The major assets traded cautiously amid weak European data, mixed U.S. jobs signals, and concerns over potential Trump tariffs.
Global equities, commodities, and cryptos saw diverging price action, while bonds sold off and the dollar strengthened.
Which headlines influenced asset price action in the last trade sessions?
We have the deets!
Headlines:
- Australia’s CPI accelerated from 2.1% to 2.3% in November, but core measures point to earlier RBA rate cuts
- Germany factory orders in November: -5.4% m/m (-0.3% expected, -1.5% previous)
- Germany retail sales in November: -0.6% m/m (0.5% expected, -0.3% previous)
- France trade deficit shrank from 7.5B EUR to 7.1B EUR in November as exports (+0.6%) outpaced imports (+0.3%)
- Euro Area economic confidence fell from 95.6 to 93.7 in December, the lowest since September 2023
- Euro Area PPI for November: 1.6% m/m (1.5% expected, 0.4% previous); Annual PPI fell by 1.2% after a 3.3% drop in October
- CNN: Trump mulls economic emergency declaration to back universal tariff plans
- FOMC voting member Christopher Waller thinks the Fed will continue to cut interest rates but is unsure of the pace of those cuts
- U.S. ADP report showed employment increased by 122K in December (vs 139K expected, 146K previous)
- U.S. weekly initial jobless claims for the week ending Jan. 4: 201K (214K expected, 211K previous)
- EIA: U.S. crude oil inventories for the week ending Jan. 3 fell by 1M barrels (-1.8M expected, -1.2M previous)
- FOMC Meeting Minutes from Dec. 17 – 18 meeting show members decided to move more slowly in the months ahead
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Markets were all over the place Wednesday, caught between pre-U.S. holiday jitters and anticipation of key data releases. Trump potentially declaring a national emergency to push new tariffs didn’t help risk-taking either.
Spot gold marked a second straight day of gains as safe-haven demand from geopolitical tensions slightly offset U.S. dollar strength. Bitcoin slipped to the $93K range, tracking tech stocks lower as risk appetite faded.
Oil prices fell despite a larger-than-expected drop in crude inventories. WTI crude oil slid to $73.20, weighed down by a jump in gasoline stockpiles and a stronger dollar. Meanwhile, U.S. stocks were mixed, with the S&P 500 inching higher and the Nasdaq dipping as traders parsed mixed labor market data ahead of Friday’s jobs report.
The dollar kept climbing, and 10-year Treasury yields hit an eight-month high after strong ADP employment and jobless claims data. That reinforced expectations the Fed will hold rates steady this month, keeping bond traders on edge.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar traded in ranges during the Asian session but found steady demand at the European open, kicking off a rally that pushed the dollar index to 109.38.
The move was fueled by a mix of drivers, including weak Euro Area economic sentiment and U.K. gilt yields hitting their highest levels since 2008, which pressured the euro and pound and boosted the Greenback.
In the U.S., early hesitation followed a mixed ADP report showing private sector job growth of 122,000, missing forecasts of 140,000. However, stronger-than-expected jobless claims data—dropping to an 11-month low of 201,000—reaffirmed the dollar’s strength. Adding to the momentum were reports that Trump might declare a national emergency to impose new tariffs, further boosting USD demand.
By late U.S. trading, the dollar held most of its gains but retreated slightly from session highs as markets digested a packed day of events, including the FOMC minutes, which had limited market impact.
Upcoming Potential Catalysts on the Economic Calendar:
- Germany industrial production at 7:00 am GMT
- Germany trade balance at 7:00 am GMT
- ECB economic bulletin at 9:00 am GMT
- Euro Area retail sales at 10:00 am GMT
- U.S. Challenger job cuts at 12:30 pm GMT
- FOMC member Harker to give a speech at 2:00 pm GMT
- BOE MPC member Breeden to give a speech at 4:00 pm GMT
- FOMC member Barkin to give a speech at 5:45 pm GMT
- FOMC member Schmid to give a speech at 6:30 pm GMT
- FOMC member Bowman to give a speech at 6:35 pm GMT
- Japan household spending at 11:30 pm GMT
Euro traders will keep an eye on German industrial production, trade balance, and retail sales, alongside the ECB economic bulletin, for fresh clues on the bloc’s economic health.
Later, speeches from multiple FOMC members and U.S. Challenger job cuts data could drive U.S. dollar moves as traders reprice the pace of FOMC’s next interest rate cuts.
Don’t forget to check out our brand new Forex Correlation Calculator when taking any trades!