Christmas holiday trading in major markets, except Japan and China, slowed momentum on Wednesday. However, chatter about Japan's potential intervention to defend the Yen, the Bank of Japan's rate hike, and China's liquidity injection via the PBoC's MLF created some market jitters in Asia.
US data, including the Atlanta Fed’s GDPNow Model and regional activity reports, showed weakness, testing US Dollar bulls. Still, a hawkish Fed bias helped the Greenback end the week strong, putting pressure on major currencies and the Antipodeans.
Equities closed higher on the last active trading day of 2024, while cryptocurrencies rebounded before losing some gains. Gold prices edged up, and crude oil remained firm.
The US Dollar's strength, combined with the dovish stances of the ECB and BoE, pressured EURUSD and GBPUSD ahead of the holiday season. Political uncertainty in Germany and France and a lack of confidence in the UK's new government and weak economic data further weighed on these pairs.
Despite Japan's efforts to defend the Yen and the Bank of Japan's plans to raise rates in 2025, USDJPY remains strong as the policy gap between the Fed and BoJ narrows. The shift in market sentiment, with investors turning to Gold and the US Dollar instead of JPY during uncertain times, also supports the strength of the Yen pair.
Commodity-linked currencies like the Australian, New Zealand, and Canadian Dollars are under pressure, weighed down by concerns over potential rate cuts and China’s stimulus news. Political tensions, trade war fears, and the hawkish stance of the Fed are further impacting AUDUSD and NZDUSD, while supporting USDCAD.
Gold ended Tuesday with modest gains, recovering from an early dip as traders expect a strong 2025 driven by geopolitical tensions and central bank policies. Increased demand from China and India also supports the precious metal, which is on track for its biggest yearly gain since 2010.
Crude oil marked a three-day winning streak despite a stronger US Dollar, as geopolitical tensions and China’s stimulus news helped offset concerns over OPEC+ talks and demand issues, reducing its yearly loss.
Despite recent pullbacks, Bitcoin (BTCUSD) and Ethereum (ETHUSD) are set for strong yearly gains, fueled by optimism over potential industry reforms under Donald Trump's presidency. Additionally, strong ETF inflows are keeping crypto buyers confident.
With Japan and China seeing some activity, markets in the West are largely closed for the rest of the week, limiting major moves. However, Thursday's US data and Friday's Japan inflation could still offer some volatility before traders turn their attention to 2025. A quiet market may lead to unexpected price spikes, so caution is advised while staying aligned with the current trend.
May the trading luck be with you!
