EURUSD braces for the first yearly gain in three amid ECB vs. Fed drama

The last trading day of 2023 portrays minor moves amid a light calendar. However, the hopes of witnessing lower rates in 2024 join an absence of risk-negative headlines from geopolitical fronts to keep the risk appetite positive. With this, the US Dollar resumes a downtrend after posting a corrective bounce from a five-month low the previous day.

Given the softer US Dollar, commodities and the Antipodeans return to the previous trends while major currencies edge higher despite lacking major incentives at home.

As a result, the EURUSD and GBPUSD print mild gains at the recently marked multi-month high whereas Gold buyers attack the key upside hurdle. The Oil price, however, lacks recovery momentum amid economic fears surrounding China, Europe and the UK, as well as fears that the latest crack in the OPEC+ will derail the cartel’s output cut programs and flow more supplies.

Elsewhere, the cautious mood in India and chatters of the Bank of Japan’s (BoJ) exit from easy-money policy push equities in India and Japan towards posting minor losses. However, expectations of witnessing more stimulus from China and expectations favoring more rate cuts in the US help global share markets overall.

Cryptomarkets print mixed signals as BTCUSD extends the previous day’s losses but ETHUSD remains mildly bid as traders anticipate a stronger 2024 for Ethereum.

Following are the latest moves of the key assets:

• Brent oil licks its wounds at a two-week low, mildly bid near $77.60 by the press time.
• Gold price picks up bids to reverse the previous day’s retreat from a three-week high, up 0.40% intraday near $2,073 at the latest.
• USD Index struggles at the lowest level since late July, indecisive near 101.10 as we write.
• Wall Street trade mixed and so did the Asia-Pacific stocks. Equities in the UK and Europe also remain dicey during the initial hour.
• BTCUSD stays pressured at $42,350 but ETHUSD lacks downside momentum near $2,350 as we write.

US Dollar fades corrective bounce…

The slightly upbeat US data allowed the US Dollar Index (DXY) to rebound from the five-month low. However, the odds of witnessing multiple Fed rate cuts in 2024 exert downside pressure on the DXY.

That said, the US Pending Home Sales for November improved to 0.0% and -5.2% MoM and YoY respectively versus -1.2% and -8.5% priors in that order. Further, the US Wholesale Inventories also matched -0.2% market forecasts for the said month compared to -0.4% marked in October. The Goods Trade Balance, however, marked a wider deficit of $-90.3B compared to $-89.8B prior whereas the weekly Initial Jobless Claims also rose to 218K from 206K previous readings, versus 210K expected.

Elsewhere, European Central Bank (ECB) policymaker Robert Holzmann said, “Even with the unprecedented streak of rate hikes, there is no guarantee for rate cuts in 2024.” The same, however, failed to impress the Euro bulls amid a broad US Dollar recovery from the multi-month low, backed by the year-end consolidation and slightly upbeat US data.

With this, the US Dollar Index (DXY) traced recovery in the US Treasury bond yields to bounce off a five-month low to post the first daily gain in a week, retreating to 101.10 by the press time.

On a different page, Oil price ignores a huge draw in the US weekly inventory levels, licking its wounds at a two-week low of late, as the US Dollar’s corrective bounce joins the latest absence of headlines citing geopolitical risks. That said, EIA Crude Oil Stocks Change came in -6.911M for the week ended on December 22 versus the market expectations of -2.704M and the previous weekly readings of 2.909M.

• Strong buy: USDCAD, USDJPY
• Strong sell: Crude Oil, US Dollar, GBPUSD
• Buy: BTCUSD, ETHUSD, Nasdaq, Gold
• Sell: DAX, FTSE 100, BTCUSD, AUDUSD, EURUSD

A few strokes to mark before 2023 ends…

Although the year-end holiday mood is likely to restrict the market momentum, the first readings of Spanish inflation data for December and Chicago PMI for the said month will precede Sunday’s China PMIs to entertain traders. That said, a likely favor to the growth outlook may help riskier assets and weigh on the Greenback, which in turn can propel commodities and Antipodeans.

May the trading luck be with you!