Last week, at the beginning of the new year, the global foreign exchange market continued to show volatility. The US dollar fell during the week, but still reached a two-year high. It is expected to record the strongest weekly performance in a month, and the overall strength remains strong; the euro and the pound Dragged down by the weak economic outlook in Europe, the Eurozone's dim growth prospects caused the euro to fall sharply; the Japanese yen continued to be under pressure as the interest rate differential between the United States and Japan expanded. As the U.S. non-farm payroll data approaches, market sentiment will usher in more critical fluctuations next week, especially the Federal Reserve's policy expectations and economic data will continue to affect the trend of the U.S. dollar.

U.S. stocks recovered after a volatile start to the new year, with both the S&P 500 and the Nasdaq Composite ending five consecutive days of losses, but failed to reverse the overall decline for the week. Despite Friday's strong performance, the major averages still posted losses last week. The S&P 500 Index fell 0.48% last week to close at 5,942.47 points; the Dow Jones Index fell 0.60% throughout the week to close at 42,732.13 points; the Nasdaq Composite Index fell 0.51% to close at 19,621.68 points.

The outstanding performance of gold prices in 2024 has led to an increase of more than 27%. Last week, despite the pressure of a stronger U.S. dollar, gold prices still rose 0.87% to $2,638 for the whole week. At the same time, the market is preparing for the possibility of U.S. President-elect Donald Trump taking office. coming economic and trade changes. Earlier in the session it hit its highest level since Dec. 13.

Recent geopolitical events have significantly increased demand for safe-haven assets. For example, Israeli air strikes on Gaza have increased market uncertainty. These risk events often prompt investors to purchase safe-haven assets such as gold and silver, thereby supporting price increases. Silver prices are kicking off 2025 on a strong note. The white metal gained nearly 2.3% on the first trading day of the new year last week, climbing to around $29.60.

In the currency market, the U.S. dollar index hit another two-year high last Thursday, rising above the 109 mark to 109.56. And in 2024, the dollar gained more than 7% against a basket of major world currencies. The pound and euro fell significantly. ECB Governing Council member Stournaras's remarks suppressed the euro, which once fell below the $1.03 mark against the U.S. dollar, hitting a two-year low. Although Japan's inflation continues to be above the target level, the market has doubts about the urgency of the Bank of Japan raising interest rates, and Japanese bond yields have fallen, limiting the room for the yen to rebound. AUD/USD is currently trading around 0.6200, having fallen to a 26-month low of 0.6179 earlier, maintaining a bearish outlook in the short term. The British pound fell by 1.7% against the U.S. dollar for the whole year, and the British pound had the lowest decline against the U.S. dollar among the major currencies. GBP/USD continues to be weak at the start of the new trading season and is down more than 1%. Key support at 1.2400 was breached for the first time in nearly ten months to reach a seven-month low at 1.2352.

Oil prices rose, mainly benefiting from cold weather in Europe and the United States and economic stimulus policies issued by China. These factors pushed oil prices to the highest level in more than two months in the previous trading day. WTI crude ended the day higher at $73.57 a barrel, up 5.1% for the week. The price of Brent crude oil futures for March delivery on the European Intercontinental Exchange closed at $76.51 per barrel, up 3.15% this week.

Last week ushered in the new year of 2025. Bitcoin swept away the gloom of late 2024 at the beginning of the week and began to rebound in early 2025, rising to around $96,000 before the weekend. U.S. Treasury Secretary Yellen warned that a debt "black swan" event would occur in January, and the China Administration of Foreign Exchange tightened its Bitcoin policy. But the "Trump deal" is back on the horizon. A certain state in the United States will start buying Bitcoin within 4 months, and Switzerland approved the Bitcoin reserve bill.

The Institute for Supply Management (ISM) report showed that manufacturing activity continued to shrink, but the contraction was smaller than expected. This boosted market confidence, with the 10-year Treasury yield rising to 4.59% from 4.56% on Thursday, and the two-year Treasury yield rising to 4.28% from 4.25%.

Outlook for this week:

This week, the focus of the global currency market will turn to the release of U.S. non-farm payrolls (NFP) data. The market expects that the U.S. labor market will continue to be strong, further supporting the strength of the U.S. dollar. This data is expected to provide an important reference for U.S. economic growth in the first quarter of 2025, and may also affect the Federal Reserve's monetary policy expectations. If the non-agricultural data exceeds expectations, the dollar is expected to remain strong and continue to challenge recent highs.

Economic data from the Eurozone will continue to be in focus, particularly German and Eurozone HCOB inflation data, both of which are expected to show modest upside. Nonetheless, pessimistic views on the euro still dominate the market, and EUR/USD is likely to remain weak in the coming weeks. As expectations of an interest rate cut by the European Central Bank intensify, the euro faces greater downward pressure.

The pound's direction will remain constrained by UK economic data. UK BRC same-store retail sales data due out on Tuesday and the Bank of England's monetary policy statement are likely to provide fresh guidance for the market. Given the weak economic growth and policy uncertainty in the UK, it may be difficult for the pound to escape downward pressure in the short term.

The Australian dollar found support last week, especially around 0.6200. Australia's Purchasing Managers' Index (PMI) and retail sales data will be the focus of attention early this week. If Australian economic data is strong, the Australian dollar may see a short-term rebound, but China's CPI data may increase market volatility and further affect the trend of the Australian dollar.

Regarding the Japanese yen, as the Bank of Japan’s recent policies continue to be dovish, the trend of the US dollar against the Japanese yen is still affected by the widening interest rate differential between the United States and Japan. Although the yen has retreated this week, there are fewer Japanese economic data releases, and the market will focus more on next month's Bank of Japan meeting. The yen's weakness is likely to continue, especially as the U.S. economy performs strongly.

In the short term, oil prices are likely to continue to be stimulated by demand brought about by cold weather and supported by China's economic policies. Oil prices are expected to remain at current levels or rise. However, the market also needs to pay attention to the impact of the Fed's policies on the macro economy, especially if inflationary pressure has not completely subsided, and the uncertainty of global economic recovery may become a potential risk for rising oil prices.

The gold market will continue to be affected by many factors in the new year. First, the direction of the Fed's monetary policy will be one of the key factors. If the Fed continues to cut interest rates, it will make holding U.S. dollar assets less attractive, pushing gold prices higher. Secondly, the uncertainty of the geopolitical situation will also have an important impact on the gold market. For example, global trade tensions and tensions in the Middle East may trigger risk aversion in the market, thereby pushing up gold prices.

Summarize :

In the short term, the strength of the U.S. dollar is likely to continue to dominate the market, especially after the release of non-agricultural data, and market expectations for Fed policy may further support the U.S. dollar. If U.S. economic data continues to exceed expectations, the dollar is expected to maintain strength and move towards higher price levels. Meanwhile, weakness in the euro, pound and yen is likely to persist, especially amid pressure from weak economic growth and central bank policy expectations. Oil prices will continue to be supported in the short term by demand stimulation from cold weather and China's economic policies. Precious metals are affected by global trade tensions and tensions in the Middle East, which may trigger risk aversion in the market, thereby pushing up prices.

The key data this week will be the U.S. non-farm payrolls report and Eurozone inflation data, both of which are likely to be important market movers. Fluctuations in market sentiment will intensify, especially when faced with uncertain economic prospects and central bank policy adjustments. Investors need to remain highly vigilant and respond flexibly to market changes.

Overview of important events and economic data this week: (Sydney time)

Important:

Monday (January 06): Federal Reserve Board Governor Lisa Cook speaks

 Saturday (January 11): 2025 FOMC voting committee and Kansas Fed Chairman Schmid discussed the economy

 and monetary policy outlook.

Economic data overview:

Monday (January 06): Eurozone Sentix investor confidence index in January; UK December SPGI services PMI final value; US November durable goods orders monthly revised value; US November factory orders monthly rate

Tuesday (January 07): Euro zone adjusted CPI annual rate in December - initial value without seasonality adjustment; Euro zone unemployment rate in November; US trade account in November (billion US dollars); US ISM non-manufacturing PMI in December; US 11 Monthly JOLT job vacancies (10,000)

Wednesday (January 08): Australian Bureau of Statistics CPI annual rate - seasonally adjusted; Eurozone economic sentiment index in December; Eurozone industrial climate index in December; US ADP employment change in December (10,000); Eurozone 12 Final monthly consumer confidence index

Thursday (January 9): Australia’s November goods and services trade account (AUD 100 million); Australia’s November import/export monthly rate; Eurozone November retail sales monthly/annual rate; US November wholesale inventory monthly rate final value; Number of initial jobless claims in the United States for the week ending December 30

Saturday (January 11): U.S. non-farm payrolls in December after seasonally adjustment; U.S. unemployment rate in December (%); U.S. average hourly wage annual rate in December; preliminary value of University of Michigan consumer confidence index in January

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