Market sentiment remains slightly positive as Monday’s China-linked optimism jostles with geopolitical and trade war fears.
China’s announcements for heavy stimulus to defend growth bolstered market sentiment the previous day, allowing Antipodeans and commodities to begin the week on a positive note. The US Dollar, however, resisted stepping back and extended Friday’s gains amid early economic signals challenging further Fed rate cuts.
On Monday, strong US GDP, inflation, and employment clues boosted the US Dollar, extending Friday's gains despite optimism from China. That said, the Atlanta Fed's GDPNow model kept its strong Q4 growth forecast at 3.3%. Additionally, the New York Fed's consumer survey showed a slight rise in inflation expectations for one-year, three-year and five-year timeframes, while US Employment Trends posted a solid November reading of 109.55, up from 107.66.
Meanwhile, Taiwan raised military alerts due to increased Chinese navy and coast guard activity. This, combined with geopolitical tensions in the Middle East, a pullback in IT stocks, and trade war concerns, dampens sentiment and provides support for the US Dollar.
Amid these developments, the US Dollar Index (DXY) pauses after a two-day winning streak, while Antipodean currencies, major currencies, and commodities trade in mixed directions.
Eurozone December Sentix investor confidence dropped to a 13-month low by flashing -17.5 figure versus -13.5 prior, which in turn challenged the EURUSD pair’s recovery.
On the other hand, Bank of England (BoE) Deputy Governor Dave Ramsden mentioned that they (BoE) should monitor and assess risks in UK financial markets, and utilize our balance sheet when it is appropriate to do so. This raises doubts about the British economic conditions and challenges the GBPUSD bulls, especially when the BoE fails to impress the buyers.
USDJPY sees mild losses after reaching its highest level in over a week, consolidating Monday's significant gains—the biggest in a month. The Yen pair benefited from upbeat comments by Japan's Economy Minister Ryosei Akazawa, who noted that while Japan hasn't fully emerged from deflation, a positive cycle of wage hikes and price increases is underway. Additionally, a pullback in the US Dollar and yields supported the move.
Earlier, the Reserve Bank of Australia (RBA) kept its monetary policy unchanged, as expected, but failed to boost AUDUSD amid concerns over potential rate cuts in 2025 and a weakening economic outlook for Australia, especially due to ongoing challenges in China, its largest trading partner.
China's troubles also weigh on NZDUSD, while USDCAD remains stronger, supported by a pullback in oil prices—Canada’s key export—and concerns over a looming trade war between Canada and the US.
Gold prices stay strong for the third day in a row, driven by market uncertainty and increased demand from the People’s Bank of China after a six-month pause. Meanwhile, Crude Oil reverses the previous day’s gains as concerns over reduced demand and higher output outside OPEC+ weigh on energy buyers.
The crypto market consolidates recent gains amid a quiet news flow and cautious sentiment ahead of this week’s key US inflation data. However, concerns over China adding Bitcoin to its reserves, along with Trump-led industry optimism, help support Bitcoin (BTCUSD) and Ethereum (ETHUSD) prices.
Looking ahead, Germany's November inflation data, along with the US Nonfarm Productivity and Unit Labor Costs for Q3, will attract intraday traders. Recent weak data from Germany and the Eurozone has weighed on EURUSD, while strong US economic signals have supported the US Dollar. As a result, EURUSD may face continued downward pressure, unless there are positive surprises from Germany.
Gold could stay strong despite a potential US Dollar rally, while USDJPY may reverse its pullback amid uncertainty over the Bank of Japan's and Federal Reserve's monetary policy differences.
China President Xi Jinping’s meeting with the heads of major international economic organizations will also be important, other than the aforementioned catalysts, as recent efforts from Beijing to bolster its economic transition favored commodities and Antipodeans.
May the trading luck be with you!
