Jones news
A little over half of the companies listed on the Dow Jones are testing into the green on Tuesday, keeping the headline index on balance despite heavier downside in key tech stocks. Nvidia (NVDA) tumbled over 5%, falling back below $142 per share as investor expectations for the chipmaker cool off. The company recently unveiled a new range of chipsets based on its now-familiar Blackwell architecture, but its decision to focus the latest release on a back-to-its-roots pivot to providing hardware for gaming rigs received a delayed tepid response from AI tech investors who initially bid the company up earlier in the week.
Dow Jones price forecast
A rough consolidation pattern is cooking into the Dow Jones chart, keeping the major equity index hobbled in a choppy range between 43,000 and 42,000. Short pressure remains unable to push price action firmly into a downside trajectory, and bids remain bolstered into a technical ceiling from the 50-day Exponential Moving Average (EMA) descending through 43,200.
Bulls tired of punching the buy button could run out of gas after keeping the Dow Jones pushed into a one-sided bullish trend. The DJIA has outpaced its own 200-day EMA for 14 straight months, and bidders could be tired of winning, which could see the index pare further gains and fall back to softer chart regions.
Dow Jones daily chart
Dow Jones FAQs
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.
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.
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.
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.
- Mexican Peso shows resilience, marginally dipping to 20.29 despite strong US services sector growth and job market data.
- Trump denies narrow tariff plans, boosting the US Dollar, yet the Peso maintains its ground against market fluctuations.
- Upcoming Mexican CPI data awaited as economic indicators from the US continue to shape Fed rate expectations.
The Mexican Peso posted minimal gains against the Greenback on Tuesday after data suggested that the United States (US) economy remained solid, while traders pared back the Federal Reserve's (Fed) first interest rate cut until July. At the time of writing, the USD/MXN trades at 20.27, down 0.16%.
The financial markets continued to reflect a positive market tone after The Washington Post published an article mentioning that US President-elect Trump's team is working toward narrowing tariffs that will “only cover critical imports.” Even though Trump refuted the article and boosted the buck, the Mexican Peso shrugged off those comments and appreciated against the US Dollar.
On the data front, the Institute for Supply Management (ISM) revealed that business activity in the Services sector improved sharply. At the same time, the survey showed that a sub-component of the Purchasing Managers Index (PMI) linked to prices hit its highest level since 2023.
At the same time, the US Bureau of Labor Statistics revealed that job vacancies broke above the 8 million threshold, indicating that the labor market is strengthening.
In Mexico, the economic docket remained absent on Tuesday and will resume on Thursday. The Consumer Price Index (CPI) will be revealed, and it is foreseen to continue its downward trajectory toward Banco de Mexico’s (Banxico) 3% target.
On Wednesday, the US economic schedule will feature the ADP Employment National Change, Initial Jobless Claims figures, and the Fed’s last meeting minutes.
Daily digest market movers: Mexican Peso consolidates ahead of Mexico’s CPI data
- The US Dollar Index (DXY) rises 0.17%, up at 108.46, a tailwind for the USD/MXN exotic pair.
- The ISM Services PMI in December increased by 54.1, exceeding forecasts of 53.3 and November’s 52.1 reading.
- The Job Labor & Turnover Survey (JOLTS) revealed that work openings increased from 7.839 million to 8.098 million in November.
- According to the Bureau of Economic Analysis, the US trade deficit widened in November, reaching $78.2 billion compared to $73.6 billion in October.
- Imports climbed by 3.4% to $351.6 billion from $339.9 billion, while exports increased by 2.7% to $273.4 billion from $266.3 billion.
USD/MXN technical outlook: Mexican Peso remains subdued near 20.30
The USD/MXN remains tilted in a vague direction, meandering around the 50-day Simple Moving Average (SMA) at 20.27. The Relative Strength Index (RSI), despite turning flat in bearish territory, indicates the exotic pair might consolidate, awaiting a fresh catalyst.
Therefore, if USD/MXN drops below the 50-day SMA, the next support would be the 20.00 figure. A breach of the latter will expose 100-day SMA at 19.91, followed by the 19.50 figure.
Conversely, if buyers stepped in and lifted the USD/MXN above 20.50, the next ceiling level would be the year-to-date (YTD) high of 20.90, ahead of 21.00 and the March 8, 2022 peak of 21.46.
Mexican Peso FAQs
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.
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.
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.
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.
- EUR/USD inches lower to 1.0370 on Tuesday after repeated rejections at the 20-day SMA.
- The RSI rises to 45, suggesting improving momentum but still hinting at a cautious outlook.
- MACD shows flat green bars, indicating easing bearish pressure yet no clear bullish shift.
EUR/USD managed to climb towards the 1.0370-1.0390 area at the begging of the year, continuing its fragile attempt to recover from recent losses. Despite this uptick, the pair has repeatedly struggled to decisively break above the 20-day Simple Moving Average (SMA) since the start of 2025, reinforcing the notion that sellers may still dictate the short-term direction.
Technical readings are mixed. While the Relative Strength Index (RSI) has lately improved to 45 suggesting a modest pickup in buying interest but it remains in negative territory, indicating that buyers are not yet fully in control. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat green bars, implying that bearish momentum is easing but hasn’t given way to a sustained bullish push.
Looking ahead, a solid move above the 20-day SMA would be necessary to establish a more convincing recovery and open the door for further gains. Absent that, the pair remains vulnerable to renewed selling pressure, keeping its recent bounce on cautious footing.
EUR/USD daily chart
- GBP/USD reaches new peak after Trump advisors hint at targeted tariffs, weakening the US Dollar despite strong US data.
- US Services PMI and JOLTS job openings surpass expectations, signaling robust economic health.
- UK retail sales hit highest level since March 2024, adding to the positive outlook for the Pound amid a light UK economic calendar.
The Pound Sterling rose to a new four-day peak of 1.2575 on Tuesday after posting its biggest gain in the last three days. The Washington Post revealed that US President-elect Donald Trump's advisers considered applying tariffs to specific imports, weakening the Greenback, which of late was boosted after upbeat US data. The GBP/USD trades at 1.2495, down by 0.12%.
Strong ISM Services PMI and JOLTS data, weighed on the GBP/USD pair
US equities remain mixed early during the North American session. The Institute for Supply Management (ISM) revealed that Services PMI rose by 54.1, exceeding estimates of 53.3 up from 52.1.
At the same time, the US Department of Labor revealed that the number of JOLTS job openings rose sharply, exceeding forecasts of 7.70 million to 8.098 million.
The data suggests the economy is in good shape and overshadowed the release of the Balance of Trade data.
The US Bureau of Economic Analysis (BEA) revealed that the trade deficit widened in November, with the Trade Balance figures coming at $-78.2 billion, more than the $-73.6 billion reported in October.
According to BEA, Imports increased from $339.9 billion to $351.6 billion, a 3.4% increase. US Exports rose from $266.3 billion to $273.4 billion, a 2.7% increase.
In the UK, the British Retail Consortium revealed that retail sales rose 3.2% year over year in December, their highest level since March 2024.
Ahead this week, the UK economic docket remains scarce. In the US, the calendar will feature the ADP National Employment report and Initial Jobless Claims data for the week ending January 4.
GBP/USD Price Forecast: Technical outlook
From a technical standpoint, the GBP/USD daily chart suggests the pair is reversing some of its weekly gains, the release of US data. If the pair drops below 1.2450, look for a retest of 1.2400. On further weakness, the next support would be the January 2 low of 1.2351.
On the other hand, if buyers buy the dip, they could retest 1.2500 and the daily high of 1.2575 before reaching 1.2600.
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 Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.24% | 0.20% | 0.48% | 0.20% | 0.03% | -0.03% | 0.53% | |
| EUR | -0.24% | -0.04% | 0.21% | -0.03% | -0.21% | -0.27% | 0.27% | |
| GBP | -0.20% | 0.04% | 0.30% | 0.01% | -0.17% | -0.23% | 0.32% | |
| JPY | -0.48% | -0.21% | -0.30% | -0.28% | -0.44% | -0.52% | 0.04% | |
| CAD | -0.20% | 0.03% | -0.01% | 0.28% | -0.17% | -0.23% | 0.31% | |
| AUD | -0.03% | 0.21% | 0.17% | 0.44% | 0.17% | -0.06% | 0.48% | |
| NZD | 0.03% | 0.27% | 0.23% | 0.52% | 0.23% | 0.06% | 0.55% | |
| CHF | -0.53% | -0.27% | -0.32% | -0.04% | -0.31% | -0.48% | -0.55% |
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).
- Job openings in the US rose above 8 million in November.
- US Dollar Index stays in positive territory slightly above 108.50.
The number of job openings on the last business day of November stood at 8.09 million, the US Bureau of Labor Statistics (BLS) reported in the Job Openings and Labor Turnover Survey (JOLTS) on Tuesday. This reading followed the 7.83 million reported in October and came in above the market expectation of 7.7 million.
"Over the month, hires and total separations were little changed at 5.3 million and 5.1 million, respectively," the BLS said in its press release. "Within separations, quits (3.1 million) decreased, but layoffs and discharges (1.8 million) changed little."
Market reaction
The US Dollar Index edged higher following this report and was last seen gaining 0.25% on the day at 108.55.
- US ISM Services PMI in the US rose more than expected in December.
- US Dollar Index turns positive on the day near 108.50.
The economic activity in the US service sector expanded at an accelerating pace in December, with the ISM Services PMI rising to 54.1 from 52.1 in November. This reading came in above the market expectation of 53.3.
Other details of the report showed that the Prices Paid Index, the inflation component, rose to 64.4 from 58.2, while the Employment Index edged lower to 51.4 from 51.5.
Market reaction
The US Dollar gathered strength against its major rivals with the immediate reaction. At the time of press, the USD Index was up 0.2% on the day at 108.52.
Soft demand for a 30-year Gilt auction today helped drive UK rates a little higher overall. The 30Y yield reached the highest since 1998 while 10Y yields touched the highest since 2023, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
GBP/USD firmer in mid-1.25s
“Relatively firm UK yields should be providing the GBP with a little more support than has been apparent in recent weeks. Even at the short end of the curve, 1Y swap spreads have narrowed notably since November while the pound has retained a soft undertone against the generally firm USD.”
“Sterling is also showing some promising technical signs on the weekly chart but, like the EUR, it is still trading below near-term resistance at 1.2610. A clear push through the low 1.26s should bolster near-term upside potential towards 1.27, at least. Support is 1.2500/10.”
Oil prices also benefited from the price hike by Saudi Arabia, Commerzbank’s commodity analyst Carsten Fritsch notes.
Price reduction in the previous month is largely reversed
“The world's largest oil exporter has increased its official selling prices (OSPs) for customers in Asia. These have to pay a price premium of USD 1.5 per barrel for deliveries of Arab Light in February compared to the Oman/Dubai benchmark. This is 60 US cents more than in January, when the OSP was cut to a 4-year low.”
“The price increase was therefore somewhat higher than market participants had expected in advance. One reason for this could be that the price of Iranian oil has risen significantly due to the US sanctions. In addition, less oil from Russia is likely to be available due to the Western sanctions against the Russian shadow fleet. As a result, the price reduction in the previous month was largely reversed.”
“For customers in Europe, the OSP for Arab Light was raised by $1.3 per barrel compared to Brent. The premium payable for customers in the US compared to ASCI, a basket of sour oil grades, was reduced by 30 US cents to $3.5 per barrel, the lowest level in almost three years. This may be an attempt by Saudi Arabia to remain competitive on the US market.”
Preliminary Eurozone CPI rose 0.4% M/M and 2.4% in the year—in line with expectations but up from November’s 2.2%, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
EUR/USD holds in low 1.04s on ECB repricing
“ECB data showed a small rise in 1– and 3 -year inflation expectations in November as well. The data helped extend the reduction in ECB rate cut expectations—marginally—through mid-year. Eurozone/US 2Y spreads have narrowed 25bps to -208bps since December 18th, providing support for the EUR’s modest recovery.”
“The EUR retains a moderately firmer undertone and has the support of potentially bullish signal developing on the weekly chart (it will need to sustain or better early week gains to confirm that). But the market remains shy of pushing through near-term resistance at 1.0450/55 (high/low resistance defined by the past month’s trading range).”
“Gains through here should cement near-term upside potential at least and pave the way for a push to 1.0500/50. Support is 1.0375.”
The Brent oil price fell by around 3% last year, Commerzbank’s commodity analyst Carsten Fritsch notes.
OPEC oil production falls by 120k bpd in December
“The year-end level of less than $75 per barrel was the lowest in four years. Since the beginning of the new year, the price has risen noticeably and yesterday reached its highest level since mid-October at $77.5 per barrel.”
“One reason is the concern that less oil from Iran and Russia is likely to reach the market due to stricter sanctions. In addition, Bloomberg reported in its survey that OPEC oil production fell by 120 thousand barrels per day in December, with the United Arab Emirates being particularly responsible for this. These produced significantly more than agreed in recent months.”
“However, the overproduction of the nine OPEC countries bound by the production targets still totaled more than 400 thousand barrels per day in December.”
The CAD is holding a minor gain on the broadly softer USD. Yesterday’s CAD rally stalled after Trudeau confirmed he was stepping aside and Trump indicated that there would be no relenting in the application of tariffs, countering the earlier story in the Washington Post that had suggested a more selective approach to tariffs, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
CAD manages to hold technical break versus USD
“To be fair to the Post, the report did say the thinking was coming from Trump’s trade team so the push back may reflect the President’s own policy approach. Or it may be that he does not want to be seen making any concessions before negotiations have even started.”
“Markets perhaps detect a crack in the president-elect’s hardline approach, however, which may provide some relief for the CAD and other currencies. The domestic political fog has hardly cleared by Trudeau announcement. The Liberals will select a new leader but opposition parties have already declared that they will not support the new government, meaning an election looks inevitable but is unlikely to occur before May/June perhaps.”
“The CAD just about held the break under 1.4335 through the close yesterday, keeping alive the technical potential of a 1.4465 double top on the charts to deliver a push back in the USD to the low 1.42 zone in the next couple of weeks. Short-term technical momentum signals are shifting a bit more favorably for the CAD but the USD enjoys a lot of residual bull momentum on the longer run studies which will make the push lower a bit of a grind. Intraday support is 1.4275/80. Resistance is 1.4375/80.”
Silver rose by 21.5% last year, posting the strongest price increase since 2020. The year-end level of just under USD 29 per troy ounce was the highest in 12 years, Commerzbank’s commodity analyst Carsten Fritsch notes.
Platinum and palladium suffered losses
“The Platinum price fell by 8.5% last year to slightly less than USD 910 per troy ounce, the lowest closing level in 6 years. Palladium fell by 17% to just over USD 910 per troy ounce. The last time Palladium traded lower at the end of a year was 8 years ago. Palladium has recorded price declines in the last four years.
“The picture for precious metals in 2024 was therefore mixed. Gold and silver made significant gains. Gold benefited from its monetary role as an investment metal, while silver gained from the increasing demand for climate-friendly applications such as photovoltaics.”
“Platinum and Palladium, on the other hand, fell because the investment aspect plays a much smaller role here. Instead, the weakness in the (automotive) industry became a burden.”
US Dollar (USD) retains a softer undertone, leaving the DXY trading close to the lows seen around the holiday period, Scotibank’s Chief FX Strategist Shaun Osborne notes.
DXY support is 107.75 intraday
“It’s not a case of significant dollar weakness, of course, but the currency has been on a strong run and remains quite significantly overvalued relative to its short run fair value estimate. USD seasonal trends are bullish in Q1 typically, but we can see that the USD continues to track its post 2016-election performance very closely, which might herald a downturn in its performance shortly if that pattern continues to hold.”
“Essentially, traders and investors are long USDs, and positioning may be prone to some liquidation pressure if the USD continues to soften. There was a lot going on yesterday. Despite the president-elect’s denial that tariffs would only be applied selectively, the USD traded broadly lower over the session and only managed to strengthen a little from the intraday low following Trump’s comment.”
“US yields remain firm. The US 10Y is nearing 4.70%, just shy of last April’s peak around 4.74%. Yields are firm/firmer elsewhere, however, meaning that spreads are not necessarily moving in the dollar’s favour. This morning’s US data run may bring mixed news on trade, JOLTS and ISM Services. Barkin (non-voter) speaks at 8ET. DXY support is 107.75 intraday. Loss of support here will tilt near-term risks towards more softness.”
The Gold price closed the last year up 27%. This corresponds to the strongest annual gain since 2010, Commerzbank’s commodity analyst Carsten Fritsch notes.
PBoC buys Gold second month in a row
“The price ended the year at USD 2,625 per troy ounce, which is the highest year-end level since the Gold price was floated more than 50 years ago. It is worth noting that the strong price increase occurred despite the fact that Gold ETFs recorded outflows last year, which amounted to 85 tons according to data from Bloomberg.”
“By comparison, 14 years ago the Gold ETFs tracked by Bloomberg recorded inflows of more than 300 tons. ETF outflows last year were only a third of the outflows in the previous year. Nevertheless, it was the fourth year in a row with outflows. It is obvious that Gold ETFs have become less important for the Gold price trend. Instead, Gold purchases by central banks have become much more influential over the past three years.”
“In contrast to the Gold ETFs, which are published almost on a daily basis, these are only published sporadically and with a long time lag, which in turn makes it much more difficult to explain short-term Gold price movements. Today, the Chinese central bank reported an increase in its Gold reserves by a good 10 tons in December, marking the second month in a row that it has bought Gold.”
- The Greenback is softening on the back of US tariff plans headlines.
- A Fed interest rate cut in January is out of the cards at the moment, while the ECB faces challenges.
- Gold price is moving within a pennant technical formation, respecting both upside and downside.
Gold’s price (XAU/USD) is hardly moving and remains stuck at around $2,640 on Tuesday. Markets are on edge over the recent string of comments and headlines about the US tariff plans that President-elect Donald Trump wants to impose.
For a brief moment, there was a sigh of relief on Monday after the Washington Post shared a piece claiming that Trump was considering imposing a simple universal tariff on critical imports. After President-elect Trump quickly pushed back against those headlines, Gold’s price returned to levels where it opened the week.
This Tuesday does not seem any different, with the price of Gold at similar levels. Meanwhile, more risk-bearing assets are surging, with Bitcoin back above $101,000. US yields are also surging, with the 10-year benchmark at 4.62%, nearly a fresh eight-month high.
Daily digest market movers: Correlation is missing
- Inflation data from several European countries and the overall Eurozone shows that the European disinflation path is being broken up, with monthly gauges tied back up with inflation. This could throw a spanner in the works for the European Central Bank (ECB), which is foreseen to cut its policy rate by 25 basis points on January 30.
- The US 10-year yield rallied to 4.64% last week, a fresh seven-month high and not far off an eight-month high of 4.65%. This Tuesday, it is settling down near 4.62%.
- The CME Fedwatch tool is currently only showing a small 10% chance for a 25 basis points (bps) interest rate cut in January. Further on, expectations are for the Fed to remain data-dependent with uncertainties that could influence the inflation path once President-elect Donald Trump takes office on January 20.
- In the runup to the US Employment report on Friday, the JOLTS Job Openings for November are due at 15:00 GMT on Tuesday. The Institute for Supply Management (ISM) will also issue its December Purchasing Managers Index (PMI)report on the Services sector.
Technical Analysis: Gold looks detached
It seems that the Gold price is sitting on the bench for now. Traders look to be very happy where the precious metal is currently trading. The weaker US Dollar (USD), together with the elevated tensions on tariffs and other geopolitical events, is not triggering any refugees into the safe-haven commodity. Should a clearer pattern emerge, expect a catch-up move in Gold prices.
On the downside, the 100-day Simple Moving Average (SMA) at $2,628 is holding again after a false break on Monday. Further down, the ascending trend line of the pennant pattern should provide support around $2,608 as it did in the past three occasions. In case that support line snaps, a quick decline to $2,531 (August 20, 2024, high) could come back into play as support level.
On the upside, the 55-day SMA at $2,656 is the first level to beat. It will not be an easy task as it was already proved twice last week as a firm resistance. In case it breaks through, $2,688 will be the ultimate upside level in the form of the descending trendline in the pennant formation.
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.
At the end of last week, USD/CNY broke above 7.30, which previously had been successfully defended in the last days of 2024. Yesterday, the exchange rate even rose to almost 7.33 before falling again in the wake of various reports about the impending US tariffs. In addition to the strong US dollar, however, the Chinese side of the exchange rate is also playing a decisive role. At least the interest rate market is still not convinced that the economic situation will change anytime soon. The current interest rate on 10-year government bonds fell further during recent weeks to 1.58%, while interest rates on 2-year government bonds even fell below 1% briefly on Monday. The market is therefore expecting further significant easing measures from the central bank and persistently low interest rates in China, Commerzbank’s FX analyst Volkmar Baur notes.
Low-interest rate level is likely here to weigh on the CNY
“And the purchasing managers' indices published at the beginning of the year did little to alleviate these concerns. Although they did include a few rays of hope, such as the increase in services and construction. However, the manufacturing sector weakened again in response. Moreover, the details once again revealed long-standing weaknesses. For example, the employment component of the PMIs clearly shows that the labour market is still not running smoothly and will continue to weigh on domestic demand.”
“And other surveys also point to the ongoing plight in the labour market. According to the central bank survey, employee perceived labour market prospects have continued to deteriorate in recent quarters and are well below pre-pandemic levels. And the National Bureau of Statistics recently published a survey of companies in the so-called ‘new economy’ according to which starting salaries were around 8% below the previous year's level. According to this survey, the decline in starting salaries accelerated significantly, particularly in the second half of the year. It is therefore no wonder that in the above-mentioned central bank survey, only a very small proportion of those surveyed currently consider it a good time to make a major purchase.”
“The inflation figures for December will be published on Thursday. The consensus, according to Bloomberg, expects consumer prices to rise by just 0.1% compared to last December, while producer prices are expected to fall by 2.4% year-on-year. In view of the labour market, the resulting weak domestic demand and the lack of price pressure from the supply side, it is difficult to imagine how inflation could increase significantly and sustainably. The low-interest rate level is therefore likely here to stay and will continue to weigh on the CNY.”
US Dollar (USD) is expected to trade in a sideways range of 7.3210/7.3610. In the longer run, room for USD to retest the 7.3700 level; it is too early to determine if it can break and remain above this level, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
Room for USD to retest the 7.3700 level
24-HOUR VIEW: “USD plunged from 7.3640 yesterday, reaching a low of 7.3131. It then rebounded to close lower by 0.17% at 7.3450. The price action did not result in an increase in either downward or upward momentum. Today, we expect USD to trade sideways between 7.3210 and 7.3610.”
1-3 WEEKS VIEW: “Last week, USD rose to a high of 7.3700 before pulling back. The pullback is likely part of a range trading phase. As long as 7.3050 is not breached, there is room for USD to retest the 7.3700 level. At this time, it is too early to determine if USD can break and remain above this level.”
On the last day of last year, the Swiss National Bank (SNB) announced the extent of its foreign exchange interventions in the third quarter - given the repeated hints from officials that more intervention was possible at any time, this was probably one of the most important data points of recent months. Unsurprisingly, however, the SNB purchased relatively little foreign currency in the third quarter, at just under CHF 730 million, i.e. it only weakened the franc slightly artificially. Given that the franc appreciated significantly in the third quarter on the back of heightened risk aversion, this is a signal from the SNB that it will only intervene more strongly in the event of an extreme emergency, Commerzbank’s FX analyst Michael Pfister notes.
Any movements in the Swiss franc to be short-lived
“For the time being, the key interest rate remains the instrument of choice for reacting to inflationary developments. With its surprise rate cut of 50 basis points in December, the SNB indicated that the risk of a return to negative interest rates had been reduced and that the SNB had effectively got ahead of the curve again in terms of stabilizing inflation in the target range in the long term. However, it will probably take some time for this effect to be reflected in price increases. Two other effects are therefore likely to come to the fore in today's December figures.”
“On the one hand, this time a relatively large price increase from the previous December is going to drop out of the calculation of the year-on-year rate, which should artificially depress the year-on-year rate. On the other hand, there are also other factors that should lead to somewhat stronger price pressures again. For example, oil prices rose again in December, suggesting higher transport costs in Switzerland. On the other hand, both Spanish and German inflation figures have surprised on the upside in recent days, which, given the relatively high correlation with the Swiss figures, also points to stronger price pressures in Switzerland. In short, today's figures promise to be quite exciting.”
“However, the usual volatility in monthly inflation figures is likely to be less relevant for the SNB than the longer-term trend. Moreover, concerns about the second Trump administration and its potential impact on global inflation are likely to grow in Switzerland as well. It is therefore quite possible that the SNB will look through today's possible surprise and that any movements in the Swiss franc will be short-lived.”
US Dollar (USD) could rise, but it does not appear to have enough momentum to reach 159.00. In the longer run, USD is expected to trade with an upward bias; any advance is expected to face significant resistance at 159.00, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
USD to trade with an upward bias for now
24-HOUR VIEW: “USD plummeted to 156.22 yesterday, rebounding strongly to close at 157.60 (+0.21%). It continues to rise in early Asian trade today. Given the increasing momentum, USD could continue to rise. However, it does not appear to have enough momentum to reach 159.00 (there is another resistance level at 158.50). On the downside, a breach of 157.20 (minor support is at 157.60) would indicate that USD is not rising further.”
1-3 WEEKS VIEW: “USD broke above the 158.10 resistance in early Asian trade today. Upward momentum is building, and we expect USD to trade with an upward bias for now. However, any advance is expected to face significant resistance at 159.00. The upward bias will remain intact as long as 156.80 is not breached.”
A leadership contest within the Canadian Liberal Party will select the new prime minister after Justin Trudeau’s resignation yesterday, ING’s FX analyst Chris Turner notes.
Upside risks to USD/CAD remain largely unchanged
“CAD has reacted positively to Trudeau’s departure and is finding a bit more support this morning on reports that Mark Carney is a frontrunner to take the role.”
“Carney would be the most market-friendly candidate, but the domestic political shake-up will be insufficient to drive USD/CAD materially lower by itself. CAD’s weakness remains strictly tied to Trump’s tariff policy, and even if direct duties on Canada are averted, universal 10% tariffs would disproportionately hit the US's largest trading partners like Canada.”
“Expect some more short-term noise on CAD during the Liberal leadership contest, but our considerations about the upside risks to USD/CAD remain largely unchanged.”
New Zealand Dollar (NZD) is likely to trade in a 0.5590/0.5705 range for now, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
NZD has probably entered a consolidation phase
24-HOUR VIEW: “Yesterday, NZD swung between 0.5612 and 0.5685, closing at 0.5644 (+0.56%). The price action lacks clarity, and further choppy trading is not ruled out, probably in a range of 0.5605/0.5665.”
1-3 WEEKS VIEW: “The recent weakness appears to have stabilized, as NZD rebounded strongly yesterday. NZD has probably entered a consolidation phase, and it is likely to trade in a 0.5590/0.5705 range for now.”
Notably EUR/USD is holding onto the gains made on yesterday's Washington Post report. We consider this a fair adjustment after EUR/USD overshot on the downside last week. And short-term fair value models – based largely on rate spreads – suggest EUR/USD could correct further to 1.05 if there was sufficient reason, ING’s FX analyst Chirs Turner notes.
EUR/USD can get back to 1.0460 and potentially 1.05
“Short EUR/USD has probably been one of the highest conviction FX trades in late 2024. Notably, EUR/USD could not make it back to the 1.0335 starting point when the tariff report first came out.”
“The FX options market suggests investors may be the most worried about an upside correction in EUR/USD since September. We read this from the one-week risk reversal – the price for a EUR/USD call over an equivalent EUR/USD put – which at 0.15% vols is now the highest since late September.”
“Data could drag EUR/USD back to 1.0460 and potentially 1.05 – all within an underlying EUR/USD bear trend.”
The Eurozone Harmonized Index of Consumer Prices (HICP) rose 2.4% year-over-year (YoY) in December after reporting a 2.2% increase in November, the official data released by Eurostat showed Monday. The reading aligned with the estimated 2.4% print for the reported period.
The core HICP increased by 2.7% YoY in December, at the same pace seen in November and matched the 2.7% market forecast.
On a monthly basis, the bloc’s HICP rebounded 0.4% in December compared to November’s 0.3% drop. The core HICP inflation came in at 0.5% month-over-month (MoM) in the same period versus November’s -0.6%.
The European Central Bank’s (ECB) inflation target is 2.0%. The old continent’s HICP inflation data significantly impacts the market’s pricing of the ECB's future interest rate cuts.
Key details from the Eurozone inflation report (via Eurostat)
Looking at the main components of euro area inflation, services is expected to have the highest annual rate in December (4.0%, compared with 3.9% in November), followed by food, alcohol & tobacco (2.7%, stable compared with November), non-energy industrial goods (0.5%, compared with 0.6% in November) and energy (0.1%, compared with -2.0% in November).
EUR/USD reaction to the Eurozone inflation report
Mixed Eurozone inflation data weigh slightly on the Euro, with EUR/USD paring back gains to trade near 1.0420 as of writing. The pair is still up 0.30% on the day.
Euro PRICE Today
The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.31% | -0.30% | -0.02% | -0.20% | -0.63% | -0.77% | 0.02% | |
| EUR | 0.31% | -0.01% | 0.26% | 0.11% | -0.32% | -0.48% | 0.31% | |
| GBP | 0.30% | 0.00% | 0.30% | 0.11% | -0.32% | -0.47% | 0.32% | |
| JPY | 0.02% | -0.26% | -0.30% | -0.19% | -0.62% | -0.78% | 0.00% | |
| CAD | 0.20% | -0.11% | -0.11% | 0.19% | -0.42% | -0.58% | 0.20% | |
| AUD | 0.63% | 0.32% | 0.32% | 0.62% | 0.42% | -0.14% | 0.64% | |
| NZD | 0.77% | 0.48% | 0.47% | 0.78% | 0.58% | 0.14% | 0.78% | |
| CHF | -0.02% | -0.31% | -0.32% | -0.00% | -0.20% | -0.64% | -0.78% |
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).
- The Euro bounces higher against the US Dollar for a third straight day in a row on Tuesday.
- A surprise uptick in German inflation and a bounce in the European Services PMIs are supporting the Euro.
- Meanwhile, markets are on edge over the rumors and pushbacks on President-elect Donald Trump’s tariff schemes.
The Euro is receiving more support on Tuesday and extends its recovery against the US Dollar (USD) for the third day in a row, with expectations that the upcoming inflation numbers for the Eurozone as a whole will remain persistent. The expectations were revised after the preliminary German Harmonized Index of Consumer Prices (HICP) data for December, released on Monday, showed that the monthly headline HIPC inflation jumped by 0.7%, above the 0.5% estimate. On a yearly basis, headline HICP rose by 2.9%, compared to 2.4% in November.
Meanwhile, markets are on edge over the whipsaw reactions and knee-jerk moves over the tariff plans from President-elect Donald Trump's tariff plans. The Washington Post published a piece mentioning that Trump was considering simplifying his tariff schemes by imposing a single universal tariff on critical imports and goods. Hours later, Trump himself came out to refute the rumors and confirm that the schemes and plans would remain in place as earlier announced.
Daily digest market movers: French HICP upbeat confirmed
- The French preliminary HICP for December has already been released earlier on Tuesday. The monthly gauge snapped the previous disinflationary print by jumping 0.2%, below the 0.4% expectation and above the -0.1% from November. The yearly gauge came in at 1.8%, which is 0.1% higher than the 1.7% from November.
- At 10:00 GMT, the preliminary Eurozone HICP for December will be released.
- The monthly headline HICP has no consensus view, while it was at -0.3% in November.
- The yearly headline HICP is expected to tick up to 2.4% from 2.2% in the previous month.
- The monthly core HICP has no forecast and was at -0.6% in November.
- The yearly core HICP is expected to remain unchanged at 2.7%.
- For now, the European Central Bank (ECB) is projected to cut its policy rate by 25 basis points on January 30.
- Italian inflation will also be released at 10:00 GMT. Here, a similar pattern is seen as in Germany, with the preliminary December monthly HICP heading to 0.3% from -0.1%.
- German Bunds ticked up quite a bit last week and stretched up to 2.47% on Monday. This Tuesday, rates are starting to ease, with the Bund currently trading around 2.44%.
- European equities are unhappy with the recent development in European inflation numbers and are dipping lower this Tuesday. The fear that inflation will pick up again could mean that the European Central Bank keeps rates steady for longer or considers starting to hike again, which is a setback for equities.
Technical Analysis: EUR/USD above ground at 1.04 with blurry outlook
EUR/USD is in a perfect technical bounce, though where to go next is becoming blurry. The geopolitical developments from Monday have helped the Euro find support at 1.0294 and rally all the way to nearly 1.0448. The question now will be whether the Euro has enough room left to head above 1.0450. This will not be the case if those European bonds start to fade from their Monday high points and need more upside to pull the Euro further up towards 1.05.
The first big level to break is 1.0448, the low of October 3, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0558 comes into play. Another catalyst will be needed for this kind of move, as it could squeeze the Dollar bulls.
On the downside, ahead of the current two-year low at 1.0224, the 1.0294 level is now acting as the new first line of defence. It was a pivotal point on Monday, offering room for buyers in EUR/USD to get involved and push price action higher. Further down, the round level at 1.02 would mean a fresh two-year low. Breaking below that level would open up the room to head to parity, with 1.0100 as the last man standing before that magical 1.00 level.
EUR/USD: Daily Chart
Inflation FAQs
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%.
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.
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.
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.
The latest monthly Consumer Expectations Survey by the European Central Bank showed on Monday that Eurozone inflation is seen a tad higher for the year ahead in November.
Key takeaways
Inflation expectations over the next year rose in November to 2.6% from 2.5% in October.
Inflation expectations three years ahead rise to 2.4% from 2.1%.
Economic growth expectations became more negative, growth seen at -1.3% over next year vs -1.1%.
Market reaction
Silver prices (XAG/USD) rose on Tuesday, according to FXStreet data. Silver trades at $30.22 per troy ounce, up 1.08% from the $29.89 it cost on Monday.
Silver prices have increased by 4.58% since the beginning of the year.
| Unit measure | Silver Price Today in USD |
|---|---|
| Troy Ounce | 30.22 |
| 1 Gram | 0.97 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 87.43 on Tuesday, down from 88.14 on Monday.
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.
(An automation tool was used in creating this post.)
- Silver price gains momentum as the weakening US Dollar makes the metal more accessible to buyers holding foreign currencies.
- The US Dollar faces challenges following reports of the incoming Trump administration adopting a more targeted approach in applying tariffs.
- Silver demand increases as China commits to adopting "more proactive" macroeconomic policies and lowering interest rates to drive economic growth.
Silver price (XAG/USD) extends its winning streak for the fourth successive day, trading around $30.20 per troy ounce during the European hours on Tuesday. The price of the dollar-denominated grey metal gains momentum as a weaker US Dollar (USD) makes it more affordable for buyers using foreign currencies, thereby boosting Silver demand.
The US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the third straight session following reports that the incoming Trump administration might adopt a more targeted approach in applying tariffs. The DXY falls to near 108.00 at the time of writing.
However, Trump refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. The US Dollar may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back.
US ISM Services Purchasing Managers Index (PMI) is set to be released on Tuesday. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting. Investors will closely monitor the US employment data for December, which is due later on Friday. This report could offer some hints about the Fed’s interest rate outlook in 2025.
Silver demand was further bolstered by a positive economic outlook in China, the world's largest consumer of the metal. Beijing recently committed to adopting "more proactive" macroeconomic policies and lowering interest rates this year to drive economic growth.
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.
- AUD/USD attracts buyers for the fourth successive day amid a modest USD downtick.
- The prospects for slower Fed rate cuts and elevated US bond yields favor the USD bulls.
- US-China trade war fears and the RBA’s dovish shift might cap the upside for the Aussie.
The AUD/USD pair regains positive traction following the previous day's pullback from the 0.6300 mark, or over a two-week top and builds on its steady intraday ascent through the first half of the European session on Tuesday. Spot prices currently trade around the 0.6285 region and draw support from a modest US Dollar (USD) downtick.
The USD Index (DXY), which tracks the Greenback against a basket of currencies, languishes near a one-week low touched on Monday amid the uncertainty over US President-elect Donald Trump's tariff plans. In fact, the Washington Post reported that Trump's aides were exploring plans that would apply tariffs only on sectors seen as critical to US national or economic security. Trump, however, denied the report in a post on his Truth Social platform. This, in turn, keeps the USD bulls on the defensive and turns out to be a key factor acting as a tailwind for the AUD/USD pair.
Meanwhile, the Federal Reserve (Fed) adopted a more hawkish stance at the end of the December policy meeting and signaled that it would slow the pace of rate cuts in 2025. The outlook remains supportive of elevated US Treasury bond yields, which, along with persistent geopolitical risks, should act as a tailwind for the safe-haven buck. Furthermore, concerns about a fresh round of US-China trade war and the Reserve Bank of Australia (RBA) dovish shift should cap the Aussie. This, in turn, might hold back traders from placing aggressive bullish bets around the AUD/USD pair.
Investors might also opt to wait on the sidelines ahead of this week's release of the FOMC meeting minutes and the closely-watched US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively. In the meantime, Tuesday's US economic docket – featuring the ISM Services PMI and JOLTS Job Openings data – might provide some impetus to the AUD/USD pair. Nevertheless, the fundamental backdrop warrants caution before positioning for an extension of the recent bounce from the 0.6180 region, or the lowest level since November 2022 touched last week.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.39% | -0.37% | -0.14% | -0.18% | -0.66% | -0.84% | -0.16% | |
| EUR | 0.39% | 0.01% | 0.23% | 0.21% | -0.27% | -0.45% | 0.21% | |
| GBP | 0.37% | -0.01% | 0.24% | 0.20% | -0.28% | -0.47% | 0.20% | |
| JPY | 0.14% | -0.23% | -0.24% | -0.04% | -0.52% | -0.71% | -0.04% | |
| CAD | 0.18% | -0.21% | -0.20% | 0.04% | -0.48% | -0.67% | 0.00% | |
| AUD | 0.66% | 0.27% | 0.28% | 0.52% | 0.48% | -0.18% | 0.48% | |
| NZD | 0.84% | 0.45% | 0.47% | 0.71% | 0.67% | 0.18% | 0.67% | |
| CHF | 0.16% | -0.21% | -0.20% | 0.04% | 0.00% | -0.48% | -0.67% |
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).
Monday saw a pick-up in FX volatility on the back of a Washington Post report – quickly rejected by Trump – that incoming US tariff policy could be more selective than first feared. The US Dollar’s (USD) failure to recover all its intra-day losses on Monday likely indicates two factors: first, the market had been heavily favouring the dollar following a nearly continuous three-month rally; second, a view that there is no smoke without fire and that the contents of that Washington Post report sounded sensible, ING’s FX analyst Chris Turner notes.
Incoming US tariff policy can be more selective
“It is unlikely investors will want to consider actively selling the dollar ahead of Trump's inauguration on 20 January on speculation over softer tariffs – but we could see a little more rebalancing of FX positioning and a little more dollar consolidation in the interim.”
“A second point worth mentioning is that risk assets are slightly better bid on the prospects of less aggressive US tariff policy plus the news yesterday that the Fed's Michael Barr is stepping down in his role as the Fed's financial supervision tsar. He had been battling Wall Street for tighter capital controls, but it seems he did not want a looming fight with the new administration to distract from the Fed's work. The US KBW regional banks index briefly rallied 2% on the news.”
“Turning to today, the focus will be on US JOLTS job opening data and the ISM Services index for December. Both could actually be supportive of the dollar, but let's see whether investors will want to use dollar rallies to pare back long dollar positions – such that any DXY rallies stall in the 108.40/60 area.”
Outlook is mixed; the Australian Dollar (AUD) could trade sideways between 0.6210 and 0.6280. In the longer run, for the time being, AUD is expected to trade between 0.6180 and 0.6310, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
AUD/USD is set to trade sideways
24-HOUR VIEW: “In a sudden and unexpected move, AUD jumped to a high of 0.6302 yesterday. However, the advance was short-lived, as it pulled back sharply, closing at 0.6246 (+0.51%). The sharp but brief swings have resulted in a mixed outlook. Today, AUD could trade sideways, probably between 0.6210 and 0.6280.”
1-3 WEEKS VIEW: “After the sharp rebound yesterday, AUD may have found an interim bottom at 0.6179 last week. However, as there has been no significant increase in upward momentum, AUD is likely to trade in a range for the time being, expected to be between 0.6180 and 0.6310. Looking ahead, if AUD breaks clearly above 0.6310, it could trigger a more sustained and sizeable recovery.”
Over the past few days, we have discussed several times within the team whether the euro has anything to offer against the Trump-induced USD strength at the moment, given the significant growth differential, Commerzbank’s FX analyst Michael Pfister notes.
ECB is likely to continue to lower rates gradually
“Yesterday's first estimate of German inflation for December, which surprised to the upside, was a welcome distraction. This makes it much more likely that we will also see higher figures for the euro area as a whole today (following the upward surprise in Spanish figures we have already seen).”
“In the short term, this is certainly a good sign for the euro. After all, it makes a major rate cut of 50 basis points at the meeting at the end of the month very unlikely. Rather, the ECB is likely to continue to lower rates gradually.”
“In the medium term, however, higher euro area inflation is not necessarily a positive for the euro: if, as our economists expect, growth remains rather sluggish while inflation picks up, discussions of stagflation are likely to intensify. We are not quite there yet, but it is something to keep in mind.”
Pound Sterling (GBP) is expected to consolidate in a range between 1.2450 and 1.2550. In the longer run, GBP is expected to trade in a range, likely between 1.2420 and 1.2620, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
GBP is expected to trade in a range
24-HOUR VIEW: “GBP soared by 0.79% yesterday, closing at 1.2522. The rapid rise appears to be excessive. Today, instead of continuing to rise, GBP is more likely to consolidate, expected to be between 1.2450 and 1.2550.”
1-3 WEEKS VIEW: “GBP dropped to a low of 1.2353 last week. Yesterday, it rebounded strongly, reaching a high of 1.2550. Although downward momentum has faded with the rebound, it is premature to expect a sustained advance. For the time being, we expect GBP to trade in a range, likely between 1.2420 and 1.2620.”
Yesterday afternoon, European time, Canadian Prime Minister Justin Trudeau officially announced that he was stepping down as leader of the Liberal Party and that he would resign as Prime Minister once a successor had been found. The move did not come as a complete surprise. Trudeau had become too unpopular, and after Finance Minister Chrystia Freeland tendered her resignation in December public pressure mounted. Trudeau was also highly controversial within the Liberal Party, given his poor re-election prospects, Commerzbank’s FX analyst Michael Pfister notes.
CAD to appreciate in the coming months
“The CAD made some gains against the USD after reports surfaced on Monday morning (GMT) that Canadian Prime Minister Justin Trudeau was close to resigning. Apparently, the Conservative Party, which is currently leading in the polls, is seen as more capable of solving Canada's problems, such as low per capita growth and increased immigration. However, we remain somewhat sceptical as to whether the CAD's strength will be sustained.”
“First of all, the situation in Canada is now characterised by increased uncertainty, even if the polls seem to indicate a foregone conclusion. After all, a lot can happen in an election campaign, especially at a time when Donald Trump is exerting considerable pressure on his northern neighbour. While we also expect the CAD to appreciate in the coming months, we would be cautious about reading too much into yesterday's events.”
“Canada and Germany are now in, or about to enter, election campaigns, France is in an uncertain situation with new elections possible in the summer, and the situation in Japan also does not currently look conducive to a stable government. So more than half of the G7 countries are not really in a position to undertake forward-looking reforms at the moment – which is not a good sign.”
- USD/CAD depreciates as the CAD gains support following the news of PM Trudeau’s resignation.
- Canada is considering advancing the release of retaliatory tariffs on US goods.
- The US Dollar corrects downwards ahead of ISM Services PMI due later in the day.
The USD/CAD pair remains subdued as the Canadian Dollar (CAD) receives support from news that Canadian Prime Minister Justin Trudeau would announce his plans to step down but said it expected to happen before an emergency meeting of Liberal legislators on Wednesday. The USD/CAD pair trades around 1.4310 during the European hours on Tuesday.
The Canadian media outlet “The Globe and Mail” published a gated report on Tuesday, stating that Canada’s federal government is considering an early release of a proposed list of American goods that would face retaliatory Canadian tariffs. This move would be in response to potential tariffs imposed by incoming US President Donald Trump on Canadian products.
However, lower crude Oil prices might have put downward pressure on the commodity-linked CAD, given that Canada is the largest Oil exporter to the United States (US). West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $72.90 per barrel at the time of writing.
However, Oil prices may find support as the Organization of the Petroleum Exporting Countries’ (OPEC) Oil production declined in December, primarily due to the United Arab Emirates' (UAE) efforts to implement supply cuts to stabilize global Oil markets, according to Bloomberg (gated).
Traders are expected to closely monitor the release of Canada’s Ivey Purchasing Managers Index (PMI) data on Tuesday, along with the US ISM Services PMI. Attention will then shift to the Minutes from the Federal Reserve’s (Fed) December policy meeting, scheduled for release on Wednesday.
On Monday, the seasonally adjusted S&P Global US Services PMI Business Activity Index climbed for the second consecutive month in December, reaching a 33-month high of 56.8, up from 56.1 in November. Meanwhile, the S&P Global US Composite PMI Output Index rose to 55.4 in December, compared to 54.9 in November. This latest reading indicated a significant monthly increase in business activity, marking the fastest expansion since April 2022.
The US Dollar (USD) may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back. Trump also refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports.
Canadian Dollar PRICE Today
The table below shows the percentage change of Canadian Dollar (CAD) against listed major currencies today. Canadian Dollar was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.19% | -0.13% | -0.05% | -0.11% | -0.48% | -0.67% | -0.00% | |
| EUR | 0.19% | 0.05% | 0.11% | 0.07% | -0.30% | -0.50% | 0.16% | |
| GBP | 0.13% | -0.05% | 0.10% | 0.02% | -0.35% | -0.55% | 0.11% | |
| JPY | 0.05% | -0.11% | -0.10% | -0.06% | -0.43% | -0.64% | 0.03% | |
| CAD | 0.11% | -0.07% | -0.02% | 0.06% | -0.37% | -0.57% | 0.10% | |
| AUD | 0.48% | 0.30% | 0.35% | 0.43% | 0.37% | -0.20% | 0.46% | |
| NZD | 0.67% | 0.50% | 0.55% | 0.64% | 0.57% | 0.20% | 0.66% | |
| CHF | 0.00% | -0.16% | -0.11% | -0.03% | -0.10% | -0.46% | -0.66% |
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 Canadian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent CAD (base)/USD (quote).
Scope for Euro (EUR) to retest the 1.0435 level; a clear break above this level seems unlikely. In the longer run, bias for EUR is tilted to the upside; any advance is likely part of a higher trading range of 1.0300/1.0465, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.
EUR is unlikely to break clearly above 1.0465
24-HOUR VIEW: “In a sudden move yesterday, EUR surged to 1.0436, pulling back quickly to close at 1.0390 (+0.80%). Although the sharp and swift rise appears to be running ahead of itself, there is scope for EUR to retest the 1.0435 level before a more sustained pullback can be expected. A clear break above 1.0435 seems unlikely. On the downside, a breach of 1.0330 (minor support is at 1.0355) would suggest that EUR is more likely to trade in a range instead of retesting the 1.0435 level.”
1-3 WEEKS VIEW: “EUR rebounded sharply yesterday, closing higher by 0.80% at 1.0390. The price action has resulted in an increase in momentum, but it is not enough to indicate the start of a sustained advance. That said, the near-term bias is tilted to the upside, even though any advance is likely part of a higher trading range of 1.0300/1.0465. In other words, EUR is unlikely to break clearly above 1.0465.”
- GBP/JPY retreats after touching a one-week high earlier this Tuesday.
- Intervention warning prompts JPY short-covering and exerts pressure.
- BoJ rate hike uncertainty should cap the JPY and support spot prices.
The GBP/JPY cross attracts some intraday sellers following an early move up to the 198.25 area, or a one-week top and retreats to the lower end of its daily range during the first half of the European session. Spot prices slide back below the mid-197.00s amid the emergence of some buying around the Japanese Yen (JPY), though the fundamental backdrop warrants caution for bearish traders.
Japan’s Finance Minister Katsunobu Kato was out with some verbal intervention and reiterated that the government will take appropriate action against excessive FX moves, including those driven by speculators. Furthermore, the Bank of Japan (BoJ) Governor Kazuo Ueda left the door open for a rate hike at the January or March policy meeting. This, along with the cautious market mood, offers some support to the safe-haven JPY and exerts some downward pressure on the GBP/JPY cross.
Investors, however, remain sceptical about the likely timing of when the Bank of Japan (BoJ) will hike rates again, which, in turn, might hold back the JPY bulls from placing aggressive bets. The British Pound (GBP), on the other hand, draws support from a modest US Dollar (USD) weakness and might contribute to limiting any meaningful downside for the GBP/JPY cross. Hence, it will be prudent to wait for strong follow-through selling before confirming that spot prices have formed a near-term top.
Moving ahead, traders now look forward to the release of the UK Construction PMI, which might influence the GBP and provide some impetus to spot prices. The immediate market reaction, however, is likely to be short-lived, suggesting that the GBP/JPY cross remains at the mercy of the JPY price dynamics.
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.
- NZD/USD rises as the US Dollar corrects downwards ahead of ISM Services PMI due later in the day.
- President-elect Donald Trump stated that his tariff policy will not be scaled back.
- The New Zealand Dollar received support from the improved China’s Services PMI in December.
NZD/USD extends its winning streak, trading around 0.5670 during the early European hours on Tuesday. Traders will likely observe the US ISM Services Purchasing Managers Index (PMI) scheduled to be released later in the North American session. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting.
On Monday, the seasonally adjusted S&P Global US Services PMI Business Activity Index climbed for the second consecutive month in December, reaching a 33-month high of 56.8, up from 56.1 in November. Meanwhile, the S&P Global US Composite PMI Output Index rose to 55.4 in December, compared to 54.9 in November. This latest reading indicated a significant monthly increase in business activity, marking the fastest expansion since April 2022.
The overall growth in activity was primarily driven by robust performance in the service sector, even as manufacturing production experienced a further decline. This resilience in services may have helped cushion potential downside pressure on the US Dollar.
Additionally, the upside of the NZD/USD pair could be limited as the US Dollar (USD) may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back. Trump also refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. Traders are expected to closely watch developments related to Trump's tariff strategy.
The New Zealand Dollar (NZD) gained support from the improved Caixin Services PMI for China, its key trading partner. The index rose to 52.2 in December 2024, up from 51.5 in November, exceeding market expectations of 51.7. This marks the fastest growth in the services sector since May.
However, the growing likelihood of aggressive monetary easing by the Reserve Bank of New Zealand (RBNZ) could limit the upside potential of the Kiwi Dollar. The RBNZ is anticipated to reduce the current cash rate of 4.25% by 50 basis points during its February meeting.
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 consolidates after the overnight pullback from a nearly three-month high.
- Concerns about weak demand from China and rising oil supply cap the upside.
- Worries about tighter Russian and Iranian supply support to the commodity.
West Texas Intermediate (WTI) US Crude Oil prices struggle for a firm intraday direction on Tuesday and oscillate in a narrow trading band, below the $73.00 round figure through the early European session. The commodity, for now, seems to have stalled its retracement slide from the vicinity of mid-$74.00s, or a nearly three-month top touched on Monday amid mixed fundamental cues.
Concerns about weak demand from China – the world's top oil importer – and the rising supply from non-OPEC countries turn out to be key factors acting as a headwind for the black liquid. Furthermore, the volume of global crude exports declined in 2024 for the first time since the COVID-19 pandemic. This, along with expectations that slower rate cuts by the Federal Reserve (Fed) in 2025 could dent fuel demand, contribute to capping Crude Oil prices.
That said, worries about tighter Russian and Iranian supply, amid widening Western sanctions checked losses, should continue to offer support to Crude Oil prices and help limit any meaningful downside. This, in turn, makes it prudent to wait for strong follow-through selling before confirming that the recent positive move witnessed over the past month or so has run out of steam and positioning for any further depreciating move in the commodity.
Traders might also opt to wait on the sidelines ahead of this week's release of the FOMC minutes and the closely-watched US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively. This will play a key role in influencing the near-term US Dollar (USD) price dynamics, which, in turn, should provide some meaningful impetus to the USD-denominated commodities and help determine the next leg of a directional move for Crude Oil prices.
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.
- USD/CHF loses traction to near 0.9040 in Tuesday’s early European session.
- Trump's tariff confusion and cautious mood boost the Swiss Franc against the USD.
- The cautious stance of the Fed might cap the downside for the pair.
The USD/CHF pair trades on a softer note around 0.9040 during the early European trading hours on Tuesday. The US Dollar (USD) weakens due to confusion about President-elect Donald Trump’s tariff plans. Investors will monitor how aggressive Trump's policies could be when he takes office. Later on Tuesday, the preliminary reading of the Eurozone Harmonized Index of Consumer Prices (HICP) for December will be released.
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 in a post on Trust Social, saying “That is wrong. Investors sentiment turn cautious ahead of this week's release of the Federal Open Market Committee (FOMC) minutes and the US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively. This, in turn, drags the Greenback lower against the Swiss Franc (CHF).
Additionally, the persistent geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war could boost the CHF, a safe-haven currency, and create a headwind for the pair. The local news agency, Aljazeera, reported that Israel's continuous bombing of Gaza continues, with six persons killed, including a child, killed in its latest attacks on residential buildings, bringing the total number of deaths on Monday to at least 28.
However, the cautious stance of the US Federal Reserve (Fed) officials could help limit the USD’s losses. 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. Several Fed policymakers are scheduled to speak later this week. Any hawkish comments from Fed officials could lift the Greenback against its rivals in the near term.
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.
Here is what you need to know on Tuesday, January 7:
The US Dollar (USD) came under selling pressure at the beginning of the week as risk flows dominated the action. Eurostat will publish December inflation data in the European session on Tuesday. Later in the day, ISM Services PMI report for December and JOLTS Job Openings data for November will be featured in the US economic docket.
On Monday, the Washington Post reported that US President-elect Donald Trump's aides were considering tariffs that would be applied to every country but only cover critical imports. Although Trump disputed this claim by calling the story "just another example of fake news," risk mood improved and made it difficult for the USD to stay resilient against its rivals. After losing more than 0.5% on Monday, the USD Index struggles to stage a rebound in the European morning on Tuesday and stays in negative territory slightly above 108.00. Meanwhile, US stock index futures trade marginally lower on the day.
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 weakest against the British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.86% | -0.93% | 0.38% | -0.90% | -0.76% | -0.82% | -0.63% | |
| EUR | 0.86% | -0.08% | 1.21% | 0.02% | 0.15% | 0.08% | 0.25% | |
| GBP | 0.93% | 0.08% | 1.29% | 0.09% | 0.23% | 0.15% | 0.32% | |
| JPY | -0.38% | -1.21% | -1.29% | -1.29% | -1.12% | -1.18% | -0.81% | |
| CAD | 0.90% | -0.02% | -0.09% | 1.29% | 0.07% | 0.04% | 0.22% | |
| AUD | 0.76% | -0.15% | -0.23% | 1.12% | -0.07% | -0.07% | 0.09% | |
| NZD | 0.82% | -0.08% | -0.15% | 1.18% | -0.04% | 0.07% | 0.16% | |
| CHF | 0.63% | -0.25% | -0.32% | 0.81% | -0.22% | -0.09% | -0.16% |
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).
Canadian Prime Minister Justin Trudeau announced his resignation on Monday. “This country deserves a real choice in the next election and it has become clear to me that if I’m having to fight internal battles, I cannot be the best option in that election,” he said. USD/CAD fell nearly 1% on Monday and touched its lowest level since mid-December below 1.4300 before correcting higher. At the time of press, the pair was trading in a tight channel at around 1.4320.
EUR/USD benefited from the broad-based USD weakness and registered strong gains on Monday. The pair stays in a consolidation phase near 1.0400 in the European morning on Tuesday. On a yearly basis, the Harmonized Index of Consumer Prices (HICP) is forecast to rise 2.4% in December in the Euro area, up from the 2.2% increase recorded in November.
GBP/USD gathered bullish momentum and broke above 1.2500 on Monday. The pair holds its ground to begin the European session and trades slightly below 1.2550.
USD/JPY touched its highest level since July near 158.50 in the Asian session on Monday but retreated back below 158.00 following a verbal intervention. "The Japanese government has been alarmed by foreign exchange developments, including those driven by speculators, and will take appropriate action against excessive moves," Japan's Finance Minister Katsunobu Kato said.
Gold dropped below $2,620 on Monday but managed to erase a large portion of its daily losses. XAU/USD holds steady at around $2,640 in the European morning on Tuesday.
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 weakens to around 1.4310 in Tuesday’s early European session.
- Justin Trudeau announced his resignation as Canada’s Prime Minister, supporting the Loonie.
- Hawkish Fed expectations might help limit the pair’s losses.
The USD/CAD pair edges lower to near 1.4310 during the early European session on Tuesday. The Canadian Dollar (CAD) strengthens against the Greenback after a report that Canadian Prime Minister Justin Trudeau would resign.
On Monday, Reuters reported that Justin Trudeau would announce his plans to step down but said it expected it would happen before an emergency meeting of Liberal legislators on Wednesday. "News that Justin Trudeau will resign is helping to underpin loonie gains," said Nick Rees, senior FX market analyst at Monex Europe Ltd.
The Globe and Mail, a Canadian media outlet, stated on Tuesday that the federal government is weighing the early release of a proposed list of American goods that would be targeted by retaliatory Canadian tariffs if the incoming US President Donald Trump imposes a 25% tax on all products from Canada.
Investors will monitor how aggressive Trump's tariff policies could be when he takes office. Meanwhile, the US Federal Reserve (Fed) is more likely to keep interest rates steady in the next meeting, which might support the Greenback. According to the CME FedWatch tool, markets are pricing in just 7.5% odds of a 25 basis points (bps) rate cut at the January Fed meeting.
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.
FX option expiries for Jan 7 NY cut at 10:00 Eastern Time via DTCC can be found below.
EUR/USD: EUR amounts
- 1.0250 1b
- 1.0300 3.5b
- 1.0375 805m
- 1.0400 832m
- 1.0500 1.1b
GBP/USD: GBP amounts
- 1.2465 406m
USD/JPY: USD amounts
- 156.85 460m
- 158.35 442m
USD/CHF: USD amounts
- 0.8805 480m
AUD/USD: AUD amounts
- 0.6190 780m
EUR/GBP: EUR amounts
- 0.8285 405m
- EUR/USD rises as the US Dollar corrects downwards ahead of ISM Services PMI due later in the North American session.
- The US Dollar could receive some support after President-elect Trump stated that his tariff policy will not be scaled back.
- Traders await the preliminary Eurozone HICP inflation data for December scheduled to be released on Tuesday.
EUR/USD continues its winning streak for the third successive session, trading around 1.0400 during the Asian hours on Tuesday. The upside of the EUR/USD pair is attributed to the subdued US Dollar (USD). Later in the day, the US ISM Services Purchasing Managers Index (PMI) is set to be released. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting.
The US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the third straight session, trading near 108.20 at the time of writing. However, the Greenback may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back.
Trump refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. Traders are expected to closely watch developments related to Trump's tariff strategy.
The Euro gained support from stronger European inflation data released on Monday. Germany's Consumer Price Index (CPI) rose to 2.6% in December, up from 2.2% in November, surpassing expectations of 2.4%, and marking its highest level in nearly a year. This represented the third consecutive monthly increase in German inflation.
In addition, stronger-than-expected PMI data from Spain, Italy, France, Germany, and the Eurozone likely supported the Euro. These reports reinforced expectations that the European Central Bank (ECB) would proceed cautiously with interest rate cuts, leading traders to slightly reduce their bets on more aggressive easing.
Economic Indicator
Harmonized Index of Consumer Prices (MoM)
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 MoM figure compares the prices of goods in the reference month to the previous month. Generally, a high reading is seen as bullish for the Euro (EUR), while a low reading is seen as bearish.
Read more.Next release: Tue Jan 07, 2025 10:00 (Prel)
Frequency: Monthly
Consensus: -
Previous: -0.3%
Source: Eurostat
- EUR/CAD may gain ground as the daily chart analysis suggests a mild bullish bias.
- The 14-day RSI maintains its position near the 50 mark, indicating neutral momentum.
- The pair tests initial resistance near the nine-day EMA at the 1.4895 level, aligned with the psychological level of 1.4900.
EUR/CAD continues to decline for the second consecutive session, trading near 1.4880 during Tuesday's Asian session. Technical analysis on the daily chart suggests a mildly bullish bias, as the pair remains within an ascending channel pattern.
However, the 14-day Relative Strength Index (RSI), a key indicator of overbought or oversold conditions, is maintaining its position slightly below the 50 mark, indicating neutral momentum. A move above this level would confirm the ongoing bullish trend.
If the RSI surpasses 50, traders may look for signs of a strengthening upward movement, potentially driving EUR/CAD towards the 1.4950-1.5050 range, where selling pressure could once again test the strength of the rally.
On the upside, EUR/CAD faces initial resistance near the nine-day Exponential Moving Average (EMA) at the 1.4895 level, followed by the 14-day EMA at 1.4903. A decisive break above this critical resistance zone would strengthen the bullish bias, potentially propelling the currency pair toward December's high at the 1.5060 level.
The primary support lies around the ascending channel's lower boundary at the 1.4800 level. This support could act as a buffer, slowing any further decline. However, if this level is decisively broken, it would reinforce the bearish bias, opening the door for the EUR/CAD cross to approach the psychological 1.4700 level.
EUR/CAD: Daily Chart
- EUR/JPY gains momentum to around 164.25 in Tuesday’s early European session, up 0.32% on the day.
- The Japanese Yen tumbles amid BoJ rate hike uncertainty.
- Investors brace for the preliminary reading of the Eurozone HICP inflation data, which is due late on Tuesday.
The EUR/JPY cross extends the rally to near 164.25 during the early European session on Tuesday. The Japanese Yen (JPY) weakens amid the uncertainty about the timing of the Bank of Japan's (BoJ) next interest rate hike. The preliminary reading of the Eurozone Harmonized Index of Consumer Prices (HICP) for December will be the highlight later on Tuesday.
BoJ Governor Kazuo Ueda said that the "timing of adjusting monetary support depends on economic, price and financial developments. Ueda’s comments didn’t offer any hints about the timing of a rate hike. This, in turn, could undermine the JPY and create a headwind for EUR/JPY.
Nonetheless, the fresh verbal intervention from the Japanese authorities might boost the JPY and cap the downside for EUR/JPY. On Tuesday, Japan Finance Minister Katsunobu Kato said, "The Japanese government has been alarmed by foreign exchange developments, including those driven by speculators, and will take appropriate action against excessive moves.”
On the Euro front, the stronger-than-expected PMI data from Spain, Italy, France, Germany, and the Eurozone support the shared currency. Investors will take more cues from the Eurozone inflation data, which might influence market expectations for the likely European Central Bank (ECB) interest rate reductions in the next meeting.
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.
Gold prices rose in India on Tuesday, according to data compiled by FXStreet.
The price for Gold stood at 7,268.09 Indian Rupees (INR) per gram, up compared with the INR 7,258.15 it cost on Monday.
The price for Gold increased to INR 84,773.62 per tola from INR 84,657.62 per tola a day earlier.
| Unit measure | Gold Price in INR |
|---|---|
| 1 Gram | 7,268.09 |
| 10 Grams | 72,680.94 |
| Tola | 84,773.62 |
| Troy Ounce | 226,063.10 |
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.
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.
(An automation tool was used in creating this post.)
- Silver catches fresh bids and remains close to a multi-week top touched on Monday.
- A move beyond the 200-day SMA seems to have shifted the bias in favor of bulls.
- A convincing break below the $28.80-$28.75 area will negate the positive outlook.
Silver (XAG/USD) attracts some dip-buying following the overnight modest pullback from a near three-week high and retakes the $30.00 psychological mark during the Asian session on Tuesday. Moreover, the technical setup now seems tilted in favor of bullish traders and supports prospects for a further appreciating move.
Against the backdrop of the recent recovery from the $28.80-$28.75 area, or a multi-month low touched in December, acceptance above the 200-day Simple Moving Average (SMA) validates the positive outlook for the XAG/USD. Moreover, oscillators on the daily chart have just started gaining positive traction and suggest that the path of least resistance for the commodity is to the upside.
Some follow-through buying beyond Monday's swing high, around the $30.35 region, will reaffirm the bullish bias and lift the XAG/USD beyond the $30.50 hurdle, towards the $31.00 mark. The next relevant barrier is pegged near the $31.15-$31.20 supply zone, which if cleared will suggest that the downtrend from the $35.00 neighborhood, or a multi-year top touched in October has run its course.
On the flip side, dips towards the $29.50-$29.40 area might now be seen as a buying opportunity. This, in turn, should help limit the downside near the $29.10-$29.00 zone. The latter is followed by the multi-month low, around the $28.80-$28.75 region, which if broken will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
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.
- GBP/USD strengthens as the US Dollar Index continues to face pressure for the third consecutive session.
- The US Dollar could receive some support after President-elect Trump stated that his tariff policy will not be scaled back.
- BRC Like-For-Like Retail Sales in the UK increased by 3.1% in December, swinging from the previous 3.4% decline.
GBP/USD continues to rise for the third consecutive day, trading near 1.2530 during Tuesday's Asian session. The pair's upward momentum is driven by a subdued US Dollar (USD). Later in the day, the US ISM Services Purchasing Managers Index (PMI) is set to be released. On Wednesday, markets will focus on the Minutes from the Federal Reserve's (Fed) December policy meeting.
The US Dollar Index (DXY), which tracks the USD's performance against six major currencies, remains under pressure for the third straight session, trading near 108.30 at the time of writing. However, the Greenback may find some support following President-elect Donald Trump's comments that his tariff policy will not be scaled back.
Trump refuted a Washington Post report suggesting his team was considering limiting the scope of his tariff plan to only cover specific critical imports. Traders are expected to closely watch developments related to Trump's tariff strategy.
The Pound Sterling (GBP) showed little movement following the release of the UK Retail Sales figures on Tuesday. The British Retail Consortium (BRC) Like-For-Like Retail Sales saw a notable 3.1% increase in December 2024, a sharp rebound from the previous month's 3.4% decline. This surge exceeded market expectations, which had forecasted a 0.2% drop, and was largely driven by robust Black Friday spending. It marked the largest monthly increase since March 2024.
Despite the December uptick, the BRC reported that overall retail performance in the fourth quarter of 2024 remained lackluster, with year-on-year sales growth of just 0.4%. For the entire year, total retail sales increased by 0.7%, while like-for-like sales rose by a modest 0.5%.
Helen Dickinson, Chief Executive of the BRC, remarked: "After a challenging year of weak consumer confidence and tough economic conditions, the crucial 'golden quarter' failed to deliver the strong finish that retailers had hoped for in 2024."
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.
- Gold price attracts some haven flows amid worries about Trump’s tariff plans.
- The Fed’s hawkish shift and elevated US bond yields cap gains for the XAU/USD.
- Traders also seem reluctant ahead of FOMC minutes and US NFP releases later this week.
Gold price (XAU/USD) edges higher during the Asian session on Tuesday and looks to build on the overnight bounce from the $2,615-2,614 area, though it lacks bullish conviction. Expectations that US President-elect Donald Trump's proposed tariffs and protectionist policies could reignite inflation seem to benefit the commodity's status as a hedge against rising prices. Apart from this, persistent geopolitical risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East underpin the safe-haven precious metal.
Meanwhile, the prospects for slower interest rate cuts by the Federal Reserve (Fed) in 2025 remain supportive of elevated US Treasury bond yields and act as a headwind for the non-yielding Gold price. Apart from this, the emergence of some US Dollar (USD) dip-buying contributes to capping gains for the yellow metal. Traders also seem reluctant to place aggressive directional bets ahead of this week's release of the FOMC minutes and the crucial US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively.
Gold price draws support from worries about Trump’s import tariffs and geopolitical risks
- US President-elect Donald Trump's proposed tariffs and protectionist policies are expected to stoke further inflation and disrupt global trade, offering support to the safe-haven Gold price.
- The Ukrainian military launched a new offensive in the Kursk region of western Russia on Sunday. Russia’s Defence Ministry said that Ukraine lost up to 340 soldiers in the Kursk region.
- As Israel’s relentless bombardment of Gaza continues, the Israeli military said on Sunday that it has been conducting operational raids in Syria amid accusations of cease-fire violations.
- The Federal Reserve's projections in December implied a shift to a more cautious pace of rate cuts in 2025, with the majority of the policymakers expressing concern that inflation could reignite.
- San Francisco Fed President Mary Daly said on Saturday that despite significant progress in lowering price pressures over the past two years, inflation remains uncomfortably above the 2% target.
- Furthermore, Fed Governor Lisa Cook said on Monday that policymakers could be more cautious with further interest rate cuts, citing labor market resilience and still stickier inflation.
- The yield on the benchmark 10-year US government bond rose to an over eight-month high on Monday, assisting the US Dollar to attract some dip-buying on Tuesday and capping the XAU/USD.
- The market focus this week remains glued to the release of the FOMC meeting minutes and the closely-watched US Nonfarm Payrolls (NFP) report on Wednesday and Friday, respectively.
- In the meantime, Tuesday's US economic docket – featuring the ISM Services PMI and JOLTS Job Openings data – could provide some impetus later during the North American session.
Gold price has been showing some resilience above the 100-day SMA pivotal support
From a technical perspective, the overnight resilience above the 100-day Simple Moving Average (SMA) and the subsequent bounce warrants some caution for bearish traders. Moreover, oscillators on the daily chart have recovered from negative territory, which, in turn, supports prospects for some near-term upside. Any further move up, however, is likely to confront some resistance near the $2,655-2,657 horizontal zone ahead of the $2,665 area, or the multi-week high touched last Friday. The momentum could extend further towards an intermediate resistance near the $2,681-2,683 zone en route to the $2,700 mark. The latter should act as a pivotal point, which if cleared will set the stage for an extension of a two-week-old uptrend.
On the flip side, the 100-day SMA, currently pegged near the $2,626 area, followed by the overnight swing low, around the $2,615-2,614 region, and the $2,600 mark could offer some support to the Gold price. This is followed by the December swing low, around the $2,583 area, which if broken will be seen as a fresh trigger for bearish traders and pave the way for deeper losses.
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.
- WTI continues to decline despite rising energy demand fueled by colder weather and Beijing's economic stimulus efforts.
- Oil prices could gain support as OPEC's oil production fell in December, largely driven by the UAE's supply cuts.
- Biden administration plans to impose further sanctions to target Russian Oil revenues.
West Texas Intermediate (WTI) Oil price extends its losses for the second successive session, trading around $72.90 per barrel during the Asian hours on Tuesday. However, crude Oil prices were bolstered by bullish factors, including higher energy demand driven by colder weather and Beijing's economic stimulus measures.
Crude Oil prices may find support as the Organization of the Petroleum Exporting Countries (OPEC) Oil production declined in December, primarily due to the United Arab Emirates (UAE) efforts to implement supply cuts to stabilize global Oil markets, according to Bloomberg (gated). Output dropped by 120,000 barrels per day (bpd) to 27.05 million bpd, with modest increases in Libya and Nigeria offset by decreases in Iran and Kuwait, as reported by a Bloomberg survey.
This development comes against the backdrop of OPEC+, Organization of the Petroleum Exporting Countries, and its allies, led by Saudi Arabia, limiting production in recent years to support prices amid weak demand and abundant US supplies. In their most recent meeting, the group further delayed plans to restore output.
US President Joe Biden is set to ban new offshore Oil and Gas development along most US coastlines, a decision that President-elect Donald Trump, who has pledged to increase domestic energy production, may find challenging to overturn. The move is largely symbolic, as it will not affect regions where Oil and Gas development is already underway.
Additionally, the Biden administration plans to impose further sanctions on Russia in response to its war on Ukraine. According to three sources cited by Reuters, these measures will target Russia's Oil revenues, including actions against tankers transporting Russian crude.
Beijing's economic stimulus efforts are bolstering Oil demand in the world's largest crude importer. In a bid to revive its struggling economy, Beijing is ramping up fiscal stimulus, announcing on Friday that it will significantly boost funding through ultra-long-dated treasury bonds in 2025 to stimulate business investment and initiatives aimed at boosting consumer spending.
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.
- The Indian Rupee trades in negative territory in Tuesday’s Asian session.
- A weak tone in the domestic markets and persistent outflows weigh on the INR.
- Traders await the US December ISM Services PMI, which is due later on Tuesday.
The Indian Rupee (INR) remains weak on Tuesday after bouncing off a record low in the previous session. The local currency remains fragile amid broad-based US Dollar (USD) bids. Furthermore, a steep fall in domestic equity markets and an unabated outflow of foreign capital contribute to the INR’s downside.
On the other hand, the Reserve Bank of India (RBI) intervention could help contain further loss in the local currency. Investors will closely watch the development surrounding the incoming US administration under Donald Trump’s tariff plan. Analysts believe that if US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at critical sectors, then the outlook for global growth should improve and the USD should weaken.
The US ISM Services Purchasing Managers Index (PMI) is due later on Tuesday. On Wednesday, the minutes of the Federal Reserve's (Fed) December policy meeting will be published. All eyes will be on the US Nonfarm Payrolls (NFP) report on Friday.
Indian Rupee loses ground amid domestic and global challenges
- The HSBC final India Services PMI eased to 59.3 in December from 60.8 in a preliminary estimate. This reading came in below the consensus of 60.5.
- "Forward-looking indicators such as new business and future activity suggested that the strong performance will likely continue in the near future," said Ines Lam, economist at HSBC.
- Trump denied the Washington Post story that his aides are considering narrowing his tariff plan so that it would only apply to specific critical imports.
- 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.
- The US ISM Services PMI is expected to improve to 53.0 in December from 52.1 in November.
USD/INR’s bullish bias prevails, overbought RSI conditions could limit its advance
The Indian Rupee softens on the day. The USD/INR pair remains on a bullish trajectory as the price has broken above the ascending trend channel over the past week and holds above the key 100-day Exponential Moving Average (EMA) on the daily chart.
Nonetheless, the 14-day Relative Strength Index (RSI) moves beyond the 70.00 mark, warranting some caution for bulls. The overbought condition suggests that further consolidation cannot be ruled out.
The crucial upside barrier emerges at an all-time high of 85.84. Sustained trading above this level could pave the way to the 86.00 psychological mark.
On the downside, the low of January 6 at 85.60 acts as an initial support level for USD/INR. Further south, the next contention level is located at 85.00, followed by 84.45, the 100-day EMA.
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 | 29.921 | 0.91 |
| Gold | 2635.43 | -0.17 |
| Palladium | 921.53 | -0.31 |
- The Japanese Yen attracts follow-through selling amid wavering BoJ rate hike expectations.
- The widening US-Japan yield differential and a positive risk tone also undermine the JPY.
- Intervention fears, along with geopolitical risks, could offer support to the safe-haven JPY.
The Japanese Yen (JPY) continues with its relative underperformance on the back of doubts over the likely timing when the Bank of Japan (BoJ) will hike interest rates again. Furthermore, the recent widening of the US-Japan yield differential, bolstered by the Federal Reserve's (Fed) hawkish signal that it would slow the pace of rate cuts in 2025, contributes to driving flows away from the lower-yielding JPY. Adding to this, a generally positive risk tone is seen as another factor undermining demand for the safe-haven JPY.
This, along with the emergence of some US Dollar (USD) buying, lifts the USD/JPY pair to a near six-month peak, beyond the 158.00 mark during the Asian session on Tuesday. Meanwhile, BoJ Governor Kazuo Ueda left the door open for a rate hike at the January or March policy meeting. This, along with speculations that Japanese authorities might intervene in the market to prop up the domestic currency, geopolitical risks and concerns about US President-elect Donald Trump's tariff plans, could support the safe-haven JPY.
Japanese Yen bears retain control amid BoJ rate-hike uncertainty
- The Bank of Japan last month opened up the possibility of waiting longer before the next rate hike, citing uncertainty over US President-elect Donald Trump's economic policies, which continues to undermine the Japanese Yen.
- Trump denied a Washington Post story that his administration will pursue a less aggressive tariff regime and will only target certain sectors in imposing trade tariffs, instead of the broad tariffs promised during campaigning.
- BoJ Governor Kazuo Ueda said on Monday the central bank will raise interest rates further if the economy continues to improve, though he stressed the need to consider various risks when deciding how soon to pull the trigger.
- Furthermore, the broadening inflationary pressures in Japan keep the door open for a potential BoJ rate hike in January or March, pushing the yield on benchmark 10-year Japanese government bonds to its highest level since July 2011.
- Meanwhile, the 10-year US Treasury yield shot to a multi-month peak in the wake of the Federal Reserve's hawkish shift, projecting only two quarter-point rate cuts in 2025 amid still elevated inflation in the world's largest economy.
- The resultant widening of the US-Japan interest rate differential and the prevalent risk-on mood do little to provide any respite to the safe-haven JPY or hinder the USD/JPY pair's positive move back above the 158.00 round figure.
- Japan’s Finance Minister Katsunobu Kato was out with some verbal intervention this Tuesday and said that the government will take appropriate action against excessive FX moves, including those driven by speculators.
- Traders now look to Tuesday's US economic docket – featuring the ISM Services PMI and JOLTS Job Openings – for some impetus ahead of the FOMC minutes and the US Nonfarm Payrolls on Wednesday and Friday, respectively.
USD/JPY seems poised to reclaim the 159.00 mark and appreciate further
From a technical perspective, a sustained move beyond the 158.00 mark could be seen as a fresh trigger for bullish traders and support prospects for additional gains. The constructive outlook is reinforced by the fact that oscillators on the daily chart are holding comfortably in positive territory and are still away from being in the overbought zone. Hence, a subsequent strength towards the 159.00 round figure, en route to the 159.45 intermediate hurdle and the 160.00 psychological mark, looks like a distinct possibility.
On the flip side, the 158.00 round figure now seems to protect the immediate downside ahead of the 157.55-157.50 region. Any further pullback might now be seen as a buying opportunity and remain limited near the 157.00 mark. Some follow-through selling, however, could drag the USD/JPY pair to the 156.25 intermediate support en route to the 156.00 mark. The latter should act as a pivotal point, which if broken decisively, might negate the positive bias and pave the way for a deeper corrective decline.
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 Canadian media outlet, the Globe and Mail, carried a gated story on Tuesday, citing that Canada's federal government is mulling early release of a proposed list of American goods that retaliatory Canadian tariffs would target if the incoming US President Donald Trump imposes Canada with tariffs.
This comes amidst looming Canadian political uncertainty, mainly after Reuters reported that Prime Minister Justin 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
At the time of writing, USD/CAD is holding lower ground below 1.4350, digesting the latest political and trade-related developments.
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.
- The Australian Dollar remains strong following the Building Permits data release on Tuesday.
- Australia’s seasonally adjusted estimate for total dwellings approved decreased by 3.6% month-on-month to 14,998 units in November 2024.
- The US Dollar Index edges closer to 108.50 after two days of losses.
The Australian Dollar (AUD) gains ground for the fourth consecutive session against the US Dollar (USD) on Tuesday. The AUD/USD remains stronger despite weaker-than-expected Building Permits for November.
The permits for new construction projects in Australia dropped by 3.6% month-on-month to 14,998 units in November 2024, falling short of market expectations for a 1.0% decline. This downturn followed an upwardly revised 5.2% increase in October, marking the first decrease in three months.
Australia’s Monthly Consumer Price Index (CPI) for November, scheduled for Wednesday, will be in the spotlight. If the reading comes in below market expectations, this could trigger the chance of a rate cut by the Reserve Bank of Australia (RBA) at its February meeting, weighing on the AUD.
Australian Dollar rises despite a hawkish shift in Fed’s policy outlook
- The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, edges higher to near 108.50 at the time of writing.
- The US ISM Manufacturing PMI improved to 49.3 in December, from 48.4 in November. This reading came in better than the market expectation of 48.4.
- Richmond Fed President Thomas Barkin highlighted on Friday that the benchmark policy rate should remain restrictive until there is greater confidence that inflation is on track to return to the 2% target.
- Fed Governor Adriana Kugler and San Francisco Fed President Mary Daly underscored the challenging balancing act facing US central bankers as they aim to slow the pace of monetary easing this year.
- 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.
- The Judo Bank Australia Composite PMI for December 2024 was revised upward to 50.2 from the previous reading of 49.9, indicating a third consecutive month of marginal growth in private sector output. This expansion was driven by the services sector, as manufacturing output continued to contract. Meanwhile, the Services PMI was revised higher to 50.8, up from 50.5 in November, marking the eleventh consecutive month of growth in the services sector.
- The Caixin China Services Purchasing Managers’ Index (PMI) rose to 52.2 in December 2024, up from 51.5 in November, exceeding market expectations of 51.7. This marks the fastest growth in the services sector since May. Meanwhile, the Caixin Manufacturing PMI, released on Thursday, unexpectedly fell to 50.5 in December, down from 51.5 in November, missing market forecasts of 51.7.
- According to Reuters, the Shanghai Stock Exchange has committed to deepening the opening of capital markets during a meeting with foreign institutions. Solid fundamentals underpin China’s economy and demonstrate resilience amid a complex global environment.
- The Financial Times reported on Friday that the People's Bank of China (PBoC) anticipates an interest rate cut at an appropriate time this year. Given their close trade relationship, fluctuations in China’s economy often have a notable impact on Australian markets.
Australian Dollar rises to near descending channel’s upper boundary
The AUD/USD pair trades near 0.6250 on Tuesday, maintaining a bearish outlook as it is confined within a descending channel on the daily chart. However, the 14-day Relative Strength Index (RSI) rises toward the 50 level, indicating a potential weakening of bearish momentum.
On the upside, the AUD/USD may test the upper boundary of the descending channel, around the psychological mark of 0.6280.
Regarding its support, the AUD/USD pair aligns with the 14-day Exponential Moving Average (EMA) at 0.6245, followed by the nine-day EMA at 0.6229. A further support region appears around the lower boundary of the descending channel, around 0.6000 level.
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 Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.05% | -0.01% | 0.41% | -0.01% | -0.14% | -0.15% | 0.08% | |
| EUR | -0.05% | -0.06% | 0.35% | -0.05% | -0.19% | -0.20% | 0.01% | |
| GBP | 0.01% | 0.06% | 0.44% | 0.00% | -0.13% | -0.13% | 0.07% | |
| JPY | -0.41% | -0.35% | -0.44% | -0.42% | -0.55% | -0.57% | -0.35% | |
| CAD | 0.00% | 0.05% | -0.01% | 0.42% | -0.13% | -0.14% | 0.06% | |
| AUD | 0.14% | 0.19% | 0.13% | 0.55% | 0.13% | -0.01% | 0.20% | |
| NZD | 0.15% | 0.20% | 0.13% | 0.57% | 0.14% | 0.00% | 0.21% | |
| CHF | -0.08% | -0.01% | -0.07% | 0.35% | -0.06% | -0.20% | -0.21% |
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.
Japan’s Finance Minister Katsunobu Kato on Tuesday that his government “will take appropriate action against excessive moves.”
Additional quotes
Won't comment on forex levels.
Recently seeing one-sided, rapid moves.
Important for currencies to move in a stable manner reflecting fundamentals.
Alarmed over FX moves, including those driven by speculators.
Market reaction
USD/JPY is retreating from multi-month high of 158.42 following these above comments, trading 0.40% higher on the day at 158.22 at press time.
- EUR/USD drifts lower to around 1.0380 in Tuesday’s early Asian session.
- Trump denied he will pare back his aggressive tariffs plan.
- Markets trim the ECB easing bets after the stronger Eurozone PMI and German CPI data for December.
The EUR/USD pair softens to near 1.0380 on Tuesday during the Asian trading hours. The Greenback edges higher after President-elect Donald Trump said that his tariff policy won't be pared back. Traders brace for the preliminary Eurozone Harmonized Index of Consumer Prices (HICP) and the US ISM Services Purchasing Managers Index (PMI) for December, which are due later on Tuesday.
Trump denied the Washington Post story that his aides are considering narrowing his tariff plan so that it would only apply to limited specific critical imports. Traders will closely monitor the development surrounding Trump’s tariff plan. Analysts believe that if US tariffs are broadly lower than Trump promised on the campaign trail and aimed only at "critical" sectors, then the outlook for global growth should improve and the USD should weaken.
Across the pond, the stronger-than-expected PMI data from Spanish, Italian, French, German, and the Eurozone could help limit the EUR's losses. Additionally, the initial German CPI, which came in hotter than forecast in December, provides some support to the EUR as markets trim the European Central Bank (ECB) easing bets. However, political instability in Europe and the threat of a US trade war could drag the shared currency lower against the USD.
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.
The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Tuesday at 7.1879 as compared to the previous day's fix of 7.1876 and 7.2994 Reuters estimates.
- USD/CAD rebounds to near 1.4345 in Tuesday’s early Asian session.
- Trump said the Washington Post story that he would pare back his tariff policy was wrong.
- Trudeau is expected to announce stepping down as party leader before the national caucus meeting Wednesday.
The USD/CAD pair recovers some lost ground to around 1.4345 during the early Asian session on Tuesday. The US Dollar (USD) pares declined after President-elect Donald Trump said that his tariff policy won't be pared back. Investors will closely watch the development surrounding political uncertainties in Canada. Also, the US ISM Services Purchasing Managers Index (PMI) for December will be in the spotlight on Tuesday.
Trump denied the report that he is considering a tariff plan that will narrow the focus to a select set of goods and services. However, the threats around his tariff plans could trigger the volatility in financial markets until Trump’s inauguration. Investors will monitor how aggressive Trump's tariff policies could be when he takes office.
Meanwhile, the hawkish comments from the US Federal Reserve (Fed) officials could provide some support to the Greenback. Fed Governor Lisa Cook noted on Monday that the US central bank can afford to be cautious with any further rate cuts given an economy that is strong and inflation that has been stickier than expected.
On the Loonie front, Canadian Prime Minister Justin Trudeau is more likely to announce his resignation, but he has yet to make a final decision. A source told Reuters and the Globe and Mail that they did not know definitely when Trudeau would announce his plans to step down but said they expect it would happen before an emergency meeting of Liberal legislators on Wednesday.
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 | -71.98 | 19688.29 | -0.36 |
| KOSPI | 46.72 | 2488.64 | 1.91 |
| ASX 200 | 6.9 | 8257.4 | 0.08 |
| DAX | 310.11 | 20216.19 | 1.56 |
| CAC 40 | 163.47 | 7445.69 | 2.24 |
| Dow Jones | -25.57 | 42706.56 | -0.06 |
| S&P 500 | 32.91 | 5975.38 | 0.55 |
| NASDAQ Composite | 243.3 | 19864.98 | 1.24 |
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.62452 | 0.56 |
| EURJPY | 163.781 | 1.16 |
| EURUSD | 1.03892 | 0.84 |
| GBPJPY | 197.353 | 1.11 |
| GBPUSD | 1.2519 | 0.82 |
| NZDUSD | 0.56422 | 0.56 |
| USDCAD | 1.43303 | -0.75 |
| USDCHF | 0.90451 | -0.42 |
| USDJPY | 157.636 | 0.3 |
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