Growing doubts about Trump’s tariff stance, rising hopes for Ukraine-Russia peace, and cautious optimism about Gaza boost market sentiment. This, along with weak US Retail Sales, challenges the hawkish Fed, weakening the US Dollar and supporting other currencies, commodities, and Antipodeans. However, the US and Canada holidays slow momentum.
Against this backdrop, the US Dollar Index (DXY) remains under pressure at the lowest level in two months after declining in the last two consecutive weeks. That said, USDJPY sees the largest drop as the strong Japan GDP raises concerns about the BoJ. Gold rebounds from its biggest daily slump in two months, and crude oil recovers from a seven-week low. Cryptocurrencies stay in a short-term range, while Asia-Pacific stocks drift lower.
The US Dollar's weakness, strong EU GDP, doubts about a hawkish Fed, and optimism about Ukraine-Russia peace talks led to EURUSD’s biggest weekly gain in three, following a two-week downtrend. However, the Euro's rally lacks momentum due to growing expectations of ECB rate cuts and concerns over a potential US trade war.
GBPUSD enjoyed a two-week uptrend, reaching its highest level since mid-December. While the US Dollar's weakness initially boosted the Pound, fears of rising prices and significant job cuts in the UK, according to surveys from the CIPD and FSB, challenge the Pound Sterling (GBP) buyers of late.
Early Monday, Japan’s Q4 GDP showed impressive growth, and inflation signals from the GDP deflator also improved. This positive data led Japan’s Chief Cabinet Secretary Hayashi and Economy Minister Akazawa to express optimism, despite concerns about a US-triggered trade war. Meanwhile, rising expectations for Bank of Japan rate hikes and doubts about the Fed’s ability to raise or slow rate cuts are contributing to USDJPY’s three-day losing streak.
The Australian, New Zealand, and Canadian Dollars have all followed the Japanese Yen's lead, posting a three-day winning streak against the US Dollar, though momentum has slowed. AUDUSD and NZDUSD benefit from market optimism and hopes for China stimulus, while anticipating rate cuts from the Reserve Bank of Australia (RBA) and Reserve Bank of New Zealand (RBNZ) this week. Meanwhile, USDCAD fluctuates around a nine-week low, halting a three-day decline due to weaker crude oil prices, concerns over Canada’s economic transition and a dovish Bank of Canada (BoC).
Gold recovers from its biggest daily drop in two months, supported by a weaker US Dollar and strong physical demand from China and India. However, the rebound lacks momentum due to the US holiday and concerns over upcoming data/events, along with the Fed's cautious approach to slowing rate cuts.
Crude oil struggles at its lowest level since December 2024, as President Trump mentioned working on a pipeline to lower energy prices. Worries about Trump's push for more drilling, OPEC+ plans to increase supply after Q1 2025, and easing Chinese energy demand are overshadowing the weaker US Dollar, keeping oil prices under pressure.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) stay range-bound this week, as a weaker US Dollar and mixed concerns about ETF inflows for both cryptos, along with industry optimism supported by the Trump administration, keep them sidelined.
Given the US and Canada holidays, coupled with a light calendar elsewhere, market players are expected to witness a lackluster Monday. The same could allow the US Dollar to consolidate its moves ahead of the FOMC minutes, PMIs, RBA, RBNZ, and inflation data from the UK, Canada, and Japan. It’s worth noting that the USDJPY might stay on the bear’s radar while EURUSD and GBPUSD could pare recent gains due to economic concerns surrounding Eurozone and the UK. Moving on, Gold buyers can keep the reins but Crude oil and Antipodeans may retreat. Elsewhere, cryptocurrencies could continue their sideways momentum while equity buyers may have to struggle.
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