Gold portrays holiday mood near $2,050

Financial markets slip into a holiday mood and push the momentum traders toward early vacation. Adding to the inaction could be a cautious mood ahead of this week’s top-tier US data, as well as mixed geopolitical updates.

Amid these plays, the US Dollar struggles to defend Wednesday’s recovery while riskier assets print mild gains. With this, the gold price edges higher within the recent range below $2,050 while crude oil picks up bids to reverse the previous day’s pullback from a three-week high.

Elsewhere, EURUSD prints mild gains but the GBPUSD edges lower while USDJPY drops the most among the G10 currency pairs. Further, USDCHF and USDCAD remain mostly idle but NZDUSD drops amid a lack of optimism in New Zealand, despite upbeat Credit Card Spending data for November.

Further, BTCUSD and ETHUSD defend the previous day’s recovery amid chatters of early approvals for the spot ETFs for Bitcoin and Ethereum.

Following are the latest moves of the key assets:

• Brent oil reverses the previous day’s retreat from early-month high, up 0.60% intraday near $79.60 by the press time.
• Gold price remains mildly bid around $2,040 at the latest, after snapping two-day uptrend the previous day.
• USD Index lacks clear directions around 102.30, struggling to defend Wednesday’s recovery.
• Wall Street closed in the red and the Asia-Pacific stocks edged lower. Further, the equities in the UK and Europe trade mixed during the early hours.
• BTCUSD and ETHUSD post minor gains near $43,800 and $2,220 as we write.

US Dollar fades recovery amid mixed markets…

The year-end risk adjustments joined upbeat US data to put a floor under the US Dollar the previous day. The same joined Federal Reserve (Fed) officials’ hesitance to the rate cut concerns and mixed geopolitical updates surrounding China and the Middle East to favor the US Dollar bulls, despite a lack of momentum of late. In doing so, the Greenback ignores downbeat Treasury bond yields while justifying a quick pullback in equities after refreshing multi-day highs.

Talking about the data, the US Conference Board (CB) Consumer Confidence jumped to a five-month high of 110.7 for December versus the market expectations of 104.6 and a downwardly revised prior release of 101.00. Further, the US Existing Home Sales for November also rose to 3.82M from 3.79M previous readings versus analysts’ estimation of 3.77M, snapping a five-month reduction series. On a different page, Philadelphia Federal Reserve Bank President Patrick Harker also tried defending the Fed’s hawkish stand and favored the US Dollar by saying, “The job of controlling inflation is not done.”

Talking about the geopolitics, China President Xi Jinping warned US President Joe Biden during a summit that Beijing will reunify Taiwan with China. It should be noted that Beijing also suspended the tariff cuts on a few Taiwanese imports and renewed geopolitical fears. Elsewhere, the US is also in the crosshairs with Hamas and Yemen’s Houthi group, not to forget Russia, while trying to defend its world leader status to broker peace. This joins the profit-booking in equities and the bond markets to allow the US Dollar.

Eurozone also reported a five-month high in the Consumer Confidence gauge for December, to -15.1 versus -16.4 expected and -16.9 prior. The same, however, failed to inspire the EURUSD bulls amid the broad US Dollar recovery and mixed comments from the European Central Bank (ECB) officials.

On Wednesday, ECB policymaker Martins Kazaks said that rates to remain at 4.00% for some time before likely cut while adding that the first rate cut could come around the middle of 2024. Further, ECB Chief Economist Philip Lane said that the disinflation is happening but not necessarily persistent. Additionally, ECB policymaker Klaas Knot said that the ECB rate cut in the first half of 2024 is rather unlikely based on current information.

Meanwhile, the UK inflation numbers came in dismal for November and pushed the GBPUSD pair toward posting the biggest daily loss in 10 weeks. Also deteriorating the Cable price is the UK’s Lloyds Bank Business Barometer which slumped from 42.0% in November to 35.0% in December, marking the biggest fall since August 2022.

That said, the Japanese government lifted its economic growth forecasts for the Financial Year (FY) 2023-24 and 2024-25 in the bi-annual economic update, to 1.6% from 1.3% prior estimate and 1.3% from 1.2% previous forecast in that order.

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

Mid-tier US data eyed ahead of Friday’s key inflation gauge…

Given the market’s lack of action amid the year-end holiday mood, the traders may not react to today’s US Weekly Jobless Claims, Philly Fed Manufacturing Index and the final projections of the US third quarter (Q3) GDP growth. However, the clues about easing inflation and stable employment in the US, as well as steady growth figures, will be eyed to defend the US Dollar bulls.

May the trading luck be with you!