CFD Markets News and Forecasts —

US market flows were hobbled on Thursday, tripping up trade volumes as the calendar rounds the corner into another US Nonfarm Payrolls (NFP) Friday.

Here’s what you need to know heading into Friday, December 10:

The US Dollar Index (DXY) stepped tentatively higher on Thursday, driven by an overall tepid market outlook with American markets shuttered in a day of mourning in observance of the passing of former President Jimmy Carter, who passed away in December at the age of 100. Maretk participants got a reprieve from the week’s hectic US data release schedule, but another round of Friday NFP jobs figures are looming ahead, further constraining already-tight market volumes. US jobs additions are expected to ease slightly in December, while wage growth is forecast to hold on the flat side, and even ease in the monthly figures. Beats in wage and jobs growth could spell further chaos for broad-market rate cut hopes looking forward into 2025, as high wages keep infaltion expectations on the high end and still-strong employment figures mean the Federal Reserve (Fed) will have little reason to move policy rates.

EUR/USD continued to grind through chart paper near the 1.0300 handle on Thursday, sending the Euro into a third straight day of tepid losses as markets coil ahead of US jobs figures. Pan-European Retail Sales figures came in well below expectations in November, further crimping bullish potential in the Euro.

GBP/USD likewise dumped into fresh 14-month lows, driven further into the basement after UK Like-For-Like Retail Sales fell much steeper than expected in December, contracting by a full percent MoM and flubbing the median market forecast for a mild recovery, though the figure was always expected to remain in contraction territory.

AUD/USD continues to churn near the 0.6200 handle. Australian Retail Sales rebounded in November, climbing to 0.8% MoM, but still coming in below the forecast 1.0% increase. Further taking wind out of Aussie sales werte Chinese Consumer Price Index (CPI) inflation figures for December, which perfectly met expectations, as managed data almost always tends to do, but still easing to a scant 0.1% YoY as the Chinese economic engine sputters and wide market expectations of rising Chinese consumption demand fail to materialize.

Federal Reserve (Fed) Board of Governors member Michelle Bowman added her voice to a chorus of Fed speakers this week as policymakers work double-duty to try and smooth over market reactions to a much tighter pace of rate cuts in 2025 than many market participants had previously anticipated.

Key highlights

Federal Reserve (Fed) Bank of Kansas President Jeffrey Schmid hit newswires on Thursday, noting that most of the Fed's mandated targets have been hit as of late, and now it's time to start shrinking the Fed's books.

Key highlights

Federal Reserve (Fed) Bank of Richmond President Tom Barkin noted on Thursday that even though consumer debt ratios are in an overall better place than they were in years past, the Fed is facing some key difficulties looking forward to future downturns unless space on the central bank's books opens up.

Key highlights

• Traders remain alert to potential Chinese stimulus effects, though the US Dollar’s upward trajectory looks steady on Thursday.
• Intensifying concerns over rising consumer prices triggered a mini-crisis in Gilts, enhancing safe-haven demand for the USD.
• Steady labor market data, cautious FOMC Minutes, and anticipation of Friday’s December Nonfarm Payrolls further underpin Greenback strength.

The US Dollar Index (DXY), which measures the value of the USD against a basket of currencies, ticks up on inflation woes, with the Greenback consolidating at current levels. Inflation concerns take over and trigger a mini-crisis in the UK’s Gilts. The DXY currently orbits the 109.00 mark, supported by robust demand amid ongoing monetary policy tightening signals. Now, investors’ eyes are on Friday’s US Nonfarm Payrolls (NFP) for December.

Daily digest market movers: USD sees gains as markets assess FOMC Minutes as NFP looms

• Initial Jobless Claims fell to 201K in the week ending January 4, better than the 218K consensus. Meanwhile, ADP reported 122K private-sector jobs in December, below expectations.
• FOMC Meeting Minutes highlight placeholder assumptions on trade and immigration policies, with officials concerned about inflation possibly taking longer to reach 2%. Most participants backed a 25 bps cut in December, but upside inflation risks pushed policymakers toward caution.
• US yields stabilize as the 10-year hovers near 4.67%, while the 30-year yield sits around 4.90% after a heavy auction week. Despite earlier lukewarm demand for 10-year notes, 30-year bonds saw solid uptake, reflecting investor resilience.
• Loose financial conditions continue with the Chicago Fed’s indicator loosening for ten straight weeks, helping spur growth as the Fed readies for potential fiscal stimulus down the road.
• Markets gear up for December NFP data on Friday, with investors expecting clarity on labor market momentum and possible policy implications. The headline figure is expected to come down from 227,000 to 160,000.

DXY technical outlook: Indicators hold upward traction but begin to flatten

The US Dollar Index defended its 20-day Simple Moving Average (SMA), maintaining a constructive bias despite intermittent pullbacks. Technical indicators still tilt positive, though they appear to be flattening rather than accelerating further.

Key support rests around 108.40, followed by 108.00 if bearish momentum picks up. As long as inflation concerns and steady yields persist, the DXY may retain its elevated stance near 109.00, albeit with narrower trading ranges in the near term.

• Mexican Peso faces pressure after Banxico's dovish shift suggests larger, and possibly quicker, interest rate cuts.
• Mixed inflation data from INEGI maintains uncertainty, adding to Peso's volatility in light trading conditions.
• Interest rate differential concerns increase as Banxico's potential 150 bps cuts contrast with the Fed's more conservative 57 bps easing outlook.

The Mexican Peso loses some ground against the US Dollar on Thursday after the Banco de Mexico (Banxico) hinted that interest rates could be reduced faster in some meetings. This and the disinflation progress weighed on the Peso despite thin trading in observance of the funeral of former US President Jimmy Carter. The USD/MXN trades at 20.50, up 0.55%.

The Instituto Nacional de Estadística Geografía e Informatica (INEGI) revealed that inflation figures were mixed. However, Banxico turned dovish, while a member said it was necessary to increase the size of the rate cuts.

Therefore, the Peso would be at risk of further depreciation due to the reduction of the interest rate differential between Mexico and the US. Although Federal Reserve (Fed) officials stated they are in an easing cycle, but market players are eyeing just 57 basis points (bps) of easing in the US this year against 150 bps by Banxico.

Daily digest market movers: Mexican Peso weakened by dovish tone of Banxico minutes

• Banxico’s meeting minutes revealed the evolution of disinflation, suggesting that the easing cycle might continue to reduce the restiveness of monetary policy. To achieve that, the Governing board stated, “larger downward adjustments could be considered in some meetings.”
• Mexico’s central bank improved the inflation outlook due to the progress in headline and core inflation. Officials acknowledged that services inflation decreased, and they expect CPI to converge to its 3% goal in Q3 2026.
• INEGI revealed that December’s Consumer Price Index (CPI) dipped to 0.38% MoM below estimates of 0.40% and the prior month’s 0.44% jump. Core CPI in the same period increased by 0.51%, up from 0.05% in the prior reading and above the forecasted 0.45%.
• On an annual basis, headline inflation came in at 4.21%, missing projections of 4.28% and was beneath November’s 4.55% reading. Excluding volatile items, inflation modestly increased from 3.58% to 3.65%, exceeding expectations of 3.62%.
• On Wednesday, the Fed revealed its December Meeting Minutes. Officials opted to reduce borrowing costs by 25 basis points, but the minutes showed that "some participants saw merit in maintaining rates at current levels, citing the heightened risk of persistently high inflation."
• Despite this, policymakers expected inflation to continue moving toward the US central bank's 2% goal, although they acknowledged potential changes in trade and immigration policy. Several officials noted that the disinflationary process “stalled.” The Minutes underscored that Fed officials opened the door to slowing the pace of interest rate cuts.

USD/MXN technical outlook: Mexican Peso remains heavy as USD/MXN climbs above 20.35

The USD/MXN uptrend remains intact. During the week, sellers tried to push the exchange rate below the 50-day Simple Moving Average (SMA) of 20.29 but failed as the pair found acceptance near the 20.40 to 20.50 range.

If buyers clear the top of the range, the next resistance would be last year’s high of 20.83, followed by the current yearly high of 20.90. On further strength, the USD/MXN could test 21.00, ahead of the March 8, 2022 high at 21.46.

Conversely, if USD/MXN tumbles below the 50-day SMA, the next support would be the 20.00 figure, ahead of the 100-day SMA at 19.93, followed by the 19.50 figure.

• GBP/JPY dumped another 0.6% and tested the 200 EMA on Thursday.
• Another limited showing on the economic calendar this week for the Guppy.
• Pound Sterling traders, take heart: UK inflation and consumer activity figures due next week.

GBP/JPY took another leg lower on Thursday, falling to it’s lowest prices in almost a month and coming within touch range of the 200-day Exponential Moving Average (EMA). Market sentiment has tilted to the cautious side this week, keeping the Guppy hobbled and drifting into the midrange.

BoE's Breeden: Some evidence of activity weakening, but we expect it to pick up again

Economic figures have been light on both sides of the currency pair this week, leaving policymaker speeches as the key driver for GBP/JPY traders to chew on. UK Chief Secretary to the Treasury Darren Jones spoke on Thursday, noting that UK financial markets continue to function in an “orderly way.” UK financial markets responded by promptly selling the Pound Sterling even further and stepping up their bets of further rate cuts from the Bank of England (BoE) throughout the year.

Yen traders have faced a borderline anemic economic calendar this week, and next week promises more of the same. On the other side of the Guppy, UK traders will have Consumer Price Index (CPI) inflation and Retail Sales figures to context with next week.

GBP/JPY price forecast

The Guppy’s backslide on Thursday saw the pair tap the 200-day EMA once again as the pair grinds into a medium-term consolidation pattern. Bidders will be looking to price in a near-term floor at the 200-day EMA near 193.50, while sellers will want to crack the key technical level and head for the last major swing low point near the 188.00 handle.

GBP/JPY daily chart

• The Canadian Dollar shed another 0.1% on Thursday as buyers evaporate.
• Canada remains open for business while the US is taking the day off.
• Holiday-thinned markets are doing few favors for the Loonie except slow the bleed.

The Canadian Dollar (CAD) chalked in a third straight losing day against the US Dollar on Thursday, falling for a third straight day and highlighting the Loonie’s ability to lose ground against the Greenback even when US markets aren’t open. 

Thursday was yet another slim showing for Canadian data on the economic calendar. CAD traders will be looking ahead to Friday’s release schedule with Canadian labor and wages data on the offering. However, most of the market will be looking forward to Friday too, with another round of US Nonfarm Payrolls (NFP) jobs data on the docket as well.

Daily digest market movers: CAD markets pull back slightly ahead of key labor print

• The Loonie’s ability to lose ground while everyone else is on holiday is nothing short of remarkable.
• US markets are shuttered in observation of a day of mourning in honor of the passing of former President Jimmy Carter, who died at age 100 in December.
• Canadian Net Change in Employment, due on Friday, is unlikely to spark much faith in the CAD as the figure is expected to decline by half, from 50.5K in November to 25K in December.
• The Canadian Unemployment Rate is also expected to tick higher from 6.8% to 6.9%.
• On the US side of things, US NFP net jobs additions are expected to ease back to 160K in December from the previous 227K, and traders will be keeping an eye out for any sharp revisions.
• The US Michigan Consumer Sentiment Index is also expected to slip for the first time in six months, but only slightly.
• A wide range of tepid to softening data could could broader market flows firmly planted on the buy side of the Greenback, further hobbling the Loonie.

Canadian Dollar price forecast

The Canadian Dollar remains caught in a tight spiral against the US Dollar, trading into multi-year lows and keeping the USD/CAD pair bolstered into the 1.4400 region. CAD weakness has been the name of the game, sending the Greenback to its highest bids against the Loonie since the pandemic.

USD/CAD is up over 7% from September’s low end near 1.3400, and although it looks like the CAD isn’t going to lose any more ground for the time being, Loonie bidders remain unable to prop things up and get the pair pushed back down below 1.4300. The immediate barrier to a CAD recovery will be the 50-day Exponential Moving Average (EMA) climbing into 1.4200, putting a technical floor underneath the Greenback.

USD/CAD daily chart

Bank of England (BoE) Monetary Policy Committee (MPC) member and Deputy Governor for Financial Stability Sarah Breeden noted that it might finally be time for the BoE to start loosening policy rates now that UK economic data has effectively begun to crumble.

Key highlights

• GBP/USD dips by 0.49% despite inactive US markets, influenced by record high UK bond yields and fiscal worries.
• US labor market shows resilience with a significant decrease in layoffs, according to the Challenger Jobs Report.
• Fed officials signal cautious stance on rate cuts, with future decisions hinged on upcoming economic data.

The Pound Sterling depreciated against the Greenback on Thursday, even though the financial markets remained closed due to former US President Jimmy Carter's funeral. The GBP(SD traded volatile during the session and exchanged hands at 1.2300, down by 0.49%.

UK Gilt yields rose to its highest level since 1998, Cable tumbles

Cable remains battered after UK bond yields rose to their highest level in 16 years as confidence in Britain’s fiscal outlook deteriorated. The 10-year Gilt yield soared to 4.925%, before ending at around 4.795%.

Usually, a higher yield in the UK would boost the Sterling, nevertheless, once the relationship has broken, reflects investors worries about the country's finances. The yield in the 30-year Gilt soared above 5.3%, its highest since 1998.

In the US, the US Challenger Jobs report for December revealed that employers lay off 38,792 fewer people than in November’s 57,727. Hence, the US labor market continues to fare better than expected.

In the meantime, Federal Reserve speakers crossed the wires. Boston Fed Susan Collins said she favors fewer cuts than before and added she’s less concerned about the labor market. Meanwhile, Philadelphia Fed Patrick Harker said the US central bank is still on the rate-cut path, and future movements would be data-dependent.

The British economic docket will remain absent this week. Across the pond, US Nonfarm Payrolls figures for December are foreseen at 160K, down from 227K. Furthermore, the University of Michigan will reveal the US Consumer Sentiment for the same period.

GBP/USD Price Forecast: Technical outlook

The GBP/USD has carved a successive series of lower highs and lower lows, an indication that the downtrend remains intact. Earlier, the pair dipped to a 13-month low of 1.2237 but bounced off that level to around the 1.2290 area. A daily close below 1.2300 will exacerbate further downside, with the following key support at 1.2200.

Conversely, if bulls step in and push the exchange rate above 1.2351, a recovery toward 1.2350 and 1.2400 is seen.

• EUR/USD slips, settling near 1.0305 and marking three consecutive days of losses.
• RSI remains flat at 40 in negative territory, suggesting momentum has stalled.

The EUR/USD pair continued its downtrend on Thursday, edging 0.18% lower to trade around 1.0305. This decline not only extends the losing streak to a third session but also underscores the pair’s struggle to establish a more robust recovery. Despite a brief bounce earlier in the month, the 20-day Simple Moving Average (SMA) remains out of reach, signaling that bullish momentum has yet to build meaningful traction.

Technical readings reflect a market grappling with waning upward impulses. The Relative Strength Index (RSI) rests at 40, indicating only minimal buying interest, while the Moving Average Convergence Divergence (MACD) histogram is printing fewer green bars, highlighting the gradual erosion of bullish momentum. If the pair fails to rebound above the 20-day SMA in the coming sessions, sellers may maintain the upper hand.

Looking ahead, EUR/USD could find immediate support around the 1.0280 region, with a deeper pullback potentially targeting 1.0250. On the upside, recapturing the 20-day SMA near 1.0350 would be critical for a more convincing recovery, exposing the 1.0400 threshold as the next key resistance.

EUR/USD daily chart

• NZD/USD faces selling pressure as the US Dollar performs strongly.
• The Fed is expected to follow a gradual policy-easing cycle as officials worry about a slowdown in the disinflation trend.
• China’s inflation grew at a slower pace in December, which weighs on the NZ Dollar.

The NZD/USD pair rises slightly after posting a fresh more-than-two-year low of 0.5570 in Thursday’s North American session but is still down quarter-to-a-percent. The outlook of the Kiwi pair remains bearish as the US Dollar (USD) performs strongly across the board on expectations that the Federal Reserve (Fed) will follow a gradual rate-cut approach this year.

Market speculation for a slower Fed policy-easing path is backed by commentary from officials that progress in the disinflation trend could stall by potential trade and immigration policies, as shown by the latest Federal Open Market Committee (FOMC) minutes.

Meanwhile, investors await the US Nonfarm Payrolls (NFP) data for December, which will be published on Friday. The US NFP report is expected to show that the economy added 154K workers in December, fewer than 227K additions in November. The Unemployment Rate is seen steady at 4.2%. Investors will pay close attention to the US labor market data as it will influence market expectations about when the Fed will deliver its first interest rate cut of this year.

The New Zealand Dollar (NZD) faces selling pressure as China’s inflation has slowed in December as expected. China’s annual Consumer Price Index (CPI) rose by 0.1%, slower than the former release of 0.2%. Being a proxy to China’s economy, the Kiwi dollar faces pressure on expectations of poor business outlook in the New Zealand (NZ) region.

NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. However, the outlook for the Kiwi pair remains bearish, as the 20-week Exponential Moving Average (EMA), which trades around 0.5867, is declining.

The 14-week Relative Strength Index (RSI) slides to near 30.00, suggesting a strong bearish momentum.

The Kiwi pair could decline to near the 13-year low of 0.5470 and the round-level support of 0.5400 if it breaks below the psychological support of 0.5500.

On the flip side, a decisive break above the November 29 high of 0.5930 could drive the pair to the November 15 high of 0.5970 and the psychological resistance of 0.6000.

NZD/USD weekly chart

Philadelphia Federal Reserve President Patrick Harker said on Thursday that the US central bank is still expected to continue to cut rates but explained that the path will depend on data, per Reuters.

Key takeaways

"Underpinnings of economy strong amid high uncertainty."

"Fed must be data-dependent amid high uncertainty."

"Labor markets stabilized, are in better balance."

"Job creation pace has normalized."

"It is taking longer to get back to 2% inflation than expected."

"Fed has had success getting inflation down from peak."

"More of overall consumer spending resting on higher incomes."

Market reaction

The US Dollar Index showed no immediate reaction to these comments and was last seen posting small daily gains at 109.07.

Federal Reserve Bank of Boston President Susan Collins said on Thursday that the current outlook calls for a gradual and a patient approach to rate cuts, as reported by Reuters.

Key takeaways

"Supported December Fed rate cut but was a close call."

"Fed not on preset path, policy well-positioned."

"Current outlook in line with Fed December forecasts."

"Economy in a good place overall with notable uncertainties."

"Too soon to say what impact election will have on economy."

"Now expecting more inflation relative to recent past."

"December rate cut provided insurance for labor market."

"Job market unlikely to be driver of inflation right now."

"Housing factors still major driver of inflation."

"Less worried about labor market fragility."

"Economy on gradual, uneven trajectory back to 2% inflation."

The Pound Sterling (GBP) fell to its lowest since 2023 before steadying. UK 1OY yields rose 120bps in a handful of disorderly trading days either side of the infamous 2022 UK budget and required the BoE to step in a stabilize the markets, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

GBP rebounds from intraday low

“GBP also dropped 5%. The sell-off in UK debt over the past month or so has taken UK 10Y yields up 60bps or so, twice the rise in core Eurozone debt yields but less than US 10Y Treasurys amid general weakness in sovereign bond markets.”

“The government may have a problem making its fiscal math work under a higher rate regime (which will likely entail spending cuts or more revenue enhancements ahead) and a falling exchange rate alongside rising yields is not a comfortable sight but this is not a repeat of 2022. Keep your lettuce in the fridge for now.”

“A new cycle low for Cable (lowest since November 2023) keeps the broader outlook for the pound negative. But there are signs from the intraday pattern of trade that a minor low is developing via a bullish ‘hammer’ pattern on the 6-hour chart which may help the GBP steady in the short run. Gains may retest the mid-1.23s but it will take price moving well above 1.24 to stabilize the technical tone at this point I think.”

The Euro (EUR) perked up a little yesterday after finding support in the upper 1.02 region but it is finding the going tough against the USD and marginal gains earlier in the session have reversed, Scotiabank’s Chief FX Strategist Shaun Osborne notes.  

EUR looks technically soft

“Tariff concerns remain a drag on the EUR. Spot is clearly diverging from (more EUR-supportive) spreads to trade one standard deviation below our fair value estimate (1.0546) currently.”

“The EUR’s early week failure to press on above 1.0450 remains a weak feature on the short-term charts. The market has consolidated around 1.03 over the past day or so and does seem to draw firm demand on dips under the figure. But trend momentum is bearish and a retest of 1.0225/30 remains likely. Resistance is 1.0325 and 1.0450.”

The Canadian Dollar (CAD) is little changed on the session. The immediate focus for local markets is on tomorrow’s labour market update but the data perhaps won’t add too much to short-term FX dynamics, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD little changed on the day

“Markets are 80% priced for a rate cut at the end of the month. Wide spreads remain a headwind for the CAD and account for much of its weak valuation versus the USD, despite tariff risks. Spot is trading close to its estimated equilibrium of 1.4334 currently. Clarity on the domestic political front is unlikely for some time.”

“Even if an election were to be called now, rules would prevent a vote happening until mid-February at the earliest. A late spring vote might suit the opposition parties who can hold the government’s feet to the fire in the meantime and make a big deal of the power vacuum when the election finally comes.”

“Spot is back to pivoting aimlessly around the 1.44 point in the short run. The failed downside breakout below 1.4335 is a negative for the CAD but the hefty drop in the USD at the start of the week remains a minor blot on the technical landscape still. The USD will need to overcome 1.4465 resistance to regain the technical initiative and make a run for 1.47. Support is 1.4335 (minor) and 1.4280.”

The US Dollar (USD) is firm but off its early session highs, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

USD firm but off highs, may consolidate ahead of NFP

“With no major data reports due today and US payrolls out tomorrow, it may be a day of consolidation for a still stretched—in my view—looking USD. Positioning and valuation remain extended and while US yields are firmer, spreads have generally steadied or narrowed marginally against the USD. Technicals are leaning marginally bearish for the DXY intraday; a bit more softness might creep in below 108.95 support.”

“Yesterday’s FOMC minutes for the December policy decision reflected the expected degree of caution on the outlook for rates following Trump’s election win. A ‘substantial majority’ of policymakers thought the Fed was well-positioned to ‘take its time’ with rate policy moving forward.

“Markets have effectively priced out any chance of another rate cut before mid-year and remain reticent on pricing in much more than one 25bps cut over the balance of 2025, with a bit less than 40bps of hikes priced in to the swaps curve for the year overall. There are a number of Fed speakers on tap today; among them, Collins, Schmid and Bowman are voters this year. Comments from Collins overnight echo the Fed’s more cautious stance.”

• The US Dollar ticks up on inflation woes, with the Greenback consolidating at current levels. 
• Inflation concerns take over and trigger a mini-crisis in UK Gilts. 
• The US Dollar Index (DXY) resides and orbits around 109.00. 

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades roughly flat above 109.00 on Thursday while bond markets are coming off the boil for a minute. Yields surged across the globe after traders started to worry about r all the plans President-elect Donald Trump wants to implement, e most of them perceived as highly inflationary. This has triggered widening rate differentials between the US and other countries

The mentioned surges in yields triggered a brief mini-crisis in UK Gilts. This week, long-term UK borrowing costs have soared substantially and the British Pound (GBP) has fallen. Markets perceive this as a sign that investors have lost faith in the government’s ability to manage the national debt and control inflation.  

The US economic calendar is light, with a shortened trading day due to the National Day of Mourning for former President Jimmy Carter. The US Challenger Job Cuts number for December will get most of the attention, while four Fed members are set to speak. 

Daily digest market movers: Markets indigestion

• US stock markets will remain closed or will be trading in shortened hours this Thursday in honor of former President Jimmy Carter.
• The Fed Minutes released on Wednesday showed Fed officials confirming a gradual and possibly longer steady rate before considering to cut further, Bloomberg reported. 
• At 14:00 GMT, Federal Reserve Bank of Philadelphia President Patrick Harker speaks in Princeton right before the National Association of Corporate Directors New Jersey Chapter Economic Forecast 2025. 
• Around 17:40 GMT, the Federal Reserve Bank of Richmond Thomas Barkin speaks to the Virginia Bankers Association and the Virginia Chamber of Commerce.
• At 18:30 GMT, the Federal Reserve Bank of Kansas City President Jeffrey Schmid delivers a speech on the economic and monetary policy outlook at the Economic Club of Kansas City.
• Around 18:35GMT,  the Federal Reserve Governor Michelle Bowman will give a speech at the California Bankers Association 2025 Bank Presidents Seminar about 2024 reflections, including monetary policy, economic performance and lessons for banking regulation.
• Equities are off to a rough start this Thursday with losses across the board 
• The CME FedWatch Tool is projecting a 93.1% chance that interest rates will be kept unchanged at current levels in the January meeting. 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.
• US yields are softening a touch with the US 10-year benchmark at 4.673%, off the fresh nine -month high at 4.728% seen on Wednesday.

US Dollar Index Technical Analysis: Stalling and grinding

The US Dollar Index (DXY) seems to be stalling its rally just above 109.30 on Thursday. Although 110.00 is very near, the DXY might need to dip again back to 108.00 or lower in order to take out that 110.00 level in the next rally, as the market seems to have fully priced in all inflation elements for now. 

On the upside, it is key that the green ascending trend line can hold as support, although that is often not the scenario going forward. If the DXY can head and break above the 110.00 psychological barrier, 110.79 becomes the next big level. Once beyond there, it is quite a stretch to 113.91, the double top from November 2023.

On the contrary, the first downside barrier is 107.35, which has now turned into support. The next level that might halt any selling pressure is 106.52, with the 55-day Simple Moving Average (SMA) at 106.63 reinforcing this region of support. 

US Dollar Index: Daily Chart

• Gold price pops above $2,660 and tries to consolidate above the level. 
• Traders are sending yields higher in concerns over inflation overheating again. 
• Gold price looks to enter a similar moment as seen in 2023 with the SVB meltdown. 

Gold’s price (XAU/USD) consolidates above the key level of $2,660 on Thursday after breaking and closing above the 55-day Simple Moving Average (SMA) at $2,654 the previous day. The move comes as yields across the globe start to surge due to inflation concerns. Traders are getting worried that inflation could peak again with all the stimulus plans, fiscal reforms, and tariff levies that President-elect Donald Trump has announced in the past few days and weeks. 

On the economic data front, this Thursday, all eyes are on the Federal Reserve (Fed), which has a slew of policymakers lined up to speak. Overnight, the Fed Minutes of the December meeting did not provide any new facts on rate expectations for 2025. Meanwhile, markets will keep an eye on Bitcoin, which has sold off substantially this week while yields are soaring. This creates the same set of parameters as in 2023, which resulted in the bankruptcy of the Silicon Valley Bank. 

Daily digest market movers: Here comes the Fed to guide markets

• US stock markets will remain closed on Thursday, observing a National Day of Mourning in honor of former President Jimmy Carter. The bond market will operate on a shortened schedule, closing early.
• A $22 billion in 30-year Treasury reopening was awarded at 4.913% vs. 4.920% when-issued yield at the 1 p.m. New York time bidding deadline, the highest result since 2007, Bloomberg reports.
• US yields are softening a touch, with the 10-year benchmark at 4.673%, off the fresh nine-month high of 4.728% seen on Wednesday.
• The reshuffle and pushback in rate cut expectations from June to July in the CME FedWatch tool falls in line with the release of the Fed Minutes on Wednesday, where Fed officials confirmed a gradual and possibly longer steady rate before considering cut further, Bloomberg reported. 
• At 14:00 GMT, Federal Reserve Bank of Philadelphia President Patrick Harker delivers a speech and participates in an audience Q&A at the Economic Forecast 2025 event organized by the National Association of Corporate Directors New Jersey Chapter.
• Around 17:40 GMT, Federal Reserve Bank of Richmond Thomas Barkin speaks to the Virginia Bankers Association and the Virginia Chamber of Commerce.
• At 18:30 GMT, Federal Reserve Bank of Kansas City President Jeff Schmid delivers a speech about the US economic and monetary policy outlook at an event organized by the Economic Club of Kansas City.
• At 18:35GMT, Federal Reserve Governor Michelle Bowman gives a speech reflecting on “2024: Monetary policy, economic performance and lessons for banking regulation.”

Technical Analysis: So far so good

The Gold price surge is making its way towards the resistance in the broader pennant chart formation. From here on out, it might start to get tricky, with $2,680 as a level to look out for. Once that level breaks, Gold prices could quickly sprint away to $2,700 and higher.

On the downside, the 55-day SMA at $2,654 should now be converted into support after it saw a daily close above it on Wednesday. Additionally, the 100-day Simple Moving Average (SMA) at $2,632 is holding again after a false break on Monday. Further down, the ascending trend line of the pennant pattern should provide support at around $2,612, 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 descending trendline in the pennant chart formation at $2,680 is the first big upside level to watch. Once through there, $2,708 is the next pivotal level to look out for.

XAU/USD: Daily Chart

• USD/CAD faces pressure to extend its upside above 1.4400 ahead of US-Canada labor market data for December.
• The US Dollar performs strongly as the Fed has become worried about a potential slowdown in progress in the disinflation trend.
• Soft Canadian employment data will boost hopes of BoC super-size rate cuts bets.

The USD/CAD pair struggles to extend its upside above the immediate resistance of 1.4400 from the last two trading sessions. The Loonie pair trades inside Wednesday’s trading range in Thursday’s European session, with investors focusing on the United States (US) and Canadian employment data for December, which will be published on Friday.

The US Nonfarm Payrolls (NFP) report is expected to show that the economy added 154K fresh workers in December, lower than the former release of 227K. The Unemployment Rate is expected to remain steady at 4.2%.

Ahead of the US NFP data, the US Dollar (USD) performs strongly across the board as the latest Federal Open Market Committee (FOMC) minutes have signaled that officials are worried about growing risks to a slowdown in the disinflation trend due to upcoming potential trade and immigration policy changes, which are expected under President-elect Donald Trump’s administration.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, stays firmly above the key support of 109.00.

Meanwhile, Trump is considering declaring a national economic emergency to formulate a new tariff plan on a legal footing. Investors consider this as a fresh escalation in the path towards a global trade war.

In the Canadian region, investors expect the labor market to have witnessed a fresh addition of 25K workers in December, almost half the number of job-seekers hired in November. The Unemployment Rate is seen accelerating to 6.9% from 6.8%. Signs of a slowdown in the labor demand would boost expectations that the Bank of Canada (BoC) will continue easing the monetary policy at a larger-than-usual pace of 50 basis points (bps).

British Treasury Minister Darren Jones said on Thursday that public spending will be in line with what was set out in the Autumn Budget and added that there is no need for any emergency intervention bu Finance Minister Rachel Reeves, per Reuters.

Key takeaways

"The government does not comment on specific market movements."

"It is normal for the price of gilts to vary."

"UK financial markets continue to function in an orderly way."

"We have set tough new fiscal rules that are non-negotiable."

Market reaction

These comments failed to trigger a recovery in Pound Sterling. At the time of press, GBP/USD was down 0.7% on the day at 1.2280.

• AUD/USD slumps to near 0.6170 as the US Dollar performs strongly on stubborn US inflation outlook.
• Investors await the US NFP data for fresh guidance on interest rates.
• The Australian Dollar weakens on moderate growth in Australian Retail Sales and China’s inflation.

The AUD/USD pair posts a fresh two-year low near 0.6170 in Thursday’s European session. The Aussie pair performs weakly as the US Dollar (USD) strengthens after reports from CNN showed that United States (US) President-elect Donald Trump plans to declare a national economic emergency.  Market participants see the move as a major step by Trump towards constructing a new tariff program through legal justification to make “America great again”.

Investors expect that Trump’s protectionist policies will be pro-growth and inflationary for the US. This scenario is USD-positive as it typically forces Federal Reserve (Fed) policymakers to adopt a hawkish monetary policy stance.

Meanwhile, the Federal Open Market Committee (FOMC) minutes of the December meeting in which the Fed cut interest rates by 25 basis points (bps) to the range of 4.25%-4.50% have already shown that officials are worried about growing risks to a slowdown in the US inflation progress towards the central bank’s target of 2% due to potential trade and immigration policy changes.

Going forward, investors will focus on the US Nonfarm Payrolls (NFP) data for December, which will be published on Friday. The US official employment data will influence market expectations for the Fed’s likely interest rate action in the policy meeting later this month.

The Australian Dollar (AUD) underperforms its major peers on Thursday amid weaker-than-expected growth in the Australian Retail Sales data for November. Aussie Retail Sales grew by 0.8%, slower than estimates of 1% but faster than the former reading of 0.5%. Slower-than-expected Retail Sales growth is expected to boost Reserve Bank of Australia's (RBA) dovish bets. Traders have fully priced in a 25-bps interest rate reduction from the RBA in the policy meeting in April.

Apart from that, an expected slowdown in the China Consumer Price Index (CPI) data for December has also weighed on the AUD. The Aussie currency faces pressure being a proxy to China’s economy. China’s annual CPI rose by 0.1%, as expected, slower than the former reading of 0.2%.

Dollar strength is causing some problems, especially for Japan, China and many emerging markets, ING’s FX analysts note.

Non-USD currencies to remain under pressure this year

“USD/JPY is now close to the 158/160 area, where Japanese authorities sold $35bn in July last year. Chinese authorities continue to resist renminbi depreciation, and in Brazil, the local bank has been drawn into a heavy bout of FX intervention too.”

“Unless US trading partners are prepared to offer some sizable fiscal stimulus to support domestic demand as an offset to a more difficult export environment, expect non-USD currencies to remain under pressure this year.”

The European natural gas market has also strengthened with TTF briefly trading above EUR50/MWh, ING’s commodity analysts note.

EU gas storage can fall at a quicker pace

“Gazprom’s transit deal with Ukraine expired at the end of 2024 and as a result, Europe has lost around 15bcm of annual gas supply. However, this should be widely priced in, given that Ukraine made it clear for over a year that it did not intend to extend the transit deal.”

“Forecasts for colder weather in early January mean that gas storage could fall at a quicker pace, leaving storage to fall further below the five-year average. EU storage is 70% full, down from 85% last year and below the five-year average of 76%.”

Gold uptrend has stalled after facing stiff resistance near $2790 in October, Société Générale’s FX analysts note.

Gold faces a lack of clear direction

“The price action has been narrowing as highlighted by two converging trend lines. Crisscross moves around 50-DMA denote a lack of clear direction.”

“Upper part of range since mid-December near $2670 is first hurdle. In case this is overcome, a rebound towards last month high of $2725 can’t be ruled out. Recent pivot low of $2610 is important support near term.”

• EUR/USD drops below 1.0300 after the FOMC minutes dropped hints of a slowdown in the US inflation progress towards the Fed’s target of 2%.
• The USD Index is on track to revisit the two-year high of 109.53 ahead of the US NFP data due on Friday.
• The ECB is expected to reach the neutral rate by summer.

EUR/USD moves lower below 1.0300 but stays inside Wednesday’s trading range in Thursday’s European session. The major currency pair faces pressure as the US Dollar (USD) moves higher, with the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, aiming to revisit the two-year high of 109.53. The US Dollar rises as Federal Open Market Committee (FOMC) minutes for the December policy meeting signaled that policymakers are cautious about further policy-easing since the disinflation trend progress has stalled. 

“Participants expected inflation to keep moving toward 2%, but effects of potential trade and immigration policy changes suggested that the process could take longer than previously anticipated,” FOMC minutes showed.

On Tuesday, the Atlanta Federal Reserve (Fed) Bank President Raphael Bostic also warned that price pressures will likely face bumps in its path towards the central bank’s target of 2%. Bostic said he believes that the policy approach should be more “cautious” because “We don't want to overreact to any one data point in an environment where things may bounce around considerably.”

Going forward, the shared currency pair will be guided by President-elect Donald Trump’s plan to declare a national economic emergency, aiming to provide legal reasoning for the possible increase in import tariffs on the nation’s allies and adversaries.

On the economic front, investors will focus on the United States (US) Nonfarm Payrolls (NFP) data release for December, which will be published on Friday. The official employment data will influence market expectations about when the Fed will deliver its first interest rate cut of the year. 

Daily digest market movers: EUR/USD weakens amid US Dollar’s strength

• EUR/USD stays under pressure, mainly due to  USD strength. However, the Euro (EUR) exhibits a mixed performance against other peers as an expected growth in the Eurozone preliminary Harmonized Index of Consumer Prices (HICP) data for December has pushed back expectations that the European Central Bank (ECB) will cut its Deposit Facility by larger-than-usual pace of 50 basis points (bps) in the upcoming policy meeting. 
• Market participants were anticipating that the ECB could fasten its policy-easing pace to avoid risks of inflation, undershooting the central bank’s target of 2% amid weakness in the overall business activity. However, the ECB will continue easing its monetary policy at a usual pace of 25 bps amid a weak economic outlook.
• ECB officials are confident that interest rates will return to the neutral rate by summer, which is approximately 2%. On Wednesday, ECB policymaker and Governor of the Bank of France Francois Villeroy said that price pressures were expected to tick higher in December but that interest rates will continue heading towards the neutral rate “without a slowdown in the pace by summer” if the upcoming data confirm that the “pullback in price pressures won’t continue”.
• The latest Economic Confidence (EC) survey by Capital Economics suggests that the economic performance of the trade bloc remained stagnant in the last quarter of 2024. The survey’s Economic Sentiment Indicator (ESI) fell to 93.7 in December from 95.6 in November.
• Meanwhile, the Eurozone Retail Sales data for November has come in weaker than expected. The Retail Sales data (MoM), a key measure of consumer spending, rose by 0.1%, slower than estimates of 0.4%.

Technical Analysis: EUR/USD eyes more downside to near 1.0100

EUR/USD trades near the key support plotted from the September 2022 high of 1.0200 on a weekly timeframe. The outlook of the major currency pair is broadly bearish as the 20-week Exponential Moving Average (EMA) at 1.0627 is declining. 

The 14-week Relative Strength Index (RSI) slides to near 30.00, indicating a strong downside momentum. However, a slight recovery cannot be ruled out as the momentum oscillator has turned oversold.

Looking down, the pair could find support near the round level of 1.0100. Conversely, the weekly high of 1.0458 will be the key barrier for the Euro bulls.

The oil market had a strong end to 2024 and a strong start to 2025 with ICE Brent trading above $76/bbl in early January, ING’s commodity analysts note.

Middle East physical market gets stronger

“In early December, OPEC+ agreed to a further extension to its supply cuts, leaving the market with a smaller-than-expected surplus for 2025.”

“In addition, broader sanctions against Iran and Russia have seen Asian buyers looking for other Middle Eastern oil grades, leading to a stronger Middle East physical market. There is also uncertainty over the Iranian oil supply once Trump enters office later this month.”

GBP/USD has extended its phase of correction after break below November lows (1.2480), Société Générale’s FX analysts note.

GBP/USD extends its correction below 1.2480

“Daily MACD is at a higher level than the trough achieved in November however signals of a meaningful rebound are not yet visible. Next potential objectives could be located at projections of 1.2220 and 1.2135.”

“Upper limit of a steep descending channel near 1.2420/1.2480 is an important resistance zone in case a short-term bounce develops.”

US Dollar (USD) is expected to trade in a range between 7.3430 and 7.3615. 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.

A break above 7.3700 is unlikely for now

24-HOUR VIEW: “Although USD traded in a subdued manner on Tuesday, we pointed out yesterday (Wednesday) that ‘despite the quiet price action, upward momentum appears to be building, albeit tentatively.’ We held the view that USD ‘could edge higher to 7.3550 before levelling off.’ We indicated that ‘the major resistance at 7.3700 is not expected to come into view.’ In line with our expectations, USD rose, reaching a high of 7.3615. USD closed higher by 0.15% at 7.3522. There has been no further increase in upward momentum. Today, we expect USD to trade in range, likely between 7.3430 and 7.3615.”

1-3 WEEKS VIEW: “Our latest narrative was from two days ago (07 Jan, spot at 7.3465), wherein ‘as long as 7.3050 is not breached, there is room for USD to retest the 7.3700 level.’ We indicated that ‘at this time, it is too early to determine if USD can break and remain above this level.’ There is no change in our view, but the ‘strong support’ level at 7.3050 has moved higher to 7.3250.”

• EUR/USD consolidates around 1.0300 on Thursday ahead of a calm trading day regarding economic data. 
• The bond market looks to be on fire, with UK Gilt yields surging as inflation concerns weight.
• Markets are getting increasingly nervous over the vast amount of fiscal spending, reforms, and tariff imposing that President-elect Donald Trump is announcing. 

The EUR/USD pair is on the back foot again and consolidates around 1.0300 on Thursday. The recent dip lower comes as markets start to get worried about the vast amount of measures, reforms, spending, and tariff levies that President-elect Donald Trump announced before his inauguration on January 20. As a result, US yields are rising further this week.

Meanwhile, UK Gilt yields are experiencing a mini-crisis. Over the past few days, long-term UK borrowing costs have soared, and the British Pound (GBP) has fallen. This could be a sign that investors have lost faith in the government’s ability to manage the national debt and control inflation.  

Daily digest market movers: Inflation uncertainty

• US stock markets will remain closed on Thursday, observing a National Day of Mourning in honor of former President Jimmy Carter. The bond market will operate on a shortened schedule, closing early.
• Economic data earlier this Thursday showed that German Imports fell by 3.3% in November, while Exports rose by 2.1%. 
• Excessive concern about possible inflation shocks can be harmful to the economy, European Central Bank (ECB) Executive Board member Piero Cipollone told Corriere della Sera in an interview, Bloomberg reports.
• The ECB should keep lowering borrowing costs at every meeting as long as the retreat in inflation matches its projections, according to Governing Council member François Villeroy de Galhau on Wednesday, Reuters reported.
• German Bunds ticked up further to hit another fresh six-month high of 2.571%, which is no longer far off from the 2.642% high seen in July 2024. 
• European equities are trading in the red, taking over the downbeat tone seen in Asia.

Technical Analysis: Concerns are growing

Concerns are emerging, and clearly, inflation is becoming a top priority for traders regarding positioning. That means the US Dollar (USD) should become even more supported, as US yields will keep surging, widening the rate differential gap between the Eurozone and the US. 

A recovery for EUR/USD would involve a first-stage move to 1.0448, the low of October 3, 2023. Once through that level, the 55-day Simple Moving Average (SMA) at 1.0539 would come into play. Another catalyst will be needed for this kind of move, as it could squeeze the Dollar bulls. 

On the downside, the two-year low of 1.0224 reached on January 2 is now the first level to watch after the 1.0294 level lost its importance this week. 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

• Eurozone annual Retail Sales rose 1.2% in November.
• Retail Sales in the old continent arrived at 0.1% MoM in November.

Eurozone’s Retail Sales rose 1.2% in the year through November after increasing by a revised 2.1% in October, the official data released by Eurostat showed on Thursday.

On a monthly basis, Retail Sales in the old continent increased by 0.1% in the same period versus October’s -0.3% revision while coming in below the estimated 0.4% growth.

FX implications

The Eurozone data fails to impress the Euro. At the time of writing, the EUR/USD pair is trading 0.16% lower on the day at 1.0301.

Room for US Dollar (USD) to rise to 158.65 before a pullback can be expected; the major resistance at 159.00 is likely out of reach. 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/JPY is expected to face significant resistance at 159.00

24-HOUR VIEW: “Yesterday, we held the view that ‘there is scope for USD to test 158.50.’ We were also of the view that ‘a break of this level this not ruled out, but any further advance is highly unlikely to reach the major resistance at 159.00.’ Our view was validated as USD rose to 158.54, closing at 158.35 (+0.21%). Despite slowing upward momentum, there is room for USD to 158.65 before a pullback can be expected. USD is still unlikely to reach the major resistance at 159.00. On the downside, support levels are at 158.00 and 157.70.”

1-3 WEEKS VIEW: “There is not much to add to our update from Tuesday (07 Jan, spot at 158.15). As highlighted, ‘upward momentum is building, and we expect USD to trade with an upward bias.’ We also highlighted that, ‘any advance is expected to face significant resistance at 159.00.’ We continue to hold the same view, provided that 157.20 (‘strong support level previously at 156.80) is not breached.”

The UK House of Commons said on Thursday that a minister from Britain's Treasury Department has been summoned to parliament to respond to an urgent question about "the growing pressure of borrowing costs on the public finances", per Reuters.

The parliamentary discussion is expected to begin around 1030 GMT, Reuters reports.

This comes after UK gilt yields exploded on Wednesday, with the 10-year yields currently sitting at the highest level since August 2008 near 4.91%.

The latest Bank of England (BoE) Decision Maker Panel (DMP) quarterly survey released on Thursday showed that “one-year ahead expected CPI inflation by the UK firms increased by another 0.1 percentage points to 2.8% in the quarter to December.”

Key takeaways

The survey is one of the most closely watched by members of the BoE's Monetary Policy Committee (MPC).

Market reaction

At the press time, GBP/USD is off 14-month lows of 1.2239 but remains heavy below 1.2300.  

Silver prices (XAG/USD) rose on Thursday, according to FXStreet data. Silver trades at $30.26 per troy ounce, up 0.53% from the $30.10 it cost on Wednesday.

Silver prices have increased by 4.74% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 88.03 on Thursday, down from 88.48 on Wednesday.

(An automation tool was used in creating this post.)

• Silver price moves higher along nine- and 14-day EMAs, establishing a bullish bias.
• The primary resistance appears at the psychological level of $31.00.
• The pair may test initial support at the psychological level of $30.00, followed by the nine-day EMA at $29.83.

Silver prices (XAG/USD) continue their upward trend, extending the winning streak that began on January 1. The grey metal trades around $30.20 per troy ounce during the European hours on Thursday. A closer look at the daily chart suggests a developing bullish bias, with the XAG/USD pair pushing higher along nine- and 14-day Exponential Moving Averages (EMAs), signaling robust short-term price momentum.

The 14-day Relative Strength Index (RSI) has also climbed above the 50 level, reinforcing the bullish sentiment. A further increase in Silver price could indicate growing bullish momentum. However, the alignment of the nine-day EMA with the 14-day EMA still suggests the absence of a strong directional trend in the short-term price movement.

Silver price may face potential resistance at the psychological level of $31.00. A decisive break above this level could bolster bullish momentum, paving the way for the metal to target the two-month high of $32.28, last reached on December 9.

On the downside, immediate support is likely at the psychological level of $30.00, followed by the nine-day EMA at $29.83. A break below this level could weaken short-term momentum, potentially pushing the XAG/USD pair toward the four-month low of $29.82, recorded on December 19.

XAG/USD: Daily Chart

New Zealand Dollar (NZD) is likely to continue to weaken against the US Dollar (USD); oversold conditions suggest any decline is unlikely to break below 0.5570. In the longer run, risk for NZD is beginning to shift to the downside, but it must break clearly below 0.5570, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

NZD/USD is likely to continue to weaken

24-HOUR VIEW: “We pointed out yesterday that ‘the current price movements appear to be part of a range trading phase, expected to be between 0.5615 and 0.5665.’ Our view was incorrect, as NZD dropped to a low of 0.5591, closing on a soft note at 0.5608 (-0.49%). The increase in downward momentum suggests that NZD is likely to continue to weaken today. Given the oversold conditions, any decline is unlikely to break the support at 0.5570. Resistance is at 0.5620, followed by 0.5635.”

1-3 WEEKS VIEW: “Our update from two days ago (07 Jan, spot at 0.8640) still stands. As indicated, NZD ‘has probably entered a consolidation phase, and it is likely to trade in a 0.5590/0.5705 range for now.’ NZD tested the lower end of our expected range yesterday, reaching a low of 0.5591. There has been a tentative buildup in downward momentum, and the risk for NZD is beginning to shift to the downside. However, to decline in a sustained manner, NZD must break clearly below 0.5570. The probability of a clear break below 0.5570 will increase in the next few days, as long as 0.5660 is not breached.”

• GBP/JPY continues losing ground for the third straight day and drops to a multi-week low.
• Stronger wage growth data from Japan lifts BoJ rate hike bets and boosts the JPY demand.
• Stagflation fears continue to weigh on the GBP and further contribute to the ongoing slide.

The GBP/JPY cross attracts some follow-through sellers for the third successive day on Thursday and drops to over a three-week low, around the 193.70-193.65 region during the first half of the European session. Spot prices, however, manage to rebound a few pips in the last hour and currently trade around the 194.20 area, still down nearly 0.80% for the day.

The British Pound (GBP) continues with its relative underperformance in the wake of concerns about stagflation in the UK amid stubborn inflation and stalling growth. This, in turn, pushes the yield on the 10-year UK government bond to a new cycle high, which is expected to put additional pressure on growth. Adding to this doubts about the newly elected Labour government’s fiscal strategy, along with the Bank of England's (BoE) dovish split vote decision to leave rates unchanged in December exert pressure on the GBP. 

The Japanese Yen (JPY), on the other hand, strengthens in reaction to data released earlier this Thursday, which showed that base pay in Japan grew at the fastest pace in more than three decades. Furthermore, the inflation rate that the ministry uses for wage calculation accelerated from 2.6% in October to 3.4% from a year earlier. Adding to this, the broadening inflationary pressure backs the case for additional interest rate hikes by the Bank of Japan (BoJ). This, along with haven flows, benefits the JPY and weighs on the GBP/JPY cross. 

Investors, however, remain skeptical about the likely timing of when the BoJ will raise borrowing costs again. This, in turn, holds back the JPY bulls from placing aggressive bets and assists spot prices to rebound around 50-60 pips from the daily swing low. That said, the fundamental backdrop seems tilted in favor of bearish traders, suggesting that any subsequent recovery might still be seen as a selling opportunity and runs the risk of fizzling out rather quickly.

The FOMC Minutes for the December 17-18 meeting had positive takeaways for the USD, DBS’ Senior FX Strategist Philip Wee notes.

Fed’s cautious stance is USD negative

“Fed officials cited two primary reasons for caution in lowering rates in 2025. First, the monetary policy stance has become significantly less restrictive after 100 bps of cuts to 4.25-4.50% in September-December. Second, President-elect Donald Trump’s policies on tariffs, tax cuts, and immigration could delay the return of inflation to its 2% target. The Fed projected two rate cuts in 2025, significantly fewer than the four forecasted three in September.”

“In 2017, Yellen leaned towards ensuring that the tightening did not derail growth amid rising inflation (PCE inflation rose to 1.8% in 2017 from 1% in 2016). The greenback was weaker throughout 2017 after its rally into Trump’s victory at the US election in November 2016, until Trump’s tariffs arrived in 2018 and increased the Fed’s vigilance on inflation with trade tensions contributing to the USD’s haven status.”

“Powell’s current caution is rooted in ensuring that lowering interest rates from elevated levels does not undo the progress made since 2022 in controlling inflation with a soft landing. With Trump’s tariffs arriving at the outset of his second term in less than two weeks, amid a resilient US economy compared to a lackluster Chinese economy and stagnation in the Eurozone, the FOMC minutes should support the case for the USD to extend its Trump Trade rally into this year.”

Provided that Australian Dollar (AUD) remains below 0.6245, it could test the major support of 0.6180 before a rebound is likely. In the longer run, AUD must break and remain below 0.6180 before further weakness can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.  

Likelihood of AUD breaking clearly 0.6180 is not high

24-HOUR VIEW: “When AUD was trading at 0.6230 in early Asian trade yesterday, we noted ‘a slight increase in downward momentum.’ However, we held the view that ‘this is likely to result in a lower trading range of 0.6215/0.6265 instead of a sustained decline.’ In London trade, AUD fell sharply, but briefly, to 0.6188. It rebounded from the low to close at 0.6216 (-0.24%). The increase in downward momentum is not enough to suggest a sustained decline. However, provided that AUD remains below 0.6245 (minor resistance is at 0.6225), it could test the major support at 0.6180 before another rebound is likely.”

1-3 WEEKS VIEW: “We highlighted on Tuesday (07 Jan, spot at 0.6240) that AUD ‘may have found an interim bottom at 0.6179 last week.’ However, we noted that ‘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.’ Yesterday (Wednesday), AUD dropped briefly to 0.6188. Although the price action has resulted in an increase in momentum, AUD must break and remain below 0.6180 before further weakness can be expected. Currently, the likelihood of AUD breaking clearly 0.6180 is not high, but it will remain intact as long as 0.6265 is not breached in the next few days.”

China’s CPI inflation slowed for the fourth consecutive month to 0.1% y/y in Dec and was flat on a m/m comparison. The PPI deflation eased to -2.3% y/y in Dec while momentum eased to fall -0.1% m/m due to factors such as production offseason and international commodity price fluctuations, UOB Group’s Economist Ho Woei Chen notes.

Weak price pressure led by decline in food prices

“China’s inflation has remained subdued for the second straight year in 2024 with the headline and core inflation at 0.2% (2023: 0.2%) and 0.5% (2023: 0.7%) respectively. China’s PPI recorded its second full year contraction at -2.2% in 2024 (2023: -3.0%). We maintain our forecast for 2025 CPI inflation at 0.9% and PPI deflation at -1.2%.”

“The government’s stimulus has yet to provide a meaningful lift to private consumption and prices. China’s 4Q24 GDP due next Fri (17 Jan) is likely to see nominal growth weighed down by weak prices while we expect the real GDP growth to accelerate to 5.0% y/y (1.9% q/q) from 4.6% y/y (0.9% q/q) in 3Q24 with full-year 2024 growth at 4.9%.”

“We maintain our 2025 GDP growth forecast at 4.3%. Thus, we expect an additional 50-100 bps reduction to the RRR and 30 bps cut to the benchmark 7-day reverse repo rate (with loan prime rates to fall by 30 bps) in 2025. A near-term RRR cut will be in focus after the PBOC skipped a cut in Dec which it had flagged earlier.”

Our best understanding of yesterday's Pound Sterling (GBP) sell-off is that the global bond market sell-off touched a raw nerve in the gilt market and that then the gilt spread widening prompted investors to cut back on overweight GBP positioning, ING FX analyst Chris Turner notes.

Modest downside risks for GBP

“Perhaps most relevant for GBP here is the positioning data, where investors had felt that GBP could best withstand the over-riding strong dollar trend.”

“The gilt sell-off has however dented that confidence in GBP and the risk now is that GBP longs get pared as investors reassess GBP exceptionalism. We do not see very strong reasons for the gilt sell-off to extend for local UK factors, but there now looks to be some modest downside risks for GBP.”

The Pound Sterling (GBP) is likely to decline; the significant support level at 1.2300 could be out of reach. In the longer run, risk has shifted to the downside but note that there is a significant support level at 1.2300, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Risk has shifted to the downside

24-HOUR VIEW: “We did not expect GBP to plunge to a low of 1.2321 yesterday (we were expecting sideways trading). While the sharp and swift selloff seems overdone, the weakness in GBP has not stabilised. Today, as long as 1.2430 is not breached, with minor resistance at 1.2395, GBP is likely to decline. However, the significant support level at 1.2300 could be out of reach. Note that yesterday’s low, near 1.2320, is expected to provide support as well.”

1-3 WEEKS VIEW: “Our latest narrative was from two days ago (07 Jan, spot at 1.2510), wherein GBP ‘is expected to trade in a range between 1.2420 and 1.2620 for the time being.’ Yesterday, in a sudden move, GBP plunged, reaching a low of 1.2321. Although the increase in momentum has shifted the risk for GBP to the downside, note that October’s 2023 low is a significant support level. The downside risk will remain intact as long as GBP remains below 1.2465. Looking ahead, the next level to watch below 1.2300 is 1.2250.”

EUR/USD remains fragile as US rates remain relatively firm, higher US Treasury yields undermine risk conditions and US tariff threats loom large, ING FX analyst Chris Turner notes.

More EUR/USD consolidation on a quieter day

“EUR:USD two-year swap rate differentials are actually narrowing a little in favour of the EUR/USD, but this week has proved that any EUR/USD gains can quickly be wiped out by the US trade story.”

“German November industrial production has come in a little better than expected today but is unlikely to move the needle for EUR/USD. Equally, a bounce back in eurozone November retail sales (11CET today) will not help much either.”

“Look for some more EUR/USD consolidation on what should be a quieter day. 1.0290-1.0330 may well be the extent of the EUR/US range.”

Instead of declining further, EUR is more is likely to trade in a 1.0275/1.0355 range. In the longer run, EUR has to break clearly below 1.0255 before further losses can be expected, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

EUR/USD is more is likely to trade in a 1.0275/1.0355 range

24-HOUR VIEW: “After EUR rose to 1.0434 two days ago and then pulled back sharply, we noted yesterday that ‘there has been a slight increase in downward momentum.’ We expected EUR to ‘edge lower and test 1.0320,’ but we were of the view that ‘the major support at 1.0300 is unlikely to come under threat.’ While our view of a lower EUR was correct, the price action did not turn out as we expected, as EUR plummeted to a low of 1.0273. It then recovered quickly to close lower by 0.20% at 1.0318. The brief decline did not result in a significant increase in downward momentum. Instead of declining further today, EUR is more likely to trade in a 1.0275/1.0355 range.”

1-3 WEEKS VIEW: “On Tuesday (07 Jan, spot at 1.0380), we indicated that ‘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.’ We were also of the view that EUR ‘is unlikely to break clearly above 1.0465.’ Yesterday, EUR broke briefly below 1.0300 before rebounding. Downward momentum is beginning to build, albeit tentatively. From here, EUR has to break clearly below 1.0255 before further losses can be expected. The likelihood of EUR breaking clearly below will increase in the next few days, provided that the ‘strong resistance’ level, currently at 1.0400, is not breached.”

How to categorize the first three trading days this week? Monday saw sharp intra-day FX swings on speculation over incoming US tariffs. Tuesday saw Trump's wide-ranging press conference espousing expansionist US foreign policy (including more tariff threats). And Wednesday saw this week's Treasury market sell-off (helped by a couple of poor auctions) lead to broader financial market volatility – enough to shake out long sterling positions, ING FX analyst Chris Turner notes.

Next big move only coming on tomorrow's payrolls

“The good news for those seeking a little calm is that last night's 30-year US Treasury auction came in a little better than expected and that the US bond market should be quiet today on a US Federal holiday and an early bond market close – that Federal holiday to mark the funeral of former president Jimmy Carter. However, we doubt the dollar needs to hand back much of its recent gains. Last night's release of the December FOMC minutes confirmed the Fed's stance that it is ready to slow the pace of its easing cycle amid solid growth and upside risks to its inflation forecasts.”

“We have five Fed speakers later today, but the next big impact on expectations of the Fed easing cycle will be tomorrow's December NFP report, where some see upside risks. Equally, the USD is likely to stay strong into Trump's inauguration on 20 January. If Tuesday's press conference is anything to go by, Trump will come out swinging at the start of his second term – as we discussed in our 'Trump clean sweep' scenario in August last year.”

“Elsewhere of note today is the firm wage data in Japan which we think makes the risk of a Bank of Japan rate hike on 24 January more likely. This – plus the threat of renewed FX intervention – will help firm up the view that USD/JPY will struggle to break through the 158/160 area. Despite the risk of profit-taking, DXY found good support under 108 earlier this week. Expect tight ranges and the c, unless Trump has something to say on Truth Social today.”

• The EUR/GBP pair advances as the Pound Sterling extends its technical downward correction.
• The GBP may gain ground due to the increased likelihood of fewer interest rate cuts from the Bank of England.
• The Euro struggles as traders increasingly anticipate aggressive rate cuts by the European Central Bank in 2025.

EUR/GBP extends its gains for the second successive session, trading around 0.8400 during the European hours on Thursday. The EUR/GBP cross rises as the Pound Sterling (GBP) continues its technical downward correction, which began on Wednesday.

However, the downside of the British Pound could be restrained as traders anticipate fewer interest rate cuts from the Bank of England (BoE), with projections lowered to just two 25bps reductions this year, compared to earlier forecasts of more than three at the beginning of last month.

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. 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%.

The upside of the EUR/GBP cross could be limited as the Euro faces challenges as traders continue to anticipate aggressive European Central Bank (ECB) rate cuts in 2025 despite rising inflation in the Eurozone. This outlook could place additional selling pressure on the Euro (EUR) against its peers. The ECB is widely expected to cut rates by 25 basis points (bps) at its upcoming meeting on January 30.

In the Eurozone’s economic powerhouse Germany, Industrial Output jumped by 1.5% MoM, the federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, against the estimated 0.5% rebound and a 1.0% drop in October. Industrial Production fell by 2.8% year-on-year (YoY) in November versus October’s -4.2% revision. Later in the day, the Eurozone Retail Sales for November will be in focus.

• The Pound Sterling faces severe selling pressure as a sharp spike in UK gilt yields mirrors a weak economic outlook.
• Fears of persistent UK inflation and Trump’s tariff hike plans have pushed UK bond yields to their highest levels since 1998.
• Renewed US inflation fears have forced Fed officials to turn cautious on interest rate cuts.

The Pound Sterling (GBP) underperforms its major peers on Thursday due to a significant jump in the United Kingdom (UK) government’s borrowing costs. An intense sell-off in UK bonds has pushed 30-year gilt yields to 5.36%, the highest level since 1998. Typically, higher UK gilt yields boost the appeal of the British currency. However, the correlation is not legitimate at this point as a resurgence in inflationary pressures and potentially inflationary United States (US) President-elect Donald Trump policies have weighed on the UK’s economic outlook.

This has led to doubts over whether Chancellor of the Exchequer Rachel Reeves will fulfill its fiscal rules, including a non-negotiable commitment to avoid borrowing for day-to-day spending. However, a British finance ministry spokesperson responded that "No one should be under any doubt that meeting the fiscal rules is non-negotiable and the government will have an iron grip on the public finances,” Reuters reported.

A sudden spike in UK bond yields has raised concerns about whether the country will remain committed to funding public services and growth-boosting investments through bond selling without further raising taxes.

Meanwhile, the Bank of England (BoE) doesn’t appear to cut interest rates at a faster pace ahead as high inflation due to stubborn wage growth remains a limiting factor. Traders price in roughly 60 basis points (bps) interest rate reduction by the BoE this year, suggesting that there will be more than two rate cuts. However, analysts at Goldman Sachs said in a note this week that the BoE will cut interest rates in each quarter through the year. This suggests that the BoE policy rate could decline to 3.75% by the year-end. 

Daily digest market movers: Pound Sterling weakens against USD ahead of US NFP

• The Pound Sterling declines below 1.2300 against the US Dollar (USD) in Thursday’s London session, the lowest level seen in over a year. The GBP/USD pair weakens as the USD performs strongly on the back of firm US bond yields as President-elect Donald Trump is expected to declare a national economic emergency to provide legal justification for a likely increment in import tariffs on the nation’s allies and adversaries, CNN reported.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, edges higher to near 109.25 but remains inside Wednesday’s trading range at the time of writing. The 10-year US Treasury yields trade close to 4.67%, the highest level since April 2024.
• Market participants expect that the US’s higher tariffs will boost demand for domestically produced goods and services, raising growth prospects, employment, and inflationary pressures. This scenario will force Federal Reserve (Fed) policymakers to remain cautious on interest rates for longer, which will be USD-positive.
• Recent Fed minutes from the December meeting also hinted that the disinflation process has stalled temporarily, forcing policymakers to signal fewer interest rate cuts for this year.
• Meanwhile, a sharp rise in the US ISM Services Prices Paid component of the Purchasing Managers Index (PMI) report for December shows that upside risks to inflation have renewed again. The data came in at 64.4, sharply higher from the prior reading of 58.2.
• Going forward, investors will pay close attention to the US Nonfarm Payrolls (NFP) data for December, which will be published on Friday. 

Technical Analysis: Pound Sterling falls to over a year low below 1.2300

The Pound Sterling slumps to a more-than-a-year-low near 1.2250 against the US Dollar (USD) on Thursday. The GBP/USD pair faces a sharp sell-off after breaking below the January 2 low of 1.2350. The broader outlook of the Cable remains bearish as the 20-day and 50-day Exponential Moving Averages (EMAs) near 1.2510 and 1.2645, respectively, are declining.

The 14-day Relative Strength Index (RSI) drops sharply to near 30.00, suggesting a strong bearish momentum. 

Looking down, the pair is expected to find support near the November 10, 2023, low of 1.2185. On the upside, the 20-day EMA will act as key resistance.

• AUD/JPY faces challenges after the release of mixed economic figures from Australia.
• The AUD faces downward pressure as China's Consumer Price Index data highlights increasing deflationary risks.
• The Japanese Yen appreciated as Labor Cash Earnings rose by 3.0% YoY in November, up from a 2.2% prior increase.

AUD/JPY losses ground as the Australian Dollar (AUD) faces challenges against its peers following domestic economic data, along with China's CPI inflation report released on Thursday. The AUD/JPY cross trades around 98.00 during the early European hours.

Earlier this week, Australian data showed a slight increase in headline inflation, rising to 2.3% in November from 2.1%. Meanwhile, core inflation eased to 3.2%, down from 3.5%. These developments follow recent statements from the Reserve Bank of Australia (RBA), which conveyed growing confidence that inflation is on track to sustainably return to its 2-3% target range, potentially paving the way for rate cuts in the months ahead.

Australia's Retail Sales, a key indicator of consumer spending, increased by 0.8% month-on-month in November, up from the 0.5% growth recorded in October (revised from 0.6%). However, the figure fell short of market expectations, which had anticipated a 1.0% rise.

Meanwhile, Australia's trade surplus rose to 7,079 million in November, surpassing the expected 5,750 million and the previous reading of 5,670 million (revised from 5,953 million). Exports increased by 4.8% month-on-month (MoM) in November, up from 3.5% (revised from 3.6%) in October. Imports grew by 1.7% MoM in November, compared to 0% (revised from 0.1%) in the previous month.

The Aussie Dollar faces challenges as China's Consumer Price Index (CPI) data points to growing deflationary risks. The annual inflation increased by 0.1% in December, slightly lower than the 0.2% rise in November, matching market expectations.

On a month-on-month (MoM) basis, CPI inflation remained unchanged at 0% in December, aligning with estimates, following a 0.6% decline in November. Any change in Chinese economic conditions could impact the Australian markets as both nations are close trading partners.

The Japanese Yen (JPY) gained support from robust wage growth data in Japan. Labor Cash Earnings increased by 3.0% year-on-year in November, up from the revised 2.2% rise in October and exceeding market expectations of 2.7%.

However, Real Wages, adjusted for inflation and considered a key measure of consumers' purchasing power, declined by 0.3% year-on-year in November. This follows a 0.4% drop in October, marking the fourth consecutive month of negative real wage growth.

This persistent decline in real wages has cast doubt on the likelihood of potential interest rate hikes by the Bank of Japan (BoJ). Adding to the dovish outlook, consumer sentiment in Japan weakened in December, further tempering expectations for any policy tightening by the BoJ.

Here is what you need to know on Thursday, January 9:

The US Dollar (USD) gathered strength against its rivals for the second consecutive day on Wednesday as markets assessed US data releases and news on President-elect Donald Trump's tariff plans. Stock markets in the US will remain closed and bond markets will close early on Thursday, in observance of a national day of mourning to honor the death of former President Jimmy Carter. In the American session, several Federal Reserve (Fed) policymakers are scheduled to deliver speeches.

US President-elect Donald Trump is considering declaring a national economic emergency to allow for a new tariff program, CNN reported on Wednesday, citing four sources familiar with the discussions. This headline caused markets to adopt a cautious stance and helped the US Dollar (USD) outperform its peers.

Meanwhile, the data from the US showed that employment in the private sector increased by 122,000 in December, missing the market expectation of 140,000. On a positive note, weekly Initial Jobless Claims declined to 201,000 in the week ending January 4 from 211,000 in the previous week. Finally, the minutes of the Fed's December policy meeting showed that almost all officials said upside risks to inflation had increased and that they agreed on the need for a careful approach to further policy easing.

The USD Index closed the second consecutive trading day in positive territory on Wednesday and was last seen trading marginally higher on the day slightly above 109.10.

EUR/USD continued to push lower and registered small losses on Wednesday. The pair struggles to find a foothold and fluctuates near 1.0300 in the European morning on Thursday. Germany's Destatis reported that Industrial Production expanded by 1.5% on a monthly basis in November, surpassing the market expectation for an increase of 0.5%.

GBP/USD declined sharply and lost nearly 1% on Wednesday. The pair stays under bearish pressure to begin the European session and trades at its lowest level in over a year below 1.2300.

USD/JPY posted small gains for the third consecutive day on Wednesday but struggled to gather further bullish momentum. The pair retreats slightly on Thursday while managing to hold above 158.00.

The data from China showed that annual inflation, as measured by the change in the Consumer Price Index (CPI), declined to 0.1% in December from 0.2% in November. In the meantime, the Australian Bureau of Statistics announced that Retail Sales rose by 0.8% on a monthly basis in November. AUD/USD showed no immediate reaction to these figures and was last seen losing 0.3% on the day near 0.6200.

Gold extended its recovery after closing in the green on Tuesday and touched a multi-week high of $2,670 on Wednesday. XAU/USD stays relatively quiet and trades in a narrow band above $2,660 early Thursday.

• USD/CHF drifts higher to around 0.9115 in Thursday’s early European session.
• Fed Minutes signalled a cautious approach to rate cuts, supporting the USD. 
• Swiss inflation slowed in December, supporting the case for more easing in interest rates by the SNB.

The USD/CHF pair gains traction to around 0.9115 during the early European trading hours on Thursday, bolstered by the stronger US Dollar (USD). The cautious stance of the Federal Reserve (Fed) and solid US economic data provide some support to the pair. Traders will monitor the Fedspeak on Thursday for more cues about the US interest rate outlook this year.

Investors scaled back rate cut bets, with pricing a less than 50% chance the Fed cuts rates ahead of its June meeting, according to the CME FedWatch Tool. "With the Federal Reserve expected to cut rates less than most other major central banks, expected interest rate differentials favor the greenback,"  noted Blake Millard, director of investments at Sandbox Financial Partners.

According to minutes of the Fed’s December meeting released on Wednesday, policymakers suggested that the process could take longer than previously anticipated due to recent hotter-than-expected readings on inflation and the effects of potential changes in trade and immigration policy.

Switzerland’s inflation rate edged down in December 2024, reinforcing the Swiss central bank’s (SNB) decision to cut more interest rates this year. The country’s Consumer Price Index (CPI) rose 0.6% YoY in December, compared to 0.7% seen in November, matching the expectations. "Another interest rate cut by the SNB in March is now virtually certain," noted GianLuigi Mandruzzato, an economist at EFG Bank. The expectations for another interest rate reduction by the SNB could weigh on the Swiss Franc (CHF) against the Greenback in the near term. 

On the other hand, the persistent geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war could boost the safe-haven flows, benefitting the CHF. The local news agency, Aljazeera, reported that Israel’s attack on Gaza has continued overnight, including a strike on a home in the Nuseirat refugee camp that killed two people. One of the victims was a child.

Germany’s industrial sector staged a turnaround in November, according to the latest data published by Destatis on Thursday.

In the Eurozone’s economic powerhouse, industrial output jumped by 1.5% MoM, the federal statistics authority Destatis said in figures adjusted for seasonal and calendar effects, against the estimated 0.5% rebound and a 1.0% drop in October.

German Industrial Production fell by 2.8% year-on-year (YoY) in November versus October’s -4.2% revision.

EUR/USD reaction to the German Industrial Production data

The upbeat German data fail to inspire Euro buyers, as EUR/USD remains 0.15% lower on the day at 1.0300 at the press time.

FX option expiries for Jan 9 NY cut at 10:00 Eastern Time via DTCC can be found below.

EUR/USD: EUR amounts

• 1.0200 4.2b
• 1.0250 943m
• 1.0260 1.9b
• 1.0340 866m
• 1.0350 1.9b
• 1.0440 855m
• 1.0450 987m
• 1.0500 2.3b

GBP/USD: GBP amounts     

• 1.2300 500m
• 1.2390 860m
• 1.2440 549m

USD/JPY: USD amounts                     

• 157.00 458m
• 157.75 612m
• 159.25 575m

AUD/USD: AUD amounts

• 0.6270 600m

NZD/USD: NZD amounts

• 0.5555 431m
• 0.5875 768m

EUR/GBP: EUR amounts        

• 0.8310 499m
• 0.8335 448m

• USD/CAD could appreciate further due to the hawkish policy shift by the US Federal Reserve.
• The latest FOMC Meeting Minutes showed that Fed policymakers expressed concern about inflation and the impact of President-elect Trump’s policies.
• The commodity-linked CAD struggles due to lower crude Oil prices.

USD/CAD edges lower after registering gains in the previous two sessions, trading around 1.4370 during the Asian hours on Thursday. However, the USD/CAD pair faced challenges as the US Dollar (USD) appreciated due to increased hawkish sentiment surrounding the Federal Reserve’s (Fed) policy outlook in 2025.

The Federal Open Market Committee (FOMC) Minutes for the December policy meeting showed that Federal Reserve’s (Fed) policymakers expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have.

Fed officials indicated they would be moving more slowly on rate reductions because of the uncertainty. Fed officials penciled the expected cuts in 2025 to two from four in the previous estimate at September’s meeting.

The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position near 109.00 as long-term US bond yields continue climbing on heavy supply. The 10-year stand at 4.66%, while the 30-year approached 4.90% at the time of writing.

Traders are evaluating the implications of Canadian Prime Minister (PM) Justin Trudeau's resignation after nine years in office, amid escalating tariff threats, political instability, and declining approval ratings, which could pave the way for snap elections. Trudeau announced on Monday that he would step down as the leader of Canada’s ruling Liberal Party once a successor is chosen.

Additionally, the commodity-linked CAD faces challenges against the US Dollar due to weakening crude Oil prices, 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 day, trading around $72.70 per barrel at the time of writing.

Traders analyze the latest weekly report from the US Energy Information Administration (EIA). The EIA report indicated a 0.959 million-barrel drop in US crude Oil stockpiles, marking the seventh consecutive decrease. The market expectations were a 0.250 million-barrel decline for the week ending January 3, against the previous decline of 1.178 million barrels.

• EUR/USD edges lower to 1.0310 in Thursday’s early European session. 
• German industrial orders dropped in November, putting pressure on the Euro. 
• Fed officials are worried about the inflation impacts from Trump's policies, FOMC minutes show. 

The EUR/USD pair trades in negative territory for the third consecutive day around 1.0310 during the early European session on Thursday. The downbeat German November Factory Orders and the expectation of aggressive rate cuts by the European Central Bank (ECB) this year weigh on the Euro (EUR) against the Greenback. Later on Thursday, the Eurozone Retail Sales for November and the Fedspeak will be in focus. 

German Factory Orders sank lower unexpectedly in November, with the figure falling by 5.4% MoM in November, compared to a decline of 1.5% in the previous reading, the Federal Statistics Office of Germany reported Wednesday. This figure came in weaker than the 0% expected. The weaker-than-expected economic data from Germany, the bloc's largest economy, exerts some selling pressure on the shared currency. 

The US Federal Reserve (Fed) officials saw the need for a careful approach in the upcoming quarter, adding that President-elect Donald Trump's trade policy could make inflation data harder to read, according to the Minutes from the Fed December 17-18 meeting. The hawkish tones from the US central bank officials could lift the USD and create a headwind for the pair in the near term. 

In its quarterly regional economic report published on Thursday, the Bank of Japan (BoJ) maintains the assessment for seven of Japan's nine regions.

Additional takeaways

• EUR/JPY attracts fresh sellers and extends this week’s rejection slide from the 200-day SMA.
• Strong wage growth data from Japan boosts the JPY and exerts some pressure on the cross.
• The ECB’s dovish bias continues to undermine the Euro and contributes to the ongoing slide.

The EUR/JPY cross comes under some renewed selling pressure following the previous day's two-way directionless price moves and drops to a three-day low, around the 162.60 area during the Asian session on Thursday. 

The Japanese Yen (JPY) strengthens across the board in reaction to government data, which showed that base salary, or regular pay, in Japan rose 2.7% in November, marking the fastest increase since 1992. Additional details of the report revealed the inflation rate that the ministry uses for wage calculation accelerated from 2.6% in October to 3.4% from a year earlier. This backs the case for another interest rate hike by the Bank of Japan (BoJ), in turn, providing a modest lift to the JPY and weighing on the EUR/JPY cross. 

Apart from this, the cautious market mood, persistent geopolitical risks and trade war fears turn out to be other factors benefiting the JPY's relative safe-haven status. The shared currency, on the other hand, is undermined by weak German data released on Wednesday. In fact, the Federal Statistics Office reported that Germany's Factory Orders unexpectedly slumped in November, by 5.4% MoM in November compared to the 1.5% decline in the previous month. Moreover, German Retail Sales declined by 0.6% MoM in November.

The data adds to concerns about the faltering Eurozone economy and validates the European Central Bank's (ECB) dovish bias. This, along with the underlying bullish tone surrounding the US Dollar (USD), weighs on the Euro and exerts additional pressure on the EUR/JPY cross. Even from a technical perspective, the recent repeated failure to break through the 200-day Simple Moving Average (SMA) pivotal resistance favor bearish trades and suggests that the path of least resistance for spot prices is to the downside.

Gold prices fell in India on Thursday, according to data compiled by FXStreet.

The price for Gold stood at 7,339.90 Indian Rupees (INR) per gram, down compared with the INR 7,357.66 it cost on Wednesday.

The price for Gold decreased to INR 85,611.14 per tola from INR 85,818.31 per tola a day earlier.

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.

(An automation tool was used in creating this post.)

• Gold price snaps a two-day winning to a multi-week top amid the Fed’s hawkish stance. 
• Retreating US bond yields undermine the USD and lend some support to the XAU/USD pair.
• Traders look to Fed speakers for some impetus ahead of the US NFP report on Friday.

Gold price (XAU/USD) drifts lower during the Asian session on Thursday and moves away from a four-week top, around the $2,670 area touched the previous day. The US Dollar (USD) stands firm near a two-year peak touched last week in the wake of the Federal Reserve's (Fed) hawkish shift, which, in turn, is seen as a key factor undermining the non-yielding yellow metal. In fact, the Fed indicated that it would slow the pace of interest rate cuts in 2025 amid a still resilient US economy, signs that the US labor market remained robust and sticky inflation. 

That said, concerns about US President-elect Donald Trump's protectionist policies and persistent geopolitical risks could offer some support to the safe-haven Gold price. The flight to safety leads to a modest pullback in the US Treasury bond yields, which holds back the USD bulls from placing fresh bets and might further contribute to limiting the downside for the XAU/USD. This warrants some caution before positioning for deeper losses as traders await the release of the closely-watched US monthly jobs data, or the Nonfarm Payrolls (NFP) report on Friday. 

Gold price is pressured by the prospects for slower rate cuts by the Fed; downside seems limited

• Automatic Data Processing (ADP) reported that private sector payrolls in the US rose by 122,000 in December, well below November's increase of 146,000 and missing expectations of 140,000.
• A separate Labor Department report showed Initial Jobless Claims stood at 201,000 in the week ending January 4, marking the lowest reading since February 2024 and pointing to a stable labor market. 
• Minutes of the December FOMC meeting showed that policymakers viewed labor market conditions as gradually easing and were in favor of slowing the pace of rate cuts amid stalling disinflation.
• The yield on the benchmark 10-year US government bond shot to its highest level since April 25 on Wednesday, assisting the US Dollar to stand firm near a two-year top and undermining the Gold price. 
• CNN reported that US President-elect Donald Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries.
• Ukrainian troops endured significant manpower losses in the face of Russia’s relentless assault. Russia's Defence Ministry said that its forces defeated Ukrainian brigades in Seversk and Chasov Yar. 
• Israeli airstrikes continued across the West Bank on Wednesday in the wake of an attack that killed three Israelis on Monday. The Israeli military recovered the body of a hostage from southern Gaza.
• Investors now look to speeches by a slew of influential FOMC members for short-term impetus later during the US session, though the focus will remain glued to the US Nonfarm Payrolls on Friday.

Gold price bulls have the upper hand, acceptance above the $2,665 static resistance awaited

From a technical perspective, the overnight swing high, around the $2,670 area, now seems to act as an immediate hurdle, which if cleared will be seen as a fresh trigger for bullish traders. Given that oscillators on the daily chart have started moving in positive territory, the Gold price might then climb to an intermediate resistance near the $2,681-2,683 zone en route to the $2,700 mark. 

On the flip side, any further slide is likely to find support near the $2,645 area ahead of the $2,635 region and the weekly low, around the $2,615-2,614 zone touched on Monday. Some follow-through selling below the $2,600 confluence, comprising the 100-day Exponential Moving Average (EMA) and a short-term ascending trend line extending from the November monthly low, will be seen as a fresh trigger for bearish traders. The Gold price might then turn vulnerable to slide further below the December swing low, around the $2,583 area, and test the next relevant support near the $2,550 zone.

• Silver price receives support from safe-haven flows amid uncertainty surrounding inflation and potential Trump tariffs.
• Industrial demand for Silver is set to exceed 700 million ounces (Moz), marking a significant milestone.
• The upside potential for the non-yielding metal may be capped as long-term US bond yields rise.

Silver price (XAG/USD) continues its upward momentum, rising for the sixth consecutive day to trade near $30.10 per troy ounce, close to three-week highs during Thursday’s Asian session. The precious metal, often considered a safe-haven asset, gains support amid uncertainty surrounding inflation and potential tariffs under President-elect Trump’s administration, as highlighted by the US Federal Reserve (Fed).

In addition, robust growth in 2024 has boosted industrial demand for Silver, which is on track to surpass 700 million ounces (Moz) for the first time. This surge is driven by its critical role in solar technology, electric vehicles (EVs), 5G networks, and consumer electronics, positioning Silver as a vital material for advancing innovation and supporting the transition to clean energy solutions.

Moreover, heightened geopolitical tensions have added to market volatility, prompting investors to turn to precious metals like Silver for stability. According to Reuters, a Russian-guided bomb attack on Wednesday claimed the lives of at least 13 people and injured 63 others in Ukraine’s southeastern city of Zaporizhzhia, further fueling safe-haven demand.

The upside of the non-yielding metal could be limited as long-term US bond yields continue climbing on heavy supply. The 10-year rose to 4.73%, while the 30-year approached 4.96% on Wednesday following the Federal Open Market Committee (FOMC) Minutes from the December meeting.

FOMC Minutes showed that Fed policymakers expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have. Fed officials indicated they would be moving more slowly on rate reductions because of the uncertainty. Fed officials penciled the expected cuts in 2025 to two from four in the previous estimate at September’s meeting.

• GBP/USD has retreated into the descending channel pattern, signaling a dominant bearish bias.
• The pair could test the nine-month low at 1.2321, recorded on Wednesday.
• The immediate resistance appears at the descending channel's upper boundary, near the nine-day EMA at 1.2447.

The GBP/USD pair remains under pressure for the third consecutive session, hovering near 1.2360 during Thursday's Asian trading hours. Technical analysis of the daily chart highlights a prevailing bearish bias, with the pair falling back to the descending channel pattern.

The 14-day Relative Strength Index (RSI) approaches the 30 mark, signaling intensified bearish momentum. Additionally, the GBP/USD pair trades below the nine- and 14-day Exponential Moving Averages (EMAs), reflecting weak short-term price dynamics.

On the downside, the GBP/USD pair could test the nine-month low of 1.2321, recorded on January 8, followed by the next support level at 1.2299, the lowest since November 2023, last observed on April 22. A break below this level could strengthen bearish sentiment, potentially driving the pair toward the lower boundary of the descending channel near 1.2050.

On the upside, the GBP/USD pair may encounter immediate resistance at the descending channel's upper boundary, near the nine-day EMA at 1.2447, followed by the 14-day EMA at 1.2481. A decisive breakout above this critical resistance zone could enhance short-term price momentum, paving the way for a potential move toward the two-month high of 1.2811, reached on December 6.

GBP/USD: Daily Chart

• The Indian Rupee weakens near an all-time low in Thursday’s Asian session. 
• A stronger USD, lacklustre sentiment in domestic equity markets, and sustained outflow of foreign funds weigh on the INR. 
• Investors await the Fedspeak on Thursday for a fresh impetus. 

The Indian Rupee (INR) declines to near a fresh record low on Thursday. The local currency remains under pressure on the back of a stronger US Dollar (USD) and higher crude oil prices. Slowing economic growth and foreign outflows from stocks also undermine the INR. 

On the other hand, the Reserve Bank of India (RBI) is likely to sell the USD to limit the INR’s losses. Investors will keep an eye on the Fedspeak on Thursday for more cues about the US interest rate outlook this year. On Friday, the attention will shift to the US employment data for December, including the Nonfarm Payrolls (NFP), Unemployment Rate and Average Hourly Earnings. 

Indian Rupee faces pressure amid a firmer USD and concerns over India's slowing economic growth 

• The Indian Rupee is likely to weaken to 86.8 per dollar this quarter, according to MUFG, while Citigroup Inc. expects it to fall to 86.35. USD/INR fell 0.2% to a new record closing low of 85.8550 on Wednesday. 
• India's economic growth rate is estimated to slip to a four-year low of 6.4% in FY25, down from 8.2% in FY24.
• The FOMC minutes from the Fed's December 17-18 meeting showed policymakers agreed inflation was likely to continue slowing this year but also saw a rising risk that price pressures could remain sticky due to the potential effect of Donald Trump's policies.
• The US weekly Initial Jobless Claims for the week ending January 4 declined to 201K from the previous week's print of 211K, according to the US Department of Labor (DOL) on Wednesday. This reading came in better than the market expectation of 218K. 
• Fed Governor Christopher Waller said on Wednesday that inflation should continue falling in 2025 and allow the US central bank to further cut interest rates, though at an uncertain pace, per Reuters. 

USD/INR maintains its positive tone, but an overbought RSI warrants caution for bulls

The Indian Rupee trades in negative territory on the day. The strong bullish outlook of the USD/INR pair remains intact as the pair is well-supported above the key 100-day Exponential Moving Average (EMA) on the daily timeframe. 

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 before positioning for any near-term USD/INR appreciation. 

The crucial resistance level for USD/INR emerges at the 85.95-86.00 zone, representing the all-time high and the psychological mark. A decisive break above this level could see a rally to 86.50. 

On the flip side, the initial support level for the pair is seen at 85.65, the low of January 7. A breach of the mentioned level could drag the pair lower to the next downside target at 84.51, the 100-day EMA.  

• NZD/USD remains subdued following China’s CPI inflation data released on Thursday.
• China's Consumer Price Index rose by 0.1% YoY in December, against the previous 0.2% increase.
• The US Dollar Index maintains its position near 109.00 amid rising hawkish sentiment surrounding the Fed.

NZD/USD continues to lose ground for the third successive session, trading around 0.5600 during the Asian hours on Thursday. The New Zealand Dollar (NZD) remains subdued following Chinese CPI inflation data. Traders are now focused on Friday’s US Nonfarm Payroll (NFP) report, for additional policy direction insights.

China's Consumer Price Index (CPI) increased by 0.1% year-on-year in December, slightly lower than the 0.2% rise in November, matching market expectations. On a month-on-month (MoM) basis, CPI inflation remained unchanged at 0% in December, aligning with estimates, following a 0.6% decline in November.

Additionally, the Kiwi Dollar faces challenges due to the growing likelihood of aggressive monetary easing by the Reserve Bank of New Zealand (RBNZ). The RBNZ is anticipated to reduce the current cash rate of 4.25% by 50 basis points during its February meeting.

The downside risks for the NZD/USD pair are bolstered by the increasing strength of the US Dollar (USD) amid rising hawkish sentiment surrounding the Federal Reserve’s (Fed) policy outlook in 2025. The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position near 109.00 following strong labor market figures.

US Initial Jobless Claims fell to 201,000 for the week ending January 3, beating the 218,000 consensus. ADP Employment Change rose by 122K in December, though below market expectations of 140K.

Additionally, long-term US bond yields continue climbing on heavy supply; the 10-year rose to 4.73%, while the 30-year approached 4.96% on Wednesday following the Federal Open Market Committee (FOMC) Minutes from the December meeting.

FOMC Minutes showed that Fed policymakers expressed concern about inflation and the impact that President-elect Donald Trump’s policies could have. Fed officials indicated they would be moving more slowly on rate reductions because of the uncertainty. Fed officials penciled the expected cuts in 2025 to two from four in the previous estimate at September’s meeting.

• The Japanese Yen strengthens in reaction to strong wage growth data from Japan. 
• The uncertainty over the likely timing of the next BoJ rate hike might cap the JPY.
• Hawkish Fed, and elevated US bond yields lend some support to the USD/JPY pair.

The Japanese Yen (JPY) ticks higher against its American counterpart after government data showed this Thursday that base pay in Japan grew at the fastest pace in more than three decades. This comes on top of talks that large Japanese firms are likely to increase wages by about 5% on average in 2025, which, along with broadening inflationary pressure, backs the case for another interest rate hike by the Bank of Japan (BoJ). Apart from this, the cautious market mood underpins the safe-haven JPY and drags the USD/JPY pair away from a multi-month peak, around the 158.55 region touched on Wednesday. 

Investors, however, remain skeptical about the likely timing of when the BoJ will hike interest rates again and expect the central bank to wait until this year's Shunto spring labor-management negotiations. Furthermore, the recent widening of the US-Japan rate differential, bolstered by the Federal Reserve's (Fed) hawkish signal that it would slow the pace of rate cuts in 2025, might contribute to capping the lower-yielding JPY. Traders might also opt to wait on the sidelines ahead of speeches by a slew of influential FOMC members later this Thursday and the US Nonfarm Payrolls (NFP) report on Friday. 

Japanese Yen draws support from a rise in Japan’s base salaries by the fastest pace in 32 years

• Government data released this Thursday showed that base salary, or regular pay, in Japan rose 2.7% in November, marking the fastest increase since 1992, while overtime pay grew 1.6% from a revised 0.7% gain in October.
• Meanwhile, inflation-adjusted real wages fell for the fourth consecutive month, by 0.3% in November. The inflation rate the ministry uses for wage calculation accelerated from 2.6% in October to 3.4% from a year earlier. 
• The Bank of Japan has repeatedly said sustained, broad-based wage hikes are a prerequisite for pushing up borrowing costs and the data support prospects for a further rate hike, providing a modest lift to the Japanese Yen.
• Investors, however, seem convinced that the BoJ will not pull the trigger at its next monetary policy meeting in January and wait until March amid the uncertainty over US President-elect Donald Trump's protectionist policies.
• CNN reported on Wednesday, citing unnamed sources familiar with the matter, that Trump is considering declaring a national economic emergency to provide legal justification for a series of universal tariffs on allies and adversaries.
• The yield on the benchmark 10-year US government bond shot to its highest level since April 25 in reaction to the news, which, to a larger extent, overshadowed mixed labor market data released from the US on Wednesday. 
• The Automatic Data Processing (ADP) reported that US private sector employment rose by 122,000 in December as compared to the 146,000 increase recorded in November and below the market expectation of 140,000.
• Separately, the US Department of Labor reported that the number of Americans filing new applications for unemployment benefits fell to an 11-month low of 201K in the week ending January 4, pointing to a stable labor market.
• Furthermore, the Minutes of the December 17-18 FOMC meeting revealed that policymakers were in favor of slowing the pace of rate cuts amid concerns about slower progress on curbing the pace of inflation toward the 2% target.
• Fed Governor Christopher Waller said that inflation should continue to fall and make further progress towards the 2% target, which should allow the US central bank to further reduce interest rates, though at an uncertain pace.
• Investors will continue to take cues from speeches by a slew of influential FOMC members later this Thursday, though the focus will remain glued to the closely-watched US Nonfarm Payrolls (NFP) report on Friday. 

USD/JPY is likely to attract some dip-buyers and find decent support near the 157.55-157.50 area

From a technical perspective, any subsequent slide is likely to attract some dip-buying near the 157.55-157.50 horizontal zone. Some follow-through selling, however, could make the USD/JPY pair vulnerable to accelerate the fall further towards the 157.00 mark en route to the next relevant support near the 156.75 region and the weekly low, around the 156.25-156.20 area. This is followed by the 156.00 mark, which if broken decisively might shift the bias in favor of bearish traders. 

On the flip side, the 158.55 region, or the multi-month top touched on Wednesday, now seems to act as an immediate hurdle. A sustained strength beyond could lift the USD/JPY pair to the 159.00 mark. The momentum could extend further towards the 159.45 intermediate hurdle before spot prices aim to reclaim the 160.00 psychological mark.

• The Australian Dollar loses ground after releasing mixed domestic data on Thursday.
• China's Consumer Price Index rose by 0.1% YoY in December, against the previous 0.2% increase.
• The US Dollar rose as the 10-year yield on Treasury bonds advanced following the FOMC Minutes release.

The Australian Dollar (AUD) extends its losses for the third consecutive day against the US Dollar (USD), with the AUD/USD pair holding losses following mixed economic data released on Thursday. Traders are now focused on Friday’s US Nonfarm Payroll (NFP) report, for additional policy direction insights.

Australia's trade surplus rose to 7,079 million in November, surpassing the expected 5,750 million and the previous reading of 5,670 million (revised from 5,953 million). Exports increased by 4.8% month-on-month (MoM) in November, up from 3.5% (revised from 3.6%) in October. Meanwhile, imports grew by 1.7% MoM in November, compared to 0% (revised from 0.1%) in the previous month.

Australia's Retail Sales, a key indicator of consumer spending, increased by 0.8% month-on-month in November, up from the 0.5% growth recorded in October (revised from 0.6%). However, the figure fell short of market expectations, which had anticipated a 1.0% rise.

China's Consumer Price Index (CPI) increased by 0.1% year-on-year in December, slightly lower than the 0.2% rise in November, matching market expectations. On a month-on-month (MoM) basis, CPI inflation remained unchanged at 0% in December, aligning with estimates, following a 0.6% decline in November.

Australian Dollar declines as US Dollar strengthens amid rising hawkish sentiment surrounding Fed

• The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, holds its position near 109.00 following strong labor market figures.
• The US Dollar strengthened as the 10-year yield on US Treasury bonds rose to near 4.73% in the previous session, currently standing at 4.67%, while the 30-year approached 4.93%.
• The Federal Open Market Committee (FOMC) Minutes from the December meeting revealed that most participants supported a 25 basis point cut but remained cautious, factoring in potential trade and immigration policy changes that could prolong elevated inflation.
• US Initial Jobless Claims fell to 201,000 for the week ending January 3, beating the 218,000 consensus. ADP Employment Change rose by 122K in December, though below market expectations of 140K.
• The US ISM Services PMI increased to 54.1 in November, up from 52.1, exceeding the market expectation of 53.3. The Prices Paid Index, which reflects inflation, rose significantly to 64.4 from 58.2, while the Employment Index dipped slightly to 51.4 from 51.5.
• According to Bloomberg, Federal Reserve Bank of Atlanta President Raphael Bostic stated on Tuesday that Fed officials should exercise caution with policy decisions due to uneven progress in reducing inflation. Bostic emphasized the need to lean toward keeping interest rates elevated to ensure the achievement of price stability goals.
• Richmond Fed President Thomas Barkin highlighted on Friday that the benchmark policy rate should remain restrictive until there is greater confidence that inflation will return to the 2% target. Meanwhile, 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.
• The Australian Dollar faced challenges as the trimmed mean, a closely watched measure of core inflation, fell to an annual 3.2% from 3.5%, edging closer to the Reserve Bank of Australia's (RBA) target band of 2% to 3%. Traders are currently pricing in a 55% probability that the RBA will lower its cash rate by 25 basis points to 4.35% in February, with a full quarter-point cut expected by April.
• Australia's monthly Consumer Price Index (CPI) rose 2.3% year-over-year in November, surpassing the market forecast of 2.2% and marking an increase from the 2.1% rise seen in the previous two months. This is the highest reading since August. However, the figure remains within the RBA’s target range of 2–3% for the fourth consecutive month, aided by the ongoing impact of the Energy Bill Relief Fund rebate.

Australian Dollar hovers around 0.6200, next barrier appears at nine-day EMA

The AUD/USD pair hovers near 0.6200 on Thursday, maintaining a bearish outlook as it continues to trade within a descending channel on the daily chart. The 14-day Relative Strength Index (RSI) remains slightly above 30, suggesting the potential for an intensification of bearish momentum.

On the downside, the AUD/USD pair could approach the lower boundary of the descending channel around the 0.5980 level.

The immediate resistance is seen near the nine-day Exponential Moving Average (EMA) at 0.6220, followed by the 14-day EMA at 0.6234. A stronger resistance level lies near the upper boundary of the descending channel, around 0.6260.

AUD/USD: Daily Chart

• WTI price attracts some sellers to $72.40 in Thursday’s Asian session. 
• The firmer USD weighs on the WTI, but the fear of supply disruptions might cap its downside. 
• US crude oil inventories declined by 959,000 last week, according to the EIA.

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $72.40 on Thursday. The WTI price edges lower amid the stronger US Dollar (USD). However, the concerns over supply disruptions might cap the downside for the WTI price. 

A strengthening of the Greenback exerts some selling pressure on the black gold as it makes oil more expensive for holders of other currencies. "The dollar's safe haven status is appreciated as fears of renewed U.S. inflationary pressure grow," said Tamas Varga, an analyst with oil broker PVM.

US crude oil inventories fell for a seventh consecutive week, which might support the WTI price. The US Energy Information Administration (EIA) weekly report showed crude oil stockpiles in the United States for the week ending January 3 declined by 959,000 barrels, compared to a fall of 1.178 million barrels in the previous week. The market consensus estimated that stocks would decrease by 250,000 barrels. 

Additionally, new sanctions on Iranian and Russian crude exports could limit global oil supplies and boost the black metal price. The Biden administration plans to impose more sanctions on Russia's oil exports ahead of Donald Trump's inauguration on January 20. 

Oil traders will take more cues from the Fedspeak later on Thursday. All eyes will be on the US employment data for December, which will be released on Friday. Any signs of a solid labor market could lift the Greenback and weigh on the USD-denominated commodity price in the near term. 

China’s Consumer Price Index (CPI) rose at an annual pace of 0.1% in December after reporting a 0.2% growth in November. The market consensus was for a 0.1% increase in the reported period.

Chinese CPI inflation came in at 0% MoM in December versus November’s 0.6% decline, in line with the 0% estimate.

China’s Producer Price Index (PPI) declined 2.3% YoY in December, following a 2.5% fall in November. The data came in line with the market consensus of -2.3%.  

Market reaction to China’s inflation data

At the press time, the AUD/USD pair is down 0.22% on the day to trade at 0.6203.

The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Thursday at 7.1886 as compared to the previous day's fix of 7.1887 and 7.3159 Reuters estimates.

Australia’s trade surplus increased to 7,079M MoM in November versus 5,750M expected and 5,670M (revised from 5,953M) in the previous reading, according to the latest foreign trade data published by the Australian Bureau of Statistics on Thursday.

Further details reveal that Australia's Exports climbed by 4.8% MoM in November from 3.5% (revised from 3.6%) seen a month earlier. Meanwhile, Imports rose by 1.7% MoM in November, compared to 0% (revised from 0.1%) seen in October.  

Market reaction to Australia’s Trade Balance

At the press time, the AUD/USD pair is down 0.29% on the day to trade at 0.6198. 

Australia’s Retail Sales, a measure of the country’s consumer spending, rose 0.8% MoM in November, compared to an increase of 0.5% in October (revised from 0.6%), the official data published by the Australian Bureau of Statistics (ABS) showed on Thursday.

The reading came in below the market expectations of a 1.0% growth. 

Market reaction to Australia’s Retail Sales data

At the time of writing, the AUD/USD pair is down 0.15% on the day at 0.6207.

• USD/CAD softens to around 1.4380 in Thursday’s early Asian session.
• Fed Minutes signalled a cautious approach to rate cuts.
• Justin Trudeau’s resignation and a rise in crude oil prices support the Loonie. 

The USD/CAD pair weakens to near 1.4380 during the early Asian session on Thursday. The resignation of Canadian Prime Minister Justin Trudeau and higher crude oil prices provide some support to the Loonie. Traders will take more cues from the Fedspeak on Thursday. The Canadian and the US employment data for December will be the highlights on Friday.

The prospect of a slower pace of interest rate cuts by the US Federal Reserve (Fed) could lift the Greenback in the near term. The Minutes from the Federal Reserve’s (Fed) December 17-18 meeting showed policymakers agreed inflation was likely to continue slowing this year but also saw a rising risk that price pressures could remain sticky due to the potential effect of Donald Trump's policies.

On the Loonie front, Canadian Prime Minister Justin Trudeau announced his resignation on Monday, saying he intended to step down from the leader of Canada’s ruling Liberal Party once a new party leader is chosen. A Canadian election may take place in the spring and must be held on October 20, with polls indicating that the opposition Conservatives will win. This, in turn, boosts the Canadian Dollar (CAD) against the USD. Additionally, a rise in crude oil prices contributes to the CAD’s upside as Canada is the largest oil exporter to the United States.