Important calendar events
The dollar edged lower last week, and the dollar index dipped from 109.6 to 109.2 on disappointing US economic data. US treasury yields also declined, putting pressure on the dollar, with the US 10-year bond yield dropping from 4.78% to 4.63%.
President-elect Donald Trump’s inauguration will take place this week on January 20 and the dollar is expected to exhibit high volatility before he takes office. The dollar has been gaining strength on expectations that Trump’s fiscal policies and trade tariffs will boost economic growth. In addition, Tramp’s plans may reignite inflationary pressures. Concerns that global inflation will rise have triggered a shift towards safe-haven assets, boosting the dollar.
Soft US economic data drove the dollar down last week. US Retail Sales climbed by just 0.4% in December, falling short of expectations of 0.6% growth and following November’s 0.8% rise. Core Retail Sales, which exclude the sales of automobiles, rose 0.4% in December, disappointing expectations of a 0.5% print but surpassing November’s 0.2% growth. In addition, US Unemployment Claims on Thursday rose to 217K for the week ending January 10, exceeding expectations of 210K and following a print of 203K the week before. The Philly Fed Manufacturing Index, however, came in better than expected on Thursday, providing some support for the dollar. The index climbed to 44.3 in January from -16.4 in December, against expectations of a -5.0 print, indicating that the manufacturing sector is expanding.
US inflation data last week came in lower than anticipated, indicating that disinflation in the US is progressing, which may affect the Fed’s rate outlook. After the release of lower-than-expected PPI data on Tuesday, soft Consumer Price Index (CPI) data on Wednesday drove the dollar down. Headline inflation rose by 2.9% year-on-year in December from 2.7% in November, which was in line with expectations. Monthly inflation rose by 0.4% in December against 0.3% in November, as expected. Core CPI, however, which excludes food and energy, rose by just 0.2% in December following a 0.3% rise in November and against expectations of a 0.3% print. Core CPI rose 3.2% year-on-year in December, below estimates for a 3.3% increase and November’s 3.3% gain.
Producer Price Index (PPI) data on Tuesday surprised on the downside, indicating that US inflation is easing, putting pressure on the dollar. PPI rose by 0.2%, in December, falling short of expectations of a 0.4% print and following a rise of 0.4% in November. Core PPI, which excludes food and energy, came in flat against expectations of a 0.2% rise and following a rise of 0.2% in November. PPI climbed 3.3% year-on-year in December, falling below expectations of 3.4% but rising above November's 3.0% print. Core PPI came in at 3.5% annually, falling short of expectations of a 3.8% print but above November’s reading of 3.4%.
The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. Fed Chair Jerome Powell delivered a hawkish message after the policy meeting, emphasizing the need to be cautious about further rate cuts. Powell stated that the Fed’s approach will remain data-driven and hinted that the pace of future rate cuts will be slower, as inflation in the US remains above the central bank’s 2% target.
Final GDP data for the third quarter of the year showed that the US economy expanded by 3.1% in the third quarter of 2024, up from 2.8% estimated earlier. In addition, the US economy expanded by 3.0% in the second quarter of the year and by 1.4% in the first quarter of the year.
EUR/USD gained strength early last week, rising from 1.017 to 1.035 but pared some gains later in the week, steadying the 1.029 level at the end of the week. If the EUR/USD pair declines, it may find support at 1.017, while resistance may be encountered near 1.053.
The ECB lowered its benchmark interest rate by 25 basis points in December, bringing its main refinancing rate to 3.15%. This was the fourth rate cut for the ECB this year, which started its easing cycle in June and has already lowered interest rates by a total of 100 bps. More importantly, ECB President Christine Lagarde hinted at further easing in the coming months as Eurozone inflation nears the central bank’s target while the economy remains weak.
Lagarde’s press conference after the policy meeting was dovish, raising expectations of further rate cuts. The central bank is currently expected to cut interest rates up to five more times next year, to a total of 125bps, until neutral policy settings are reached. Expectations that the ECB will return to a more normalized policy setting sooner than the Fed are putting pressure on the EUR/USD rate.
On Wednesday, ECB member François Villeroy gave a dovish speech, hinting that interest rates in the EU should come down to 2% by summer as the battle against inflation has been almost won. The minutes of the latest ECB meeting were released on Thursday and confirmed that ECB policymakers are likely to continue lowering interest rates, putting pressure on the Euro. Most ECB members agreed that interest rates should be lowered gradually if the progress of disinflation in the EU meets the central bank’s projections.
On the data front, Eurozone industrial production came in at 0.2% in November same as in October, disappointing expectations of 0.3% growth. Eurozone Industrial Production contracted by 1.9% annually in November falling below October’s contraction by 1.1%.
Eurozone inflation remains above the ECB’s 2% target and may prevent the ECB from cutting interest rates further. Eurozone inflation rose to 2.4% year-on-year in December from 2.2% in November, which was in line with expectations. Every month, Eurozone inflation rose 0.4% in December after dropping 0.3% in November. Core CPI, which excludes food and energy, remained steady at 2.7% in December, matching market expectations. This week, Final CPI and Core CPI data for December are due on Friday. The final data, however, is expected to match last week’s Flash estimates.
Flash GDP data showed that the Eurozone economy expanded by 0.4% in Q3 of 2024, rising from 0.2% in Q2. The Eurozone economy also expanded by 0.3% in the first quarter of 2024. The economic outlook of the EU remains fragile as prolonged tightening has brought the Euro area economy to the brink of recession.
GBP/USD traded sideways last week, oscillating around the 1.218 level. If the GBP/USD rate goes up, it may encounter resistance at 1.272, while support may be found near 1.209.
Economic data released last week for the UK were disappointing, indicating that the country’s economic outlook is declining. UK Retail sales data released on Friday missed expectations putting pressure on the Sterling. British retail sales fell unexpectedly by 0.3% in December following a downwardly revised 0.1% expansion in November against market estimates of 0.4% growth.
Monthly GDP data released on Thursday showed that the British economy expanded by just 0.1% in November, disappointing expectations of 0.2% growth and following contraction by 0.1% in October. Final GDP data for the third quarter of the year have previously shown that the British economy is stagnating. Earlier forecasts indicated slight economic growth by 0.1% in the third quarter of 2024, but the British economy is being stifled by high interest rates and cannot expand.
In addition, Manufacturing and Industrial Production data released on Thursday missed expectations, putting pressure on Sterling. Industrial Manufacturing Production contracted by 0.4% in November against expectations of 0.1% growth. Manufacturing Production contracted by 0.3% in November against a 0.2% drop anticipated.
Inflation data released on Wednesday showed that price pressures in the UK are easing, raising the odds of a BOE rate cut in February and providing support for the Sterling. Headline inflation in the UK rose to 2.5% year-on-year in December, dropping from 2.6% in November, against expectations of a 2.6% print. Core annual inflation, which excludes food and energy, also came in lower than expected, rising by 3.2% annually in December, against a 3.5% reading in November and 3.4% anticipated.
The BOE kept interest rates steady at its latest policy meeting, having cut interest rates twice already this year. MPC members voted 6-3 to keep rates on hold, with three members in favor of cutting interest rates.
Bank of England Governor Andrew Bailey has stated that the central bank needs to adopt a gradual approach to future rate cuts. Bailey has also stressed that the BOE’s policy outlook will remain data-driven and refused to commit to a timeline or magnitude of future rate cuts.
USD/JPY dipped last week, dropping from 156.7 to 156.2. If the USD/JPY pair declines, it may find support at 154.9. If the pair climbs, it may find resistance at 159.0.
The BOJ maintained its current monetary policy guidelines steady and its interest rate at 0.25% at its latest policy meeting. BOJ Governor Kazuo Ueda stated that Japan’s economic and inflationary outlook remains uncertain and stressed that the central bank’s policy will remain data-driven. In a recent speech, Ueda reaffirmed the BOJ’s commitment to continue raising interest rates if Japan’s economy continues to improve and the BOJ's 2% inflation target is reached. Ueda cautioned, however, that the timeline of the rate hike will depend on economic and inflationary conditions. Last week, Ueda commented that wage growth in Japan is progressing satisfactorily, driven by structural labor shortages.
Market odds that BOJ officials will raise interest rates at the policy meeting this week on the 24th are on the rise, boosting the Yen. The BoJ is also expected to adjust its inflation projections upward this week, to reflect the depreciation of the yen and rising oil prices.
Odds of a BOJ rate hike at the next policy meeting this week are rising, but the exact timing of the next BOJ rate hike is still uncertain. Markets are pricing in a 25-basis points rate hike by the end of March, which will raise Japan’s interest rate from 0.25% to 0.50%.
Inflation in Japan is on the rise, raising the odds of future rate hikes and providing support for the Yen. The headline Tokyo CPI inflation rose to 3.0% annually in December, up from 2.6% in November. Headline inflation in Japan rose by 2.7% year-on-year in November from 2.3% in October against expectations of a 2.6% print. In addition, BOJ Core CPI rose to 1.7% year-on-year in November from 1.5% in October against expectations of 1.5%.
Final GDP data for the third quarter of the year showed that Japan’s economy expanded by 0.3%, exceeding initial estimates of 0.2%, but down from 0.7% in the second quarter. The Japanese economy is expanding, after shrinking by 0.5% in the first quarter of the year.
Gold prices dropped to $2,660 early last week, but rallied later in the week, rising above $2.700 per ounce. If gold prices rise, they may encounter resistance at $2,700 per ounce, while if gold prices decline, support may be encountered near $2,580 per ounce.
Gold prices are driven by opposing forces. Increased safe-haven demand due to geopolitical tensions is driving gold prices up. In addition, the uncertainty surrounding President-elect Donald Trump’s proposed trade tariffs is driving investors towards safe assets. On the other hand, however, the Fed’s recent hawkish shift is putting pressure on gold prices.
President-elect Donald Trump’s inauguration will take place this week on January 20 and gold prices are expected to exhibit high volatility before he takes office. Trump’s proposed tariffs could potentially ignite trade wars, raising demand for safe-haven assets. In addition, Tramp’s plans may reignite inflationary pressures. Concerns that global inflation may rise are propping up gold prices.
US inflation data last week came in lower than anticipated, indicating that disinflation in the US is progressing, which may affect the Fed’s rate outlook. After the release of lower-than-expected PPI data on Tuesday, soft Consumer Price Index (CPI) data on Wednesday boosted gold prices. Headline inflation rose by 2.9% year-on-year in December from 2.7% in November, which was in line with expectations. Monthly inflation rose by 0.4% in December against 0.3% in November, as expected. Core CPI, however, which excludes food and energy, rose by just 0.2% in December following a 0.3% rise in November and against expectations of a 0.3% print. Core CPI rose 3.2% year-on-year in December, below estimates for a 3.3% increase and November’s 3.3% gain.
Producer Price Index (PPI) data on Tuesday surprised on the downside, indicating that US inflation is easing, boosting gold prices. PPI rose by 0.2%, in December, falling short of expectations of a 0.4% print and following a rise of 0.4% in November. Core PPI, which excludes food and energy, came in flat against expectations of a 0.2% rise and following a rise of 0.2% in November. PPI climbed 3.3% year-on-year in December, falling below expectations of 3.4% but rising above November's 3.0% print. Core PPI came in at 3.5% annually, falling short of expectations of a 3.8% print but above November’s reading of 3.4%.
Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar edged lower last week, and the dollar index dipped from 109.6 to 109.2 on disappointing US economic data. US treasury yields also declined, putting pressure on the dollar, with the US 10-year bond yield dropping from 4.78% to 4.63%.
Gold prices are under pressure by decreased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. Fed Chair Jerome Powell delivered a hawkish speech after the meeting, emphasizing the need to be cautious about further rate cuts. Powell stated that the Fed’s approach will remain data-driven and hinted that the pace of future rate cuts will be slower.
Safe-haven demand remains high, due to uncertainty in the Middle East, boosting gold prices. Reports that Israel and Hamas have reached a ceasefire agreement put pressure on gold prices last week, however. Meanwhile, the situation between Russia and Ukraine remains critical.
Oil prices gained strength last week and WTI price rose from $78.1 per barrel to $79.2 per barrel. If oil prices retreat, they may encounter support near $68.8 per barrel, while resistance may be found near $81.0 per barrel.
Concerns of a broadening conflict in the Middle East have been boosting oil prices in the past year. Reports that Israel and Hamas have reached a ceasefire agreement put pressure on oil prices last week. A ceasefire deal in the Gaza area will likely halt Houthi militia’s attacks on ships in the Red Sea. The attacks have been raising supply concerns for some time now, boosting oil prices, but concerns over a break in the oil supply chain receded after the announcement of the deal, putting pressure on oil prices.
Oil prices have been gaining strength these past few weeks as cold weather in the US and the EU raises oil demand. In addition, supply concerns have been driving oil prices up.
US crude oil inventories released on Wednesday showed an unexpected drop in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported a weekly crude stockpile draw of 2.0M barrels for the week to January 10, against expectations of a much smaller drop by 1.0M barrels and following a drop of 1.0M barrels the week before.
The US Energy Information Administration forecasted on Tuesday that oil demand in the US would remain steady at 20.5 million barrels per day (bpd) in 2025 and 2026. At the same time, the EIA report revised upward the US oil output for 2025 to 13.55 million bpd, from its previous forecast of 13.52 million bpd.
Increasing Western sanctions against Russia and Iran have been paying off, limiting the oil output of these countries. US President Joe Biden imposed the broadest package of sanctions on Russian oil exports so far on Friday, causing oil prices to surge. The outgoing US President’s administration is targeting Russia's oil and gas revenues and is reportedly planning to impose more sanctions ahead of Donald Trump's inauguration on 20 January. In addition, incoming US President Donald Trump is expected to reinforce restrictions on Iran's oil exports, raising oil supply concerns.
OPEC+ has announced that it will extend its voluntary production cuts until the end of the first quarter of 2025, however. Oil prices have been under pressure and the cartel is limiting production in an attempt to raise oil prices.
Oil prices are kept in check by high central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. In his press conference after the policy meeting, Fed Chair Jerome Powell delivered a hawkish message, emphasizing the need to be cautious about further rate cuts.
Bitcoin price gained strength last week, overcoming the key $100,000 barrier and rising above 106,000 but plummeted again below $100,000 on the weekend. If BTC price declines, support can be found at $88,890, while resistance may be encountered at $106,300.
Ethereum traded sideways last week, oscillating around the $3,200 level. If Ethereum's price declines, it may encounter support near $2,900, while if it increases, resistance may be encountered near $3,740.
Bitcoin price registered a new all-time high of $108,200 in December after US President-elect Donald Trump confirmed plans to build a Bitcoin strategic reserve. Donald Trump has openly declared his support of crypto markets, announcing that he will make the US ‘the crypto capital of the planet’. Growing expectations that the new government will adopt a pro-crypto regulatory and fiscal policy have been boosting crypto markets, especially since Donald Trump reaffirmed his pre-election commitment to build a Bitcoin strategic reserve.
The uncertainty surrounding US President-elect Donald Trump’s trade tariffs, however, is causing a risk aversion sentiment driving high-risk assets down. President-elect Donald Trump’s inauguration will take place this week on January 20 and crypto markets are expected to exhibit high volatility before he takes office.
Bitcoin gained strength last week as soft US inflation data bolstered expectations of Fed rate cuts this year, boosting risk assets and driving Bitcoin price above the key $100,000 level. Bitcoin price plummeted on the weekend, however, as a bearish trend prevailed ahead of Trump’s inauguration.
Cryptocurrency prices are also affected by central banks’ interest rates. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. Indications that the Fed will follow a more hawkish approach than previously anticipated are putting pressure on crypto markets. Fed Chair Jerome Powell’s stance has been more hawkish lately, emphasizing the need to be cautious about further rate cuts.
BTC/USD 1h Chart
ETH/USD 1h Chart
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Written by:
Myrsini Giannouli
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