A lack of major risk-negative tariff news, combined with a weak US ISM Services PMI and comments from US Treasury Secretary Scott Bessent, helped improve sentiment and put pressure on the US Dollar. Despite strong ADP Employment data and hawkish Fed remarks, the US Dollar Index (DXY) dropped for the third day in a row, reaching a one-week low. This contributed to a recovery in major currencies and Gold.
Meanwhile, Crude Oil remained under pressure due to higher inventory levels and Trump’s calls for more output, while the Antipodean currencies gained. Tensions over China’s WTO dispute and Trump’s statements on Iran and the Panama Canal added uncertainty, giving the Greenback some support early Wednesday.
The US Dollar's weakness helped EURUSD score a two-day winning streak before pulling back on Wednesday. Meanwhile, USDJPY struggled to support the Greenback's bounce, dropping to its lowest point since early December. EURUSD faces pressure from mixed Eurozone data and concerns over the region's economic transition, while USDJPY reacts to comments from Japanese officials hinting at higher inflation and potential Bank of Japan rate hikes.
Weaker-than-expected UK Services PMI and concerns over a potential economic slowdown are putting pressure on GBPUSD, challenging its three-day winning streak ahead of the Bank of England’s (BoE) Monetary Policy Meeting. The anticipated BoE rate cut, along with a rebound in the US Dollar, is also contributing to GBPUSD’s pullback from a one-month high.
A drop in Australia’s December trade surplus, along with economic concerns in New Zealand and Canada, especially after Trump’s tariff war, is putting pressure on AUD, NZD, and CAD. Additionally, fears related to China and lower Crude Oil prices are weighing on AUDUSD and NZDUSD, while boosting the USDCAD rebound.
Gold continues to trade near its all-time high of $2,882, supported by market uncertainty and a weaker US Dollar during its six-day winning streak. However, the Greenback’s recent rebound tests the XAUUSD bulls at these record levels, especially amid new trade and geopolitical concerns.
In contrast, Crude Oil failed to benefit from the weaker Dollar, with a large build in EIA Weekly Crude Oil Stockpiles weighing on prices. Additional downside pressure comes from Trump’s calls for more output and concerns over reduced energy demand from China.
Standard Chartered’s bullish Bitcoin (BTCUSD) forecast of $500K by 2028 and mixed market sentiment and rising ETF inflows, has sparked renewed buying in cryptocurrencies. However, Bitcoin and Ethereum (ETHUSD) are struggling to gain momentum, lacking major industry-friendly news to drive further gains.
Eurozone Retail Sales for December, along with upcoming announcements from the BoE, US Initial Jobless Claims, and Bank of Canada Governor Tiff Macklem’s speech, will keep market participants busy. However, the key focus will be on risk factors such as tariff news and geopolitical updates from the Trump administration.
With softer EU data and a dovish ECB outlook, EURUSD may face downward pressure. The expected BoE rate cut and ongoing UK economic challenges could push GBPUSD lower. Meanwhile, USDJPY may remain under pressure, and Gold could continue to attract buyers as market uncertainty drives demand for safe havens.
Antipodean currencies, Crude Oil, and cryptocurrencies may see declines if the US Dollar recovers its earlier losses.
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