The anticipation that the Federal Reserve will only reduce interest rates once this year strengthened the US dollar at the beginning of last week. This sentiment is expected to continue influencing market movements on Tuesday (14/1/2025).
GOLD
The price of Gold dropped by more than $27 or 270 pips to $2,662.78 per troy ounce during trading on Monday. This decline occurred due to large-scale profit taking after a four-day rise that brought it to a one-month high.
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Robust US labor market data has led to expectations that the Fed will only lower interest rates once this year, a decrease from previous forecasts which included two cuts. This has bolstered the US dollar and exerted downward pressure on Gold, prompting widespread profit taking.
This sentiment will likely continue to impact Gold trading during the European session.
OIL
Oil prices (CLS10) surged by more than $2 during Monday’s trading, reaching $78.85 per barrel, the highest level in the past five months. This increase is still influenced by sanctions imposed by the United States on the Russian crude oil industry.
Given the relatively high position, there is potential for Oil to experience profit taking during the European trading session.
EURUSD
The EURUSD pair fell to 1.01777, marking the lowest level since November 11, 2022, before managing to rebound and close at 1.02411.
The rebound in EURUSD was primarily due to technical factors given its low position. However, the sentiment remains negative as it is anticipated that the Fed will only cut interest rates once this year, while the European Central Bank (ECB) is expected to be much more aggressive.
GBPUSD
GBPUSD dropped over 100 pips to 1.20992 during Monday’s trading, reaching its lowest point since October 2023 before gradually recovering.
Similar to the EURUSD, this currency pair is also overshadowed by negative sentiment due to the strengthening US dollar, stemming from expectations that the Fed will only implement one interest rate cut this year.
USDJPY
USDJPY fell by 227 points (22.7 pips) to 157.467 during Monday’s trading, despite the strength of the US dollar. The Asian stock market’s performance increased the demand for yen as a safe haven, which contributed to the decrease in the USDJPY.
However, today the Asian stock indices have rebounded, which might place downward pressure on the yen. In other words, USDJPY may experience a positive sentiment.
Nasdaq
The Nasdaq index dropped over 300 points to 20,693 during Monday’s trading, hitting its lowest point in the last five weeks. This low position allowed the Nasdaq to recover, although negative sentiment still looms over today’s European trading session.
This is largely due to the prospect that the Fed will only implement one interest rate reduction this year, and the markets are also concerned about the uncertainties regarding the policies that US President-elect Donald Trump will introduce after his inauguration on January 20.
