Asset Summary – Thursday, 22 January
US DOLLAR faced downward pressure as geopolitical concerns eased, reducing demand for the currency as a safe haven. However, positive US economic data, including upward revisions to GDP growth and steady jobless claims, provided a counterweight, supporting expectations of stable interest rates and limiting further declines. While a softer stance from the US President boosted the dollar initially, its upward momentum is struggling to break through key resistance levels, indicating some uncertainty about its near-term strength.
BRITISH POUND is experiencing mixed signals, creating some uncertainty in its near-term outlook. While UK inflation data showed a slight uptick, exceeding expectations, wage growth slowed, suggesting potential headwinds. Political factors, such as President Trump’s comments on trade and interest rates, add to the complexity. GDP data is expected to show a slight expansion. Market participants are closely watching incoming US economic data and statements from central bank officials for further clarity on the currency’s trajectory. A supportive factor appears to be the backing of central bank independence from political pressure.
EURO is exhibiting stability around the $1.17 level, supported by a temporary easing of trade tensions between the US and Europe. Comments from the US President suggesting a potential deal framework regarding Greenland and the absence of new tariffs provide some relief. Furthermore, the Eurozone economy’s resilience and inflation levels close to target are bolstering expectations that the European Central Bank will likely maintain current interest rates, adding to the Euro’s steady performance. However, geopolitical uncertainty persists regarding Greenland’s sovereignty, and the US dollar’s continued strength is preventing the Euro from making significant gains. Upcoming US economic data releases, particularly GDP figures, could influence the dollar’s trajectory and subsequently affect the Euro’s value.
JAPANESE YEN is facing downward pressure due to a combination of factors, including concerns about Japan’s fiscal outlook driven by potential looser fiscal policies proposed by Prime Minister Takaichi. The Bank of Japan’s expected decision to hold steady on interest rates, following a recent rate hike, also contributes to this pressure. An ambiguous stance from the BOJ regarding further monetary tightening could further weaken the Yen. While Japanese exports have been strong, the currency’s weakness raises concerns about domestic inflation, and traders are wary of potential intervention. Meanwhile, a stronger US dollar, supported by easing EU-US tensions and potentially positive US economic data, adds to the Yen’s challenges.
CANADIAN DOLLAR is currently showing mixed signals. Recent inflation data, while indicating a slight increase overall, also reveals some moderation in underlying price pressures. This suggests the Bank of Canada may proceed cautiously with interest rate cuts. Support for the currency is coming from stable oil exports to the US, alongside a relatively tight North American crude balance, which helps maintain energy revenues and a positive trade outlook. The US dollar’s recent weakness due to tariff concerns also provides a boost. However, the USD/CAD pair is struggling to maintain upward momentum above the 1.3800 level, indicating vulnerability and caution ahead of the US PCE Price Index release, which could influence future direction.
AUSTRALIAN DOLLAR is currently experiencing upward pressure driven by positive domestic economic data and improved global risk sentiment. Strong employment figures in December, including a significant increase in jobs and a drop in the unemployment rate, have fueled speculation of near-term interest rate hikes by the Reserve Bank of Australia. Easing tensions between the US and Europe, with President Trump stepping back from potential tariffs, have further bolstered the currency. Market focus is now shifting to upcoming CPI data, where a core inflation increase could reinforce expectations for earlier policy tightening, further supporting the Australian Dollar’s value.
DOW JONES is poised to open higher, driven by positive sentiment stemming from a potential resolution in trade tensions with Europe and upbeat news from the technology sector. The suspension of planned tariffs, coupled with positive developments from companies like Alibaba and Nvidia, are boosting investor confidence. Strong performance from mega-cap stocks and better-than-expected US economic data, specifically revised GDP growth and falling jobless claims, are providing additional tailwinds. However, individual stock performance, like the decline in General Electric despite earnings beats, suggests that company-specific news may still introduce some volatility.
FTSE 100 experienced an upward trend, driven by a boost in risk appetite after the US signaled a de-escalation of trade tensions with Europe regarding Greenland. This positive sentiment was further supported by discussions of a potential future trade deal. Sector-wide gains contributed to the index’s rise, with ABF’s reaffirmed outlook offsetting the negative impact of B&M’s revised guidance and increased investment plans. Additionally, a smaller-than-expected UK public sector budget deficit provided further support for market confidence.
DAX experienced a significant upswing, breaking a recent downward trend, buoyed by positive sentiment stemming from indications of eased trade tensions between the US and Europe. Optimism was further fueled by strong performance in the automotive sector, particularly Volkswagen’s exceeding financial expectations, and Deutsche Börse’s strategic acquisition, both signaling positive momentum for key components of the index. The improved outlook reflects a market reacting favorably to both macroeconomic and company-specific developments.
NIKKEI experienced a significant rebound, driven largely by positive developments in the technology sector, particularly in chip and AI-related stocks. Enthusiasm stemming from Nvidia’s CEO’s comments at Davos fueled this rally, benefiting companies like Kioxia, SoftBank, Lasertec, Disco Corp, and Advantest. A retreat in Japanese government bond yields and positive cues from Wall Street further supported the market’s recovery, indicating a shift in investor sentiment and potentially paving the way for continued gains.
GOLD is experiencing mixed pressures, leading to price consolidation. While positive US economic data and reduced geopolitical tensions stemming from the US stance on Europe and Greenland are limiting gains by increasing real yields and decreasing safe-haven demand, persistent global uncertainties and concerns over spillover effects from bond market volatility are providing support. The market is also awaiting key US economic data releases, particularly the PCE Price Index and final Q3 GDP growth, which will likely influence the Federal Reserve’s future policy decisions and, consequently, the direction of the US Dollar and Gold prices. Overall, traders are showing caution, reflecting the tug-of-war between factors that could either boost or suppress the value of Gold.
OIL faces downward pressure as global supply is anticipated to outstrip demand, according to recent forecasts. Rising US crude inventories further contribute to this bearish sentiment. Although a delay in tariff measures and aversion of military action offer some support by reducing downside risks to energy demand, these are insufficient to offset the oversupply concerns. Supply-side issues, such as production disruptions in Kazakhstan and weak Venezuelan exports, provide limited counterweight to the prevailing bearish outlook driven by oversupply.