The announcement of monetary policy by the Federal Reserve and the European Central Bank (ECB), along with the release of economic growth data (Gross Domestic Product/GDP) for Germany, the eurozone, and the United States, led to high volatility in trading sessions on Thursday, which is expected to continue in the European trading session on Friday (January 31, 2025).
GOLD
Gold prices (XAUUSD) soared by US$ 34, or 340 pips, continuing this morning to reach US$ 2,799.35 per troy ounce, marking an all-time high. Gold is now less than US$ 1, or 10 pips, shy of the historic US$ 2,800 milestone.
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The surge in Gold prices followed the release of the US GDP data for the fourth quarter of 2024, recording a growth of 2.3% quarter-on-quarter (annualized), which was below the Trading Central forecast of 3% and the previous quarter’s 3.1%. This data paves the way for the Federal Reserve to potentially cut interest rates at least twice this year.
Market participants are also eagerly awaiting policy decisions from US President Donald Trump, especially concerning the anticipated increase in import tariffs from Canada and Mexico, set to be announced on February 1.
Such sentiments will likely continue to influence Gold prices during European trading sessions.
OIL
Oil prices experienced significant volatility during trading on Thursday before closing slightly higher at US$ 73.23 per barrel.
The oil market remains pressured by negative sentiment surrounding the potential increase in supply in the United States and weak demand from China. The poor GDP figures from Germany and the eurozone also add pressure on oil prices, which is expected to be felt during the European trading session.
EURUSD
The EURUSD currency pair exhibited high volatility yesterday, initially rising to 1.04677 before reversing and closing at 1.03902. Weak GDP data from Germany and the eurozone, coupled with the ECB’s decision to cut interest rates by 25 basis points, placed pressure on EURUSD.
The GDP data released yesterday indicates a faltering economy, which has become a focal point for the ECB, suggesting a possibility of further interest rate cuts in the near future. In today’s European trading session, the release of German retail sales data at 14:00 WIB could potentially influence EURUSD’s movement. Trading Central forecasts indicate retail sales for December grew by 1.9% year-on-year (YoY), lower than the previous month’s 2.5% YoY.
This data could exert additional pressure on EURUSD if it comes in below forecasts.
GBPUSD
The GBPUSD pair mirrors the movements of EURUSD, closing yesterday’s session at 1.24133. Compared to Wednesday’s closing price, GBPUSD fell by 368 points (36.8 pips).
The less favorable economic conditions in the UK lead the market to expect the Bank of England (BoE) to adopt an aggressive stance on interest rate cuts. The first cut is expected to happen next week. This sentiment is likely to keep pressing on GBPUSD in the European trading session.
USDJPY
The USDJPY pair dropped by more than 100 pips during trading on Thursday to 154.235 after Bank of Japan Deputy Governor Ryozo Himino stated that interest rates would continue to rise if the economy and inflation align with BoJ forecasts.
However, by midday, USDJPY had rebounded to 154.793, indicating ongoing high volatility in this currency pair. The position of USDJPY at a five-week low might trigger a short covering rally, pushing it higher. Yet, with the yen remaining under positive sentiment, there is a possibility for USDJPY to face downward pressure again.
Nasdaq
The Nasdaq index displayed extreme volatility yesterday before slightly closing higher at 21,608. Today, it quickly jumped 178 index points to 21,786 in response to Apple’s impressive financial report.
The iPhone manufacturer reported a gross margin of 46.9%, achieving the highest level in its history. As the world’s largest company by market capitalization, Apple injects positive sentiment into the Nasdaq.
