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CFD Markets News and Forecasts — 27-12-2024
- NZD/JPY inches higher on Friday, touching 88.90 and holding recent upside momentum.
- MACD bars remain green but have flattened, signaling cautious optimism amid lingering downside risks.
- RSI moves up to 51, entering positive territory as buyers tentatively return.
NZD/JPY added a modest 0.20% on Friday, climbing to 88.90 and building on the gains seen since the pair broke above its 20-day Simple Moving Average (SMA). This move comes after a notable loss of ground prompted by a breakout from a sideways trading range between 90.00 and 92.00, underscoring the pair’s ongoing effort to regain its footing.
Under the hood, the Relative Strength Index (RSI) has shifted to 51, sitting just inside the positive zone and hinting at a mild uptick in buying interest. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram remains above zero but has flattened out, suggesting that bullish momentum may need a further push to gain traction.
Looking ahead, a firm close above the 20-day SMA could help solidify the recovery, potentially targeting resistance points closer to 90.00. Should the pair slip back below this moving average, however, NZD/JPY could once again be vulnerable to renewed selling pressure.
NZD/JPY daily chart
- Aussie dips to 0.6215 on a quiet Friday session.
- Year-end lull keeps markets subdued.
- RBA dovish bets rise amid easing inflation and mixed economic outlook.
The Australian Dollar pair trades in a very tight range near the yearly support of 0.6200 in Friday’s session. The Aussie struggles for direction as global market activity remains muted, with traders largely focused on New Year festivities. Thin liquidity and lingering policy uncertainties contribute to the currency’s softness.
Daily digest market movers: Aussie continues soft and struggles to gain traction, USD strength
- December’s highlight was that the US Federal Reserve cut rates by 25 basis points but Chair Jerome Powell highlighted cautious further easing as inflation remains stubborn. In addition, the bank showed that it now sees less cuts than expected in 2025.
- To add to that, potential new tariffs under the incoming Trump administration could stoke higher prices, tempering the pace of Fed rate reductions into 2025.
- Market participants weigh Trump’s proposed deregulation, tax cuts, and potential tariff hikes, which could boost US growth and inflation, favoring a stronger USD.
- The Australian Dollar remains pressured as RBA minutes show officials confident in easing inflation, paving the way for potential rate cuts as soon as February.
- RBA Governor Michele Bullock reiterated a data-driven approach, underscoring no explicit discussion of a February rate cut, though odds stand at 65%.
AUD/USD technical outlook: Aussie extends losses as oversold signals build
The AUD/USD declined to 0.6215 on Friday, hovering near its yearly low. The Relative Strength Index (RSI) sits at 27, signaling deeper oversold territory with a mild downward bias. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram prints flat red bars, indicating persistent selling pressure. Despite the pair’s extended losses, thin holiday trading volumes could limit any pronounced move, leaving the Aussie vulnerable to further downside without a clear catalyst.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- DXY trades near 107.90 on Friday on a tight range.
- Trading desks remain short-staffed contributing to a muted trading.
- Holiday momentum keeps Dollar elevated as 2025 comes to an end.
The US Dollar Index, which measures the value of the USD against a basket of currencies, is trading within a very tight range on Friday, holding near 108.00 mark. Markets remain cautious, and thin year-end trading conditions limit volatility. Incoming data from Japan and China hinted at further industrial slowdown, but the Greenback’s buoyancy persists. Despite profit-taking after last week’s gains, the US Dollar continues its climb as traders return from Christmas holidays.
Daily digest market movers: US Dollar eyes robust growth outlook
- Government shutdown risks rise after House Republicans failed to pass a funding deal. Historically, short shutdowns have limited economic fallout, and Treasury has room to maneuver before any default risk escalates.
- Longer-term yields keep climbing. The 10-year Treasury yield hovers near 4.60%, and the 30-year stands at 4.77%, both testing highs not seen since May.
- The US Dollar stands on track for a near 7% annual gain as traders anticipate robust US growth and limited rate cuts in 2025, as Fed Chair Jerome Powell signals caution on further easing.
- Chinese stimulus measures and deposit rate cuts have supported local markets, but the Dollar shrugs off these developments, remaining broadly bid into year-end.
DXY technical outlook: Indicators hold upward traction
The Dollar Index maintains its bullish momentum, with indicators pointing higher and nearing overbought levels. Despite thin trading liquidity, the DXY keeps inching upward near 108.00, reflecting continued buying interest. As long as the index remains above 106.00, the technical picture stays positive.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- The Canadian Dollar tested back into recent lows and struggled to find gains.
- Canada’s economic data docket remains incredibly thin in the near term.
- Policy rate divergence is set to be the Loonie’s primary driver heading into 2025.
The Canadian Dollar (CAD) continued its soft stance on Friday, easing into familiar near-term lows and shedding one-quarter of one percent against the US Dollar. The Loonie is entering a lull period with functionally no releases on the data docket in the immediate future, leaving CAD traders to battle it out near multi-year lows.
Following the midweek market closure for the Christmas holiday, a soft-footed market footprint remains ahead of the New Year’s midweek holiday next Wednesday.
Daily digest market movers: Battered CAD holds near multi-year lows
- The Canadian Dollar continues to churn chart paper near 56-month lows, bolstering the USD/CAD rate back above the 1.4400 handle.
- Constrained holiday markets will bleed slowly into the new year, but volumes to remain crimped for the time being.
- Canadian economic data is entirely absent from the release schedule next week.
- The upcoming New Year’s midweek market closure will further hobble market flows.
- The Bank of Canada (BoC) is expected to continue easing rates, while the Federal Reserve (Fed) is poised to slowe the pace of cuts in 2025, widening the policy rate divergence currently pummeling the Loonie.
Canadian Dollar price forecast
The Canadian Dollar is back into the low side to wrap up the Christmas trading week, falling against the Greenback and pushing USD/CAD into the high end of recent chart congestion. The pair continues to drift higher as bids trade well north of the 50-day Exponential Moving Average (EMA) near 1.4100.
December is poised to close out deep in the green and will notch in a fourth consecutive gain month for USD/CAD as the Loonie crumples. Both Greenback bidders and Loonie shorts will target a long-term barrier near 1.4700, where the pair would be pushing into its highest bids in over 20 years. For now, the uptrend must overcome December’s peak of 1.4467.
USD/CAD daily chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- The Dow Jones lost 400 points on Friday.
- Holiday markets traded on the low side, Dow ended the week flat.
- Another midweek holiday next week will crimp market volumes.
The Dow Jones Industrial Average (DJIA) shed around 400 points on a quiet Friday. Most investors are still out of the markets on holidays and thin volumes have left the Dow Jones roughly a full percent lower.
Holiday market flows are in full swing in equities, with a broad-base cooling effect in the long-run tech rally as investors pull up stakes and do some light profit-taking ahead of the rollover into the new year. A thin data release schedule this week, followed by another midweek holiday next week, leaves equity indexes on the tepid side in the near term.
Traders are still grappling with the Federal Reserve’s (Fed) recent pivot into expectations of less rate cuts in 2025 than previously expected. According to the Fed’s latest Summary of Economic Projections (SEP), policymakers only expect another two quarter-point rate cuts through next year, hobbling market expectations for a steeper decline in the headline reference rate.
Dow Jones news
Despite an overall blustery year that saw the Down Jones climb nearly 21.5% bottom-to-top, the major equity index still got coal in its stocking as December turns deeper into the red and pares away November’s heady gains. All but five of the Dow’s listed securities are testing into the red on Friday, with losses led by Nvidia (NVDA), which fell over 2% and is back below $137 per share.
Nvidia appears to have shrugged off recent reports that its latest Blackwell AI-focused chipset may have experienced an overheating problem, but fresh woes for the AI-fueled tech rally have cropped up as investors weigh the prospect of stiffer restrictions on Chinese access to US-manufactured silicon solutions. An outsized amount of Chinese demand for recently-developed AI-focused chipsets could leave profit expectations for Nvidia in the lurch if regulations hamper trade.
Dow Jones price forecast
The Dow Jones’ stellar 2024 run appears to be taking a breather after declining for three consecutive weeks. The DJIA is down nearly 5% from record highs above 45,000, testing the waters just south of the 43,000 handle.
The Dow Jones has fallen below its 50-day Exponential Moving Average (EMA) near 43,345 for the second time in as many months, but price action is still holding well above the 200-day EMA near 40,960 after bids found a technical floor near 42,000.
Dow Jones daily chart
Dow Jones FAQs
The Dow Jones Industrial Average, one of the oldest stock market indices in the world, is compiled of the 30 most traded stocks in the US. The index is price-weighted rather than weighted by capitalization. It is calculated by summing the prices of the constituent stocks and dividing them by a factor, currently 0.152. The index was founded by Charles Dow, who also founded the Wall Street Journal. In later years it has been criticized for not being broadly representative enough because it only tracks 30 conglomerates, unlike broader indices such as the S&P 500.
Many different factors drive the Dow Jones Industrial Average (DJIA). The aggregate performance of the component companies revealed in quarterly company earnings reports is the main one. US and global macroeconomic data also contributes as it impacts on investor sentiment. The level of interest rates, set by the Federal Reserve (Fed), also influences the DJIA as it affects the cost of credit, on which many corporations are heavily reliant. Therefore, inflation can be a major driver as well as other metrics which impact the Fed decisions.
Dow Theory is a method for identifying the primary trend of the stock market developed by Charles Dow. A key step is to compare the direction of the Dow Jones Industrial Average (DJIA) and the Dow Jones Transportation Average (DJTA) and only follow trends where both are moving in the same direction. Volume is a confirmatory criteria. The theory uses elements of peak and trough analysis. Dow’s theory posits three trend phases: accumulation, when smart money starts buying or selling; public participation, when the wider public joins in; and distribution, when the smart money exits.
There are a number of ways to trade the DJIA. One is to use ETFs which allow investors to trade the DJIA as a single security, rather than having to buy shares in all 30 constituent companies. A leading example is the SPDR Dow Jones Industrial Average ETF (DIA). DJIA futures contracts enable traders to speculate on the future value of the index and Options provide the right, but not the obligation, to buy or sell the index at a predetermined price in the future. Mutual funds enable investors to buy a share of a diversified portfolio of DJIA stocks thus providing exposure to the overall index.
- EUR/USD registers a minor uptick on Friday, trading near 1.0430 after recent losses.
- RSI climbs to 44 in negative territory, indicating a tepid recovery but still suggesting sellers hold the upper hand.
- MACD histogram shows flat green bars, hinting at fading bearish momentum while the 20-day SMA remains a key hurdle.
The EUR/USD pair ended a shortened week with a modest bounce, inching up to around 1.0430 on Friday. While this uptick offers brief respite from recent declines, the pair continues to trade below the 20-day Simple Moving Average (SMA), highlighting the prevailing downtrend. The SMA, parked above current price levels, will be the first target on the agenda in 2025 if buyers seek to bolster a more constructive outlook.
Technical signals are mixed but lean cautiously toward the downside. The Relative Strength Index (RSI) has risen sharply to 44, yet it remains entrenched in negative territory, suggesting that bullish efforts are tentative at best. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram shows flat green bars, implying that the market may be losing some of its earlier bearish traction but has yet to shift decisively in favor of the bulls.
Looking ahead, traders will need to see a sustained move above the 20-day SMA to confirm a meaningful trend change. In the absence of such a breakthrough, the pair is likely to stay vulnerable to fresh selling pressure, keeping downside risks in play despite the recent stabilization in price action.
EUR/USD daily chart
- NZD/USD gains to near 0.5630 as the US Dollar ticks lower in a thin trading volume day.
- The Fed is expected to cut interest rates two times next year.
- Investors expect that the RBNZ will cut interest rates by 50 bps in February.
The NZD/USD pair moves higher to near 0.5630 in Friday’s North American session. The Kiwi pair gains as the US Dollar (USD) drops in a holiday-thinned trade. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, ticks lower to near 107.90.
The near-term outlook for the Greenback remains firm, as the Federal Reserve (Fed) has guided a more gradual rate-cut approach for 2025. A recent Fed dot plot showed that policymakers collectively see Federal Fund rates heading to 3.9% by the end of 2025, suggesting that there will be two interest rate cuts of 25 basis points (bps) next year.
Meanwhile, the broader outlook for the New Zealand Dollar (NZD) remains weak, as the Reserve Bank of New Zealand (RBNZ) is expected to continue aggressively reducing interest rates. The NZ economy sank into a recession in the third quarter, fueling the need for more interest rate cuts.
The RBNZ has already reduced its key Official Cash Rate (OCR) by 125 bps this year and is expected to cut further by 50 bps in the policy meeting in February.
NZD/USD finds a temporary cushion near the two-year low of 0.5520 on a weekly timeframe. The outlook of the Kiwi pair remains bearish as the 20-week Exponential Moving Average (EMA), which trades around 0.5900.
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 four-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 other hand, 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 daily chart
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- AUD/USD consolidates around 0.6200 amid thin trading volume following the Christmas and Boxing Day holidays.
- The RBA becomes confident over inflation easing in line with their expectations.
- The Fed turns cautious in interest rate cuts as progress in inflation towards the central bank’s target of 2% has stalled.
The AUD/USD pair trades in a very tight range near the yearly support of 0.6200 in Friday’s North American session. The Aussie pair struggles for direction as the price action is broadly muted in global markets amid thin trading volume, given that traders are busy welcoming the New Year.
The Australian Dollar (AUD) is currently exposed to a fresh downside move below 0.6200 against the US Dollar (USD) as the Reserve Bank of Australia (RBA) minutes for December’s policy meeting showed that policymakers have become confident that price pressures are easing in line with their expectations, which makes “appropriate for them” to begin relaxing the “degree of monetary policy tightness”.
This has led to an increase in RBA dovish bets. Traders expect the RBA to start reducing its key borrowing rates from the policy meeting in February.
Meanwhile, the US Dollar (USD) drops slightly, with the US Dollar Index (DXY) struggling to hold the key support of 108.00. The Greenback ticks lower while its outlook remains firm as the Federal Reserve (Fed) is expected to deliver fewer interest rate cuts in 2025.
The Fed has shifted its stance from “dovish” to “cautionary” on interest rates as progress in the disinflation trend has stalled in last three months and labor market conditions are not as bad as they appeared in the September meeting. Additionally, policymakers see incoming immigration, tariff and tax policies from the US President-elect Donald Trump as inflationary for the economy.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- The US Dollar trades broadly stable in very calm holiday trading
- Monthly Industrial Production in Japan fell by 2.3%, less than the expected 3.5%, while big Chinese manufacturers also reported falling profits.
- The US Dollar Index (DXY) resides at 108.00, close to a two-year high.
The US Dollar (USD) is trading within a very tight range on Friday, with the DXY index holding above 108.00, as markets remain cautious and trading desks are short-staffed due to the Christmas holiday. The Dollar failed to react to more action in Asian markets, with data signaling further contraction in Japan’s Industrial Production and Chinese industrial companies reporting lower profits.
The US economic calendar is very light on Friday, with the preliminary Goods Trade Balance and the Wholesale Inventories data. Not much movement is expected from these data points. So a rather steady trading session is expected.
Daily digest market movers: Markets indigestion
- At 13:30 GMT both data points from the US for this Friday will be released:
- The November Goods Trade Balance is expected to show a widening deficit of 100.9 billion USD against the previous 98.7 billion USD deficit.
- November Wholesale Inventories are expected to grow at a stable 0.2%.
- Equities trade mixed on Friday, with all US equity futures trading in the red before the opening bell.
- The CME FedWatch Tool for the first Fed meeting of 2025 on January 29 sees an 89.3% chance for a stable policy rate against a small 10.7% chance for a 25 basis points rate cut.
- The US 10-year benchmark rate trades at 4.60%, not far from this week’s high at 4.64%.
US Dollar Index Technical Analysis: Not much going on
The US Dollar Index (DXY) is not expected to attack any firm levels this Friday given the low liquidity and only a handful of market participants present between Christmas and New Year. Any big movements aren’t expected unless an outside event takes place on the geopolitical front. It looks like the DXY will head into New Year’s Eve trading just above 108.00.
On the upside, a trend line originating from December 28, 2023, is acting as a moving cap. The next firm resistance comes in at 109.29, which was the peak of July 14, 2022, and has a good track record as a pivotal level. Once that level is surpassed, the 110.00 round level comes into play.
The first downside barrier comes in at 107.35, which has now turned from resistance into support. The second level that might be able to halt any selling pressure is 106.52. From there, even 105.53 could come under consideration while the 55-day Simple Moving Average (SMA) at 105.83 is making its way up to that level.
US Dollar Index: Daily Chart
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
- Oil prices are up near 1.00% this Friday ahead of last Oil data points for 2024.
- With the unusual trading week due to Christmas, all data has been moved to Friday.
- The US Dollar Index trades flat and resides just above 108.00, heading into New Years Eve next week.
Crude Oil prices increase on Friday as traders brace for a string of data releases in the US trading session, including stockpile data from the Energy Information Administration (EIA), which was moved due to the Christmas Day holiday on Wednesday. While other asset classes are seeing low volatility, it looks like Oil prices are set to see some last spikes before the week ends.
The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – remains residing just below the two-year high at around 108.00. The Greenback has seen volatility die down and is not expected to pick up much towards New Year’s Eve. With its current position, a fresh two-year high could still be hit before the end of the year in case an outside event takes place.
At the time of writing, Crude Oil (WTI) trades at $70.00 and Brent Crude at $73.33.
Oil news and market movers: Schedule ahead
- At 15:30 GMT, the Energy Information Administration (EIA) will release its weekly Gas Storage Change number. The previous week's storages stood at 125 billion cubic meters.
- At 17:00 GMT, the EIA will release the Crude Oil stockpile change numbers. The expectation is for a drawdown of 2 million barrels against the previous drawdown of 0.934 million barrels.
- On Tuesday, the weekly US American Petroleum Institute (API) stockpile data showed a draw of 3.2 million barrels, lower than the 4.7 million decline seen a week earlier.
- At 18:00 GMT, the Baker Hughes Oil Rig Count will close off this Friday. No forecast is available, with the previous reading at 483 rigs operational.
Oil Technical Analysis: Save the best for last
Crude Oil price action could be an outlier on Friday as other assets are fully into the Christmas market lull. With still some key data points to digest, Oil traders will need to be on point because there will be a very limited window of opportunity to trade. Expect to see some brief volatile moves, although any possible rally will lack fundamentals to extend into 2025.
Looking up, the 100-day Simple Moving Average (SMA) at $70.59 and $71.46 (February 5 low) act as firm resistance levels nearby. Should more tailwinds emerge in support for Oil, the next pivotal level will be $75.27 (January 12 high). However, watch out for quick profit-taking as the year-end quickly approaches.
On the downside, $67.12 – a level that held the price in May and June 2023 and during the last quarter of 2024 – is still the first solid support nearby. In case that breaks, the 2024 year-to-date low emerges at $64.75, followed by $64.38, the low from 2023.
US WTI Crude Oil: Daily Chart
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- USD/CAD consolidates around 1.4400 on a thin trading volume day.
- The Fed sees two interest rate cuts next year amid improving economic conditions.
- The BoC has already reduced its key borrowing rates by 125 bps this year to 3.25%.
The USD/CAD pair trades in a tight range around 1.4400 in Friday’s European session. The Loonie pair consolidates as trading activity has muted in a holiday-curtailed week. The US Dollar (USD) trades sideways, but its outlook remains broadly firm on expectations that the Federal Reserve (Fed) will take a slower path of interest rate cuts compared with other central banks.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, oscillates above 108.00.
In the latest monetary policy meeting, the Fed signaled two interest rate cuts for 2025. Officials are confident about the United States (US) economic outlook and labor market conditions appear better than previously anticipated.
Meanwhile, the broader outlook for the Canadian Dollar (CAD) remains weak, as the Bank of Canada (BoC) has followed an aggressive policy-easing spell this year. The BoC has reduced interest rates by 175 basis points (bps) to 3.25% this year and is expected to cut further, as officials are worried about growing economic risks.
USD/CAD has shown a stalwart rally after a breakout of the Ascending Triangle chart pattern on a weekly timeframe. Upward-sloping 20-day Exponential Moving Average (EMA) near 1.4000 suggests that the overall trend is bullish.
The 14-day Relative Strength Index (RSI) oscillates in the bullish range of 60.00-80.00, suggesting that a strong upside momentum is intact.
The rally in the Loonie pair could advance to the psychological resistance of 1.4500 and Mar 2020 high of 1.4668 if the asset breaks above the previous week high of 1.4433.
On the contrary, a downside move below the December 11 low of 1.4120 could drag the asset towards the December 4 high of around 1.4080, followed by the psychological support of 1.4000.
USD/CAD weekly chart
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- Silver price drops sharply to near $29.60 as US bond yields rise on expectations that the Fed will follow gradual rate-cut cycle in 2025.
- Heightened geopolitical tensions in Middle East failed to uplift the Silver price.
- The outlook of the Silver price has weakened amid a breakdown of the upward-sloping trendline around $30.00.
Silver price (XAG/USD) falls to near $29.60 in a thin trading volume session following holidays on Christmas and Boxing Day on Friday. The white metal is under pressure even though tensions in the Middle East region between Israel and Iran have escalated.
On Thursday, Israel launched missiles at the Iran-backed Houthis military and bombed Yemini airport. After the air assault, Israeli Prime Minister Benjamin Netanyahu said in an interview with an Israeli TV station of the Houthis, “We are just getting started with them”. Israel retaliated to last week’s air assault by Iran.
Historically, heightened geopolitical tensions improve the demand for safe-haven assets, such as Silver.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, oscillates in a tight range above the key support of 108.00. 10-year US Treasury yields rise to near 4.61%. Higher yields on interest-bearing assets elevate the opportunity cost of non-yielding assets, making them an expensive bet for investors.
US bond yields remain firm on expectations that the Federal Reserve (Fed) will deliver fewer interest rate cuts in 2025. The Fed is expected to slow down the policy-easing cycle amid confidence in the United States (US) economic outlook.
Silver technical analysis
Silver price stays below the upward-sloping trendline, plotted from the February 29 low of $22.30 on a daily timeframe, after a breakdown near $30.00. The white metal wobbles around the 200-day Exponential Moving Average (EMA), suggesting that the longer-term outlook is uncertain.
The 14-day Relative Strength Index (RSI) rebounds to near 40.00. A fresh bearish momentum would trigger if it fails to break above that level.
Looking down, the September low of $27.75 would act as key support for the Silver price. On the upside, the 50-day EMA around $30.90 would be the barrier.
Silver daily chart
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- The Pound Sterling weakens slightly as investors expect the BoE to follow a less gradual policy easing cycle in 2025 than previously anticipated.
- Traders project at least two BoE interest rate cuts of 25 bps next year.
- US Initial Jobless Claims surprisingly fell to 219K last week.
The Pound Sterling (GBP) registers minor losses against its major peers on Friday, with investors looking for fresh cues about how the Bank of England (BoE) will follow the interest rate cut path in 2025. The latest BoE policy announcement in mid-December indicated a dovish buildup as the nine Monetary Policy Committee (MPC) voted 6-3 to keep interest rates on hold, a bigger split than the 8-1 economists had predicted.
A higher number of BoE officials voting for an interest rate cut has led traders to gradually raise dovish bets for 2025. Markets currently see a 53-basis points (bps) reduction in interest rates in 2025, up from 46 bps after the BoE policy announcement on December 19, suggesting that there will be at least two meetings in which officials will reduce key borrowing rates by 25 bps.
Meanwhile, BoE Governor Andrew Bailey has not guided a specific policy easing path for 2025, citing heightened uncertainty in the United Kingdom (UK) economy.
Daily digest market movers: Pound Sterling trades in tight range against US Dollar
- The Pound Sterling oscillates in a tight range above the psychological support of 1.2500 against the US Dollar on Friday amid thin trading volume following Christmas and Boxing Day. The GBP/USD pair is expected to continue trading sideways as the activity will likely remain muted. However, any price action could be on the bearish side as investors remain confident that the Federal Reserve (Fed) will deliver fewer interest rate cuts in 2025, supporting the USD. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, wobbles around 108.00.
- Fed officials have collectively forecasted that the Federal fund rate will be at 3.9% by the end of 2025, suggesting that there will be two interest rate cuts next year against the four cuts projected in September. The Fed has turned cautious on interest rate cuts as the growth outlook is positive and the labor market is holding up.
- Initial Jobless Claims for the week ending December 20 have also come in lower than expected. Individuals claiming jobless benefits for the first time surprisingly fell to 219K from the former release of 220K. Economists expected the number of jobless claims to come in higher at 224K.
- Additionally, inflationary pressures have turned out stubborn in the past few months. This scenario has renewed fears of price pressures remaining persistent.
- Going forward, the major trigger for the US Dollar will be revised estimates for S&P Global and ISM Manufacturing Purchasing Managers’ Index (PMI) data for December, which will be released next week.
Technical Analysis: Pound Sterling remains weak on declining short-to-long-term EMAs
The Pound Sterling remains vulnerable against the US Dollar after a breakdown below the upward-sloping trendline around 1.2600, which is plotted from the October 2023 low of 1.2035.
All short-to-long-term Exponential Moving Averages (EMAs) are sloping down, suggesting a strong bearish trend in the long run.
The 14-day Relative Strength Index (RSI) falls below 40.00. A fresh downside momentum could trigger if the oscillator sustains below this level.
Looking down, the pair is expected to find a cushion near the April 22 low at around 1.2300 if it breaks below the immediate support of 1.2485. On the upside, the December 17 high at 1.2730 will act as key resistance.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Silver prices (XAG/USD) fell on Friday, according to FXStreet data. Silver trades at $29.67 per troy ounce, down 0.41% from the $29.80 it cost on Thursday.
Silver prices have increased by 24.70% since the beginning of the year.
| Unit measure | Silver Price Today in USD |
|---|---|
| Troy Ounce | 29.67 |
| 1 Gram | 0.95 |
The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 88.51 on Friday, up from 88.42 on Thursday.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
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- EUR/USD oscillates around 1.0400 amid thin trading volume, while its broader outlook remains weak amid a firm US Dollar.
- The Greenback remains firm as the Fed is expected to deliver fewer interest rate cuts in 2025.
- Investors expect the ECB to reduce its Deposit Facility rate by a further 100 bps next year.
- US Initial Jobless Claims for the week ending Dec 20 surprisingly fell to 219K.
EUR/USD trades in a narrow range around 1.0400 in Friday’s European session amid thin trading as market participants stay on the sidelines due to the Christmas holiday. The pair struggles for direction while the US Dollar (USD) ticks higher on firm expectations that the Federal Reserve (Fed) will follow a gradual policy-easing path as inflation has rebounded slightly in the last three months.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, stays above the crucial support of 108.00.
The performance of the USD has remained upbeat in the last few months in part by expectations of firm growth under the administration of United States (US) President-elect Donald Trump and growing speculation of a slowdown in the Fed’s easing cycle.
The latest Fed dot plot showed that policymakers see Federal fund rates heading to 3.9% by the end of 2025, suggesting that there will be two interest rate cuts next year instead of the four trims previously anticipated.
Despite the latest signs from the dot plot, analysts at BCA research say that the Fed will cut rates by more than 50 basis points (bps) next year amid expectations that price pressures will undershoot central bank’s target of 2% and the jobless rate will rise over Fed’s forecast of 4.3%. The report added that fewer interest rate cuts would require a “significant improvement in labor market momentum, a trend shift we don’t view as particularly likely”.
On the economic front, US Initial Jobless Claims data for the week ending December 20 came in lower than expected. Individuals claiming jobless benefits for the first time surprisingly fell to 219K from the former release of 220K. Economists expected the number of jobless claims to come in higher at 224K.
Daily digest market movers: EUR/USD trades sideways while Euro’s outlook remains fragile
- EUR/USD struggles for direction at the year-end while the overall outlook of the Euro (EUR) remains downbeat as the European Central Bank (ECB) is expected to continue pushing interest rates lower at the current pace until the first half of 2025.
- The ECB has already reduced its Deposit Facility rate by 100 bps this year and is expected to deliver another 100-bps interest rate reduction next year as the Eurozone inflation has come under control. Still, inflation is higher than the central bank’s target of 2%.
- ECB President Christine Lagarde said on Monday that she is confident about further progress in the disinflation trend. “We're getting very close to that stage when we can declare that we have sustainably brought inflation to our medium-term 2%”, Lagarde said in an interview with the Financial Times (FT). However, she still believes that “we (policymakers) should be very vigilant about inflation in the services sector.”
- Recent commentaries from almost all ECB policymakers have indicated that they have agreed to market expectations for a consistent reduction in interest rates until the benchmark deposit rate reaches 2%, which they see as a neutral rate, to avoid risks of inflation undershooting the bank’s target of 2%.
Technical Analysis: EUR/USD wobbles above two-year low of 1.0330
EUR/USD consolidates in a tight range since Monday above the two-year low of 1.0335. The outlook of the major currency pair remains bearish as the 20-day and 50-day Exponential Moving Averages (EMAs) at 1.0464 and 1.0588, respectively, are declining.
The 14-day Relative Strength Index (RSI) oscillates near 40.00. A downside momentum would trigger if it sustains below that level.
Looking down, the asset could decline to near the round-level support of 1.0200 after breaking below the two-year low of 1.0330. Conversely, the 20-day EMA near 1.0500 will be the key barrier for the Euro bulls.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CHF rises due to rising odds of fewer rate cuts by the Federal Reserve next year.
- The Fed revised its 2025 projections, now anticipating only two rate cuts, down from the previously forecasted four.
- The Swiss Franc may depreciate as SNB President Martin Schlegel suggested that interest rates might dip below zero.
USD/CHF recovers its recent losses from the last two sessions amid thin trading activity following the Christmas holiday, trading around 0.9000 during the European hours on Friday. This upside of the USD/CHF pair could be attributed to a stronger US Dollar (USD), driven by growing expectations of fewer rate cuts by the US Federal Reserve (Fed).
In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four. However, the likelihood of additional rate cuts next year was tempered by moderate US PCE inflation data.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as US Treasury bond yields remain subdued on Friday. 2-year and 10-year yields stand at 4.33% and 4.58%, respectively, at the time of writing.
The USD/CHF pair faced headwinds as the Swiss Franc (CHF) strengthened following the release of Swiss GDP data, which indicated stronger-than-expected economic growth and an acceleration in Q3 on a year-over-year basis. However, recent remarks from Swiss National Bank President Martin Schlegel, suggesting that interest rates in Switzerland might dip below zero, remain fresh in traders' minds.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
Here is what you need to know on Friday, December 27:
Trading action in financial markets remain choppy on Friday as trading conditions stay thin following the Christmas break. The US economic calendar will feature preliminary Goods Trade Balance and Wholesale Inventories data for November.
Wall Street's main indexes closed little changed on Thursday and the US Dollar (USD) Index ended the day flat. The USD Index fluctuates in a very tight range above 108.00 in the European morning on Friday and US stock index futures trade in negative territory, reflecting a cautious mood. The US Department of Labor reported on Thursday that the weekly Initial Jobless Claims decreased slightly to 219,000 in the week ending December 21, from 220,000 in the previous week. This reading came in better than the market expectation of 224,000.
US Dollar PRICE This week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.23% | 0.38% | 0.90% | 0.27% | 0.48% | 0.44% | 0.83% | |
| EUR | -0.23% | 0.11% | 0.61% | 0.02% | 0.31% | 0.19% | 0.59% | |
| GBP | -0.38% | -0.11% | 0.43% | -0.09% | 0.18% | 0.08% | 0.48% | |
| JPY | -0.90% | -0.61% | -0.43% | -0.60% | -0.35% | -0.44% | -0.15% | |
| CAD | -0.27% | -0.02% | 0.09% | 0.60% | 0.25% | 0.17% | 0.57% | |
| AUD | -0.48% | -0.31% | -0.18% | 0.35% | -0.25% | -0.12% | 0.28% | |
| NZD | -0.44% | -0.19% | -0.08% | 0.44% | -0.17% | 0.12% | 0.36% | |
| CHF | -0.83% | -0.59% | -0.48% | 0.15% | -0.57% | -0.28% | -0.36% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
During the Asian trading hours, the data from Japan showed that the Tokyo Consumer Price Index rose 3% on a yearly basis in December, following the 2.6% increase recorded in November. Meanwhile, the Bank of Japan's Summary of Opinions from the December policy meeting showed that one member argued that it was necessary to adjust the degree of monetary support in a preemptive manner, while another member said that the timing for a rate hike was approaching but they needed to be patient due to the uncertainty in the US economy. USD/JPY touched its strongest level since mid-July above 158.00 late Thursday before entering a consolidation phase. At the time of press, the pair was trading in the red at around 157.70.
GBP/USD registered small losses on Thursday but managed to stabilize above 1.2500 early Friday.
Gold edged higher on Thursday and gained more than 0.5% on a daily basis. XAU/USD clings to small gains above $2,630 in the European morning on Friday and looks to end the week in positive territory.
EUR/USD struggles to gain traction and retreats toward 1.0400 after closing marginally higher on Thursday.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- AUD/USD receives downward pressure from rising odds of fewer rate cuts by the US Federal Reserve.
- RBA hinted at potential rate cuts in 2025, with markets anticipating a reduction to 3.6% by year-end.
- The Australian Dollar struggles due to growing concerns about China's economic health.
AUD/USD continues to lose ground for the fifth successive day, trading around 0.6220 during the Asian session on Friday. The AUD/USD pair moves downwards as the US Dollar (USD) receives support from growing expectations of fewer rate cuts by the US Federal Reserve (Fed). In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as 2-year and 10-year yields on US Treasury bonds remain subdued at 4.32% and 4.57%, respectively, at the time of writing.
The Australian Dollar (AUD) faces pressure as the Reserve Bank of Australia (RBA) hints at potential rate cuts in 2025, with markets projecting a reduction to 3.6% by year-end. According to the latest RBA monetary policy minutes, the central bank appears increasingly confident that inflation is on a sustainable path toward its target.
Additionally, the AUD struggles due to increased risk aversion and growing concerns about China's economic health, a crucial factor given that China is Australia’s largest trading partner. However, the World Bank raised its growth forecast for China in 2024 and 2025 but cautioned that weak confidence and challenges in the property sector will continue to pressure the economy.
Traders were focused on China’s recent economic measures, including reports that officials have more flexibility to use government bond proceeds to stimulate growth, potentially boosting Oil demand from the leading consumer.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- GBP/USD trades with mild gains around 1.2520 in Friday’s early European session.
- The negative outlook of the pair remains intact below the 100-day EMA with the bearish RSI indicator.
- The initial support level emerges at 1.2460; the first upside barrier is seen at 1.2614.
The GBP/USD pair posts modest gains to near 1.2520 during the early European session on Friday. Nonetheless, the upside of the major pair seems limited amid thin trading activity and the rising expectation that the US Federal Reserve (Fed) will deliver fewer rate cuts next year.
According to the daily chart, the bearish outlook of GBP/USD remains in play with the price holding the key 100-day Exponential Moving Average (EMA). The downward momentum is reinforced by the 14-day Relative Strength Index (RSI), which is located below the midline around 38.35, indicating that further downside looks favorable.
The first downside target to watch is 1.2460, the lower limit of the Bollinger Band. A breach of this level could see a drop to 1.2331, the low of April 23. The next contention level is seen at 1.2187, the low of November 10.
On the bright side, the immediate resistance level emerges at 1.2614, the high of December 20. Further north, the next hurdle is located at 1.2728, the high of December 17. The crucial upside barrier to watch is the 1.2810-1.2820 zone, representing the 100-day EMA and the upper boundary of the Bollinger Band.
GBP/USD daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CAD faced a minor challenge of improved crude Oil prices.
- Oil prices are set for weekly gains as reports suggest that European energy firms focus on Oil rather than renewables.
- The Canadian Dollar may struggle due to rising expectations of the BoC easing rates to support growth.
USD/CAD remains tepid following two days of gains, trading around 1.4410 during the Asian hours on Friday. The USD/CAD pair holds minor losses as the Canadian Dollar (CAD) gains ground due to improved crude Oil prices, given Canada is the largest Oil exporter to the United States (US).
West Texas Intermediate (WTI) Oil price gains ground, trading around $69.50 per barrel at the time of writing. Crude Oil prices are being bolstered by reports that major European energy companies are focusing on Oil and gas rather than renewables for short-term profits, a trend expected to continue into 2025.
Canada's GDP likely contracted by 0.1% month-over-month in November, marking the first monthly decline of the year and reflecting the central bank's recent warnings and downgraded growth projections. The government also revised its GDP forecasts downward, lowering 2025 growth to 1.7% from 1.9% and 2026 to 2.1% from 2.2%. Rising expectations that the Bank of Canada (BoC) may further ease rates to support growth could widen the interest rate gap with the US, diminishing the CAD’s attractiveness.
The downside of the USD/CAD pair could be limited as the US Dollar (USD) gains ground due to growing expectations of fewer rate cuts by the US Federal Reserve (Fed). In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as 2-year and 10-year yields on US Treasury bonds remain subdued at 4.32% and 4.57%, respectively, at the time of writing.
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- NZD/USD trades in negative territory near 0.5615 in Friday’s early European session.
- The fall in China's industrial profits exerts some selling pressure on the China-proxy Kiwi.
- The potential Trump’s tariff policies might trigger inflation and convince the Fed to slow its easing cycle, supporting the USD.
The NZD/USD pair extends its downside to around 0.5615 during the early Asian session on Friday. The New Zealand Dollar (NZD) weakens amid concerns about weak consumer demand and a prolonged downturn in the property market in China. The markets are likely to trade in a quiet session ahead of the New Year holiday.
Data released on Friday revealed that China’s industrial profits extended declines to a fourth straight month, falling 7.3% in November from a year earlier. Persistently weak Chinese domestic demand could undermine the China-proxy Kiwi, as China is the largest trading partner of New Zealand.
Furthermore, the speculation about a potential 10% tariff on Chinese goods from Donald Trump’s administration contributes to the NZD’s downside. Many analysts expect that Trump’s tariff policies could fuel inflation and might convince the Fed to slow or pause its rate decisions next year in a wait-and-see approach. This, in turn, might lift the Greenback and create a headwind for NZD/USD.
The markets anticipate the Reserve Bank of New Zealand (RBNZ) to deliver further interest rate cuts to stimulate growth after the country sank into recession in the third quarter (Q3). Markets have priced in nearly a 70% chance of a 50 basis points (bps) cut in February, and rates were seen declining to 3.0% by the end of 2025.
New Zealand Dollar FAQs
The New Zealand Dollar (NZD), also known as the Kiwi, is a well-known traded currency among investors. Its value is broadly determined by the health of the New Zealand economy and the country’s central bank policy. Still, there are some unique particularities that also can make NZD move. The performance of the Chinese economy tends to move the Kiwi because China is New Zealand’s biggest trading partner. Bad news for the Chinese economy likely means less New Zealand exports to the country, hitting the economy and thus its currency. Another factor moving NZD is dairy prices as the dairy industry is New Zealand’s main export. High dairy prices boost export income, contributing positively to the economy and thus to the NZD.
The Reserve Bank of New Zealand (RBNZ) aims to achieve and maintain an inflation rate between 1% and 3% over the medium term, with a focus to keep it near the 2% mid-point. To this end, the bank sets an appropriate level of interest rates. When inflation is too high, the RBNZ will increase interest rates to cool the economy, but the move will also make bond yields higher, increasing investors’ appeal to invest in the country and thus boosting NZD. On the contrary, lower interest rates tend to weaken NZD. The so-called rate differential, or how rates in New Zealand are or are expected to be compared to the ones set by the US Federal Reserve, can also play a key role in moving the NZD/USD pair.
Macroeconomic data releases in New Zealand are key to assess the state of the economy and can impact the New Zealand Dollar’s (NZD) valuation. A strong economy, based on high economic growth, low unemployment and high confidence is good for NZD. High economic growth attracts foreign investment and may encourage the Reserve Bank of New Zealand to increase interest rates, if this economic strength comes together with elevated inflation. Conversely, if economic data is weak, NZD is likely to depreciate.
The New Zealand Dollar (NZD) tends to strengthen during risk-on periods, or when investors perceive that broader market risks are low and are optimistic about growth. This tends to lead to a more favorable outlook for commodities and so-called ‘commodity currencies’ such as the Kiwi. Conversely, NZD tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
- WTI prices rose as reports indicated that European energy companies are prioritizing Oil and gas for short-term profits.
- Oil prices are set for weekly gains, fueled by optimism that economic stimulus efforts will drive a recovery in China.
- Russia announced a federal emergency due to an Oil spill caused by two Russian tankers in the Black Sea.
West Texas Intermediate (WTI) Oil price edges higher after registering losses in the previous session, trading around $69.50 per barrel during the Asian hours on Friday. Crude Oil prices are being bolstered by reports that major European energy companies are focusing on Oil and gas rather than renewables for short-term profits, a trend expected to continue into 2025.
This shift by Oil giants follows a global slowdown in the rollout of clean energy policies, with many governments delaying targets as energy prices spiked after Russia's full-scale invasion of Ukraine in 2022.
Oil prices are on track for a weekly increase, driven by optimism that economic stimulus efforts will spur a recovery in China, the world's largest Oil importer. The World Bank raised its growth forecast for China in 2024 and 2025 but cautioned that weak confidence and challenges in the property sector will continue to pressure the economy.
Traders were focused on China’s recent economic measures, including reports that officials have more flexibility to use government bond proceeds to stimulate growth, potentially boosting Oil demand from the leading consumer.
On Thursday, Russia declared a federal emergency in response to an Oil spill caused by two Russian tankers in the Black Sea, according to the Emergencies Ministry. The incident occurred on December 15 when the tankers were struck by a storm—one of the vessels split in half, while the other ran aground, per Reuters.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
- Silver price gains ground due to safe-haven demand ahead of the incoming Trump administration.
- The non-yielding Silver appreciates due to the increased likelihood of more Fed rate cuts following US PCE inflation data.
- Heightened geopolitical tensions, driven by the ongoing Russia-Ukraine conflict and unrest in the Middle East, have increased safe-haven demand.
Silver price (XAG/USD) extends its winning streak for the sixth successive day, trading around $29.90 during the Asian hours on Friday. Silver prices could find upward support amid safe-haven demand as markets anticipate signals regarding the United States (US) economy under the incoming Trump administration and the Federal Reserve’s (Fed) interest rate outlook for 2025.
The non-yielding Silver gains traction as moderate US PCE inflation data challenges expectations of limited Fed rate cuts next year, hinting at the possibility of more reductions. The safe-haven appeal is bolstered by heightened geopolitical risks stemming from the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East.
Reuters reported on Thursday that Russia's Federal Security Service announced that it had thwarted multiple assassination plots by Ukrainian intelligence targeting high-ranking Russian officers and their families in Moscow. Meanwhile, Gaza authorities reported that an Israeli airstrike killed five Palestinian journalists. However, the Israeli military claimed that the individuals were members of Islamic Jihad posing as media workers.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level of 108.54, a level not seen since November 2022. Any further strengthening of the Greenback could limit the upside of the dollar-denominated precious commodities like Silver, as a stronger USD makes these assets more expensive for holders of other currencies.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
Gold prices remained broadly unchanged in India on Friday, according to data compiled by FXStreet.
The price for Gold stood at 7,229.12 Indian Rupees (INR) per gram, broadly stable compared with the INR 7,231.92 it cost on Thursday.
The price for Gold was broadly steady at INR 84,319.62 per tola from INR 84,351.63 per tola a day earlier.
| Unit measure | Gold Price in INR |
|---|---|
| 1 Gram | 7,229.12 |
| 10 Grams | 72,291.70 |
| Tola | 84,319.62 |
| Troy Ounce | 224,850.80 |
FXStreet calculates Gold prices in India by adapting international prices (USD/INR) to the local currency and measurement units. Prices are updated daily based on the market rates taken at the time of publication. Prices are just for reference and local rates could diverge slightly.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
(An automation tool was used in creating this post.)
- The Japanese Yen appreciated following the release of Tokyo CPI inflation data, which showed a rise in December.
- The Tokyo Consumer Price Index increased to 3.0% YoY in December, up from 2.6% in November.
- The US Dollar edges higher amid rising odds of fewer rate cuts by the Federal Reserve.
The Japanese Yen (JPY) gains ground against the US Dollar (USD) on Friday. The USD/JPY pair pulls back from its recent gains as the Japanese Yen (JPY) strengthens following the release of Tokyo Consumer Price Index (CPI) inflation data. The data is expected to keep the Bank of Japan (BoJ) on track for an interest rate hike in January.
The headline Tokyo CPI inflation rose to 3.0% YoY in December, up from 2.6% in November. Meanwhile, the Tokyo CPI excluding Fresh Food and Energy increased to 2.4% YoY in December, compared to 2.2% the previous month. The Tokyo CPI excluding Fresh Food also climbed 2.4% YoY in December, slightly below the expected 2.5% but higher than the 2.2% recorded in November.
The Bank of Japan (BoJ) released the Summary of Opinions from its December monetary policy meeting on Friday, highlighting plans to adjust easing measures if economic conditions align with expectations. One BoJ board member emphasized the importance of monitoring wage negotiation momentum, while another stressed the need for scrutiny of data to determine any changes to monetary support.
Japanese Yen appreciates due to rising odds of BoJ’s interest rate hike in January
- The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades around 108.10, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as US Treasury bond yields remain subdued on Friday. 2-year and 10-year yields stand at 4.32% and 4.57%, respectively, at the time of writing.
- The downside of the USD/JPY pair could be limited as the US Dollar receives support from growing expectations of fewer rate cuts by the US Federal Reserve (Fed). In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four. However, the likelihood of additional rate cuts next year was tempered by moderate US PCE inflation data.
- On Friday, Japan's Finance Minister Katsunobu Kato said that he recently saw one-sided and sharp foreign exchange (FX) moves. Kato further stated that the official will take suitable measures against excessive foreign exchange movements.
- The Bank of Japan October meeting Minutes released this Tuesday reiterated the possibility of gradual rate hikes if inflation trends align with expectations, with a potential path to 1.0% by late fiscal 2025. The Minutes also emphasized a cautious approach to monetary policy, wage-driven economic growth amid domestic and global uncertainties, and fiscal measures to counter deflationary pressures.
- BoJ Governor Kazuo Ueda said last week that the central bank expects the Japanese economy to move closer to sustainably achieving the BoJ's 2% inflation target next year. Ueda also added, "The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward."
USD/JPY remains below 158.00, monthly highs
The USD/JPY trades around 157.70 on Friday. Daily chart analysis indicates a continued bullish trend, with the pair moving upwards within an ascending channel pattern. The 14-day Relative Strength Index (RSI) is just below the 70 level, reinforcing the bullish outlook. A breakout above the 70 mark could signal an overbought condition, which might lead to a potential downward correction for the pair.
The USD/JPY pair could test its monthly high at 158.08, reached on Thursday. A break above this level could support the pair to target the upper boundary of the ascending channel near the 160.30 level.
On the downside, the USD/JPY pair could find primary support at the nine-day Exponential Moving Average (EMA) around 156.48, aligned with the ascending channel’s lower boundary.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.00% | -0.20% | -0.04% | 0.07% | 0.13% | 0.04% | |
| EUR | -0.07% | -0.06% | -0.28% | -0.10% | 0.00% | 0.06% | -0.02% | |
| GBP | -0.01% | 0.06% | -0.22% | -0.04% | 0.06% | 0.12% | 0.04% | |
| JPY | 0.20% | 0.28% | 0.22% | 0.15% | 0.27% | 0.22% | 0.16% | |
| CAD | 0.04% | 0.10% | 0.04% | -0.15% | 0.09% | 0.17% | 0.08% | |
| AUD | -0.07% | -0.00% | -0.06% | -0.27% | -0.09% | 0.06% | -0.02% | |
| NZD | -0.13% | -0.06% | -0.12% | -0.22% | -0.17% | -0.06% | -0.08% | |
| CHF | -0.04% | 0.02% | -0.04% | -0.16% | -0.08% | 0.02% | 0.08% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- The Indian Rupee tumbles in Friday’s Asian session.
- A firm USD and importers’ month-end USD demand weigh on the INR.
- The RBI is likely to intervene in the FX market to prevent the local currency from depreciating further.
The Indian Rupee (INR) extends the decline to near an all-time low on Friday. The local currency remains under selling pressure due to sustained strong US Dollar (USD) demand from importers, foreign investors, and oil-related companies.
Nonetheless, any routine intervention by the Reserve Bank of India (RBI) could help limit the INR’s losses. The preliminary reading of the US Goods Trade Balance for November is due later on Friday. Trading volumes are likely to be low ahead of next week’s New Year holiday.
Indian Rupee softens to near a record low amid a mix of global and domestic challenges
- India's economy is estimated to grow at around 6.5% in fiscal year 2024/25, closer to the lower end of its 6.5%-7.0% projection, according to the finance ministry's monthly economic report for November.
- Foreign Institutional Investors (FIIs) were net sellers in the capital markets on Tuesday, offloading shares worth ₹2,454.21 crore, according to exchange data.
- “Importers were pretty active in the session, while trading volumes were relatively low towards the year-end,” a trader with a private bank said.
- "Slowing FDI flows, weak manufacturing export growth, and narrowing policy rate differentials with the US are likely to pressurise the INR, according to the recent Standard Chartered Bank report. It expects the INR to depreciate modestly, reaching 85.5 per US Dollar over the next 12 months.
- The US weekly Initial Jobless Claims for the week ending December 21 declined to 219,000, down from 220,000 in the previous week, according to the US Department of Labor on Thursday. This reading came in below the market consensus of 224,000.
USD/INR’s constructive bias remains in place
The Indian Rupee weakens on the day. Technically, the price action shows a strong uptrend on the daily timeframe, with the pair being well-supported above the key 100-day Exponential Moving Average (EMA). However, the 14-day Relative Strength Index (RSI) is near 74.25, suggesting an overbought condition. This means that additional consolidation should not be ruled out before positioning for any short-term USD/INR appreciation.
For bulls, the ascending channel upper boundary at 85.35 acts as an immediate resistance level for the pair. Sustained trading above this level could draw in more buyers and send prices to 85.50, en route to the 86.00 psychological level.
On the flip side, the potential support level for USD/INR emerges at the 85.05-85.00 region, representing the lower boundary of the trend channel and the round mark. A decisive break below the mentioned level may trigger momentum sellers to step in and take the price towards 84.27, the 100-day EMA.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
| Raw materials | Closed | Change, % |
|---|---|---|
| Silver | 29.765 | 0.35 |
| Gold | 2633.48 | 0.67 |
| Palladium | 924.38 | -2.52 |
- GBP/USD edges lower amid light trading day post-Christmas holiday.
- The US Dollar strengthens as expectations grow for reduced Fed policy easing next year.
- The Pound Sterling struggles as a surprise MPC split vote signals a potentially accelerated pace of monetary easing in 2025.
GBP/USD remains subdued for the third successive day, trading around 1.2520 during the Asian hours on Friday. The downside can be attributed to thin trading activity following the Christmas holiday and a stronger US Dollar (USD), driven by growing expectations of fewer rate cuts by the US Federal Reserve (Fed).
In its December meeting, the Fed reduced interest rates by a quarter point and revised its 2025 projection to include only two rate cuts, down from the previously forecasted four. However, the likelihood of additional rate cuts next year was tempered by moderate US PCE inflation data.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. However, the upside of the Greenback could be restrained as US Treasury bond yields remain subdued on Friday. 2-year and 10-year yields stand at 4.33% and 4.58%, respectively, at the time of writing.
The Pound Sterling (GBP) weakened against its major counterparts as expectations grew for a dovish policy stance from the Bank of England (BoE) in the coming year. In December, the UK central bank held its key interest rate steady at 4.75%, but a surprising split vote—where three policymakers supported rate cuts—hinted at a potentially faster pace of easing in 2025.
Market expectations for 2025 now include a 53-basis-point (bps) rate cut, up from the previously anticipated 46 bps. This adjustment follows a 6-3 vote by the Monetary Policy Committee (MPC), with three of the nine members advocating for a 25 bps rate reduction. Investors interpreted this as a clear signal of a dovish shift on the horizon.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Japan's Finance Minister Katsunobu Kato said on Friday that he recently saw one-sided and sharp foreign exchange (FX) moves. Kato further stated that the official will take suitable measures against excessive foreign exchange movements.
Key quotes
Decline to comment on the possibility of meeting the government’s target of achieving a primary budget surplus by the next fiscal year.
Recently saw one-sided, sharp FX moves.
Important for currencies to move in a stable manner reflecting fundamentals.
Alarmed over FX moves, including those driven by speculators.
Will take appropriate action against excessive moves.
Market reaction
At the time of writing, USD/JPY was down 0.24% on the day at 157.60.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- Gold price declines as traders anticipate signals regarding the US economy under the incoming Trump administration.
- The non-yielding Gold received support due to the increased possibility of more Fed cuts following US PCE inflation data.
- The safe-haven metal could gain ground due to increased geopolitical tensions.
Gold price (XAU/USD) edges lower amid thin trading following the Christmas holiday, trading near $2,630 during the Asian session on Friday. However, the safe-haven asset could find upward support as markets anticipate signals regarding the United States (US) economy under the incoming Trump administration and the Federal Reserve’s (Fed) interest rate outlook for 2025.
Gold, a non-yielding asset, gains traction as moderate US PCE inflation data challenges expectations of limited Fed rate cuts next year, hinting at the possibility of more reductions. The safe-haven appeal is bolstered by heightened geopolitical risks stemming from the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East.
The precious metal is on track to close the year with an impressive 27% gain, marking its best annual performance since 2010. This surge has been fueled by central bank purchases, escalating geopolitical uncertainties, and monetary easing by major central banks.
Gold price receives downward pressure as US Dollar edges higher
- The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against its six major peers, trades above 108.00, slightly below its highest level since November 2022. Any further strengthening of the Greenback could limit the upside of the dollar-denominated precious commodities like Gold, as a stronger USD makes these assets more expensive for holders of other currencies.
- However, the non-interest-bearing Gold may receive support as US Treasury bond yields remain subdued on Friday. 2-year and 10-year yields stand at 4.33% and 4.58%, respectively, at the time of writing.
- On Thursday, Russia's Federal Security Service announced that it had thwarted multiple assassination plots by Ukrainian intelligence targeting high-ranking Russian officers and their families in Moscow. The agency stated that the attacks were planned using bombs disguised as power banks or document folders, according to Reuters.
- Meanwhile, Gaza authorities reported that an Israeli airstrike killed five Palestinian journalists. However, the Israeli military claimed that the individuals were members of Islamic Jihad posing as media workers. Medics reported that the five were among at least 31 people killed in Israeli airstrikes across the Palestinian enclave.
- Last week, the Federal Reserve signaled a more cautious outlook for additional rate cuts in 2025, marking a shift in its monetary policy stance. This development highlights uncertainties surrounding future policy adjustments amid the anticipated economic strategies of the incoming Trump administration.
Gold price remains below $2,650 with testing 14- and nine-day EMAs
Gold price trades above $2,630.00 on Friday, with the daily chart indicating a consolidation phase as the metal moves sideways near the nine- and 14-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) hovers just below the 50 mark, reflecting a neutral sentiment. A decisive move above 50 could signal increased buying interest in the commodity.
On the upside, the XAU/USD pair may target the psychological level of $2,700.00, with the next resistance at its monthly high of $2,726.34.
The 14- and nine-day EMA at $2,631.40 and $2,627.44 act as the immediate support for the XAU/USD pair. A break below these levels could increase selling pressure, potentially pushing Gold toward its monthly low of $2,583.39.
XAU/USD: Daily Chart
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- EUR/USD trades with a mild negative bias to around 1.0415 in Friday’s Asian session.
- The US Initial Jobless Claims declined to the lowest in a month last week.
- The dovish ECB bets might weigh on the Euro in the near term.
The EUR/USD pair drifts lower to around 1.0415 during the Asian trading on Friday. Trading volumes are thin as many traders are on holiday before New Year. Later on Friday, the preliminary reading of the US Goods Trade Balance for November will be released.
Data released on Thursday by the US Department of Labor revealed that the weekly Initial Jobless Claims dropped to the lowest in a month last week. The number of Americans filing new applications for jobless benefits declined to 219,000 in the week ending December 21, compared to 220,000 in the previous week. This reading came in below the market consensus of 224,000.
Meanwhile, the US Dollar Index (DXY) was last up 0.02% at 108.10, holding below a two-year high reached on Friday. The Federal Reserve (Fed) signaled a slower pace of interest rate cuts next year compared with the past few months, which might boost the Greenback.
Across the pond, the European Central Bank (ECB) Governing Council member Boris Vujcic said last week that the central bank will probably cut borrowing costs again if incoming data is in accordance with its projections. The ECB has cut rates four times this year, bringing the deposit rate to 3.0%. Analysts expect policymakers to continue such quarter-point moves until it hits 2.0% in June. This, in turn, might drag the shared currency lower against the US Dollar.
Euro FAQs
The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The People’s Bank of China (PBoC) set the USD/CNY central rate for the trading session ahead on Friday at 7.1893, as compared to the previous day's fix of 7.1876 and 7.2981 Reuters estimates.
The Bank of Japan (BoJ) published the Summary of Opinions from its December monetary policy meeting, with the key findings noted below.
Key quotes
BoJ member plans to adjust easing measures if the outlook is met.
BoJ board member notes importance of monitoring momentum in wage negotiations.
One BoJ Member says no urgent need for rate hike despite upside risks.
BoJ member says yen carry trade not ideal now.
BoJ member suggests scrutiny of data necessary to determine monetary support adjustments.
BoJ member suggests confirming progress on wage negotiations for next year, taking into account the new US administration when deciding on rate hikes.
BoJ member suggests maintaining steady policy due to uncertainty in incoming US administration's policies.
One BoJ member suggests maintaining current policy for the time being.
One BoJ member says economy and inflation remain on track.
One BoJ member says rate hike timing approaching but patience needed due to US economy uncertainty.
Member sees risks to prices tilting towards upside, proposes gradual adjustment of monetary support in a forward-looking and timely manner.
Member advocates for preemptive adjustment of monetary support.
Member sees increased likelihood of achieving bank's outlook.
Member foresees high wage growth in Japan next year amid labour shortage.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is down 0.13% on the day to trade at 157.76 as of writing.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
| Index | Change, points | Closed | Change, % |
|---|---|---|---|
| NIKKEI 225 | 437.63 | 39568.06 | 1.12 |
| KOSPI | -10.85 | 2429.67 | -0.44 |
| Dow Jones | 28.77 | 43325.8 | 0.07 |
| S&P 500 | -2.45 | 6037.59 | -0.04 |
| NASDAQ Composite | -10.77 | 20020.36 | -0.05 |
- USD/JPY loses momentum to around 157.75 in Friday’s early Asian session.
- Tokyo CPI rose 3.0% YoY in December vs. 2.6% prior.
- Fed signaled a slower pace of rate cuts, which might underpin the US Dollar.
The USD/JPY pair loses traction to near 157.75 during the early Asian session on Friday. The Japanese Yen (JPY) edges higher after the Tokyo Consumer Price Index (CPI) inflation data. Trading volumes are likely to be low ahead of the next week’s New Year holiday.
Data released by the Statistics Bureau of Japan on Friday showed that the headline Tokyo CPI inflation climbed to 3.0% YoY in December from 2.6% in November. Meanwhile, the Tokyo CPI ex Fresh Food, Energy arrived at 2.4% YoY in December versus 2.2% prior. The Tokyo CPI ex Fresh Food rose 2.4% YoY in December against 2.5% expected and up from 2.2% in November. The reading is likely to keep the Bank of Japan (BoJ) on track for a January interest rate hike.
BoJ Governor Kazuo Ueda said last week that the central bank expects the Japanese economy to move closer to sustainably achieving the BoJ's 2% inflation target next year. "The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward," said Ueda.
On the USD’s front, the expectation of fewer rate cuts by the US Federal Reserve (Fed) could support the Greenback in the near term. The Fed cut interest rates by a quarter point in the December meeting and projected just two rate cuts in 2025, down from its original forecast for four.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
| Pare | Closed | Change, % |
|---|---|---|
| AUDUSD | 0.62137 | -0.29 |
| EURJPY | 164.682 | 0.8 |
| EURUSD | 1.04162 | 0.16 |
| GBPJPY | 197.933 | 0.41 |
| GBPUSD | 1.25167 | -0.13 |
| NZDUSD | 0.56066 | -0.5 |
| USDCAD | 1.43968 | 0.29 |
| USDCHF | 0.8973 | -0.12 |
| USDJPY | 157.956 | 0.51 |
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