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Author: The Forex Feed
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Greenland, Canada and the Panama Canal: What is the real plan here?
Here is my base case.
Greenland:
This is a real pet project of Trump’s. He’s a real estate guy, it’s the biggest island in the world and there are only 56,000 people there. Denmark is weak, there is already a US base on the island and there are probably a lot of natural resources waiting to be discovered. Plus, imperialism is kinda fun.
Panama canal:
Some friends in shipping have been complaining to him about the cost to use the canal and they don’t like it. America did build the canal but American ships or those bringing goods to America don’t get any special deal. Meanwhile, it’s one of the greatest monopolies in world history and funds all of Panama’s government, allowing the rest of the country to be a giant tax-free money laundering operation to fund things like the Trump Hotel in Panama, which was once the largest building in Latin America. Of course, that project was something of a disaster (I lived there) and it was later re-named and he probably holds a grudge.
Canada:
It was a lame joke that he’s beating to death.
Now for the fun part.
(Warning: Do not take this seriously and certainly don’t devise some kind of trading strategy based on it. This is for fun)
What if I’m wrong? What if there is some kind of strategy here?
The obvious answer is that it’s a move to counter China. It would aim to create some kind of schism in the world that puts the Americas (or at least the Caribbean and east coast of the Americas) firmly in the US sphere.
Panama Canal
I did a deep dive on China shipping, and surprisingly, blocking the Panama Canal wouldn’t be that big of a deal. Virtually all Chinese goods to Europe and Africa flow through the Suez Canal or round the Cape of Good Hope. For places like Brazil and Argentina, circling Cape Horn would be a moderate shipping headache but wouldn’t materially change the economics or trade with China. T
Two spots do stand out as more-vulnerable — Venezuela and Cuba. Both are precarious economies that would have significant trouble trading with China if forced to go the long way. Nearly half of Venezuela’s oil goes to China and 50-70% of it goes through the canal.
If Trump really had imperial designs, then Cuba is surely the starting point and an invasion is not something you broadcast in advance but blocking its canal trade and tightening the screws on the economy even further would lay the groundwork for regime change.
Greenland:
There is some talk of tightening Arctic shipping lanes as some kind of grand-master strategy but it doesn’t make sense to me. Ships could use the Russian route instead as it’s not that much of a detour. Some people see some kind of global warming angle but to even get to Winnipeg, which is the coldest major city in the world, global temperatures would need to rise 5-7 degrees Celsius. In that kind of scenario, you’d have a total breakdown in pretty much everything.
I have to think it’s more about exploiting resources that are there, or might be there. It would increase US landmass by 23% and the monetary costs would be low. I mean, even if you bribed every person in Greenland with $1 million, that would only be $56 billion. Compare that to the $200 billion already spent by the US in Ukraine or the $953 billion in the scam known as the Paycheck Protection Program.
Given that tech bros have also taken over the Republican Party, it might be seen as a test case for how effective they can run algos. If you can manipulate an election, why not try to manipulate a country into joining the United States?
If that works, then Greenland would just be the test case for…
Canada
Let’s say that Elon and the tech bros tweak the algo and Greenlanders join the US willingly. There won’t be bribes but the US money will flow in and Greenlanders would have the option of moving to the United States.
Not only would it achieve its goals for Greenland, but it would become an amazing propaganda tool, a minnow on the fish hook that would be used to catch the whale — Canada.
There is the kernel of a plan there and Trump already hinted at the rest of it, saying he would use ‘economic force’ to convince Canada to join. The US can wreck virtually any global economy with the wave of a pen and Canada is highly vulnerable. The vast majority if the economy is directed to the US, with no alternatives. The oil pipelines from Canada almost all go in one direction, and even some critical Canadian pipelines for domestic use take a short-cut through the USA.
Now Canada is also the USA’s biggest export market so it could deliver major pain to the US as well but if the US were to steadily undermine Canada’s economy via trade and other under-handed methods, while leveraging social media, it would have a chance. Drive the loonie to sub-50 cents and offer to merge at par and provide free movement into a better-paying economy and that’s a compelling offer.
To be honest, I think the major problem with it is the Republican side, because if you were to give Canada the proportionate House, Senate and electoral college votes, the US election results would be very different. But Canada is insanely rich in resource wealth and in some kind of robot-dominated, no immigration world, you could run an impressive closed economy.
Just please god don’t let this clown anywhere near any kind of negotiation:
Kevin O’Leary
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Gold prices dip in face of strengthening US Dollar
- Gold slightly down in late trading, still up 0.40% for the week amid geopolitical tensions.
- Mixed US economic data; higher Housing Starts, lower Building Permits minimally impact Bullion.
- Fed Governor Waller’s dovish comments suggest potential for early rate cuts.
Gold’s price dropped late in the North American session, but it is set to finish the week with gains of over 0.40% as market players await the inauguration of US President-elect Donald Trump. Although the XAU/USD trades at $2,701, down 0.44%, investors continued to buy the golden metal due to political uncertainty.
The precious metal continues to be driven by geopolitics and politics in the United States (US). Although US Treasury bond yields in the belly of the curve remained unchanged, Bullion buyers failed to push prices higher to book additional gains ahead of the weekend.
The US economic schedule showed that Housing Starts jumped double digits, though Building Permits contracted in December. Gold barely reacted to the news, as most of the data revealed during the week, led by Retail Sales featured on Thursday, suggest the economy is solid.
The US Dollar Index (DXY), which tracks the USD’s performance against a basket of six peers, surged 0.35% to 109.34.
Other data revealed during the Asian session showed that China’s economy hit a 5% Gross Domestic Product (GDP) growth rate in 2024, according to the National Bureau of Statistics.
On Thursday, Fed Governor Christopher Waller tilted dovish and commented that the US central bank could lower borrowing costs sooner and faster if the disinflation process evolves.
Market participants are pricing in near-even odds that the Fed will cut rates twice by the end of 2025 and see the first reduction in June.
Source: Prime Market Terminal
Next week, the US economic docket will feature the US Presidential Inauguration, the release of Initial Jobless Claims and Flash PMIs data.
Daily digest market movers: Gold price pressured ahead of the weekend
- Gold fell as real yields remained firm on Friday. Measured by the 10-year Treasury Inflation-Protected Securities (TIPS) yield, was virtually unchanged at 2.18%.
- The US 10-year Treasury bond yield was unchanged at 4.618%, a headwind for the golden metal.
- US Housing Starts jumped from 1.294 million to 1.499 million in December, a jump of 15.8% MoM.
- Building Permits for the same period shrank as permits dipped from 1.493 million to 1.483 million, a 0.7% drop.
- The latest inflation data and Fed Waller’s comments pressured the US Dollar, as traders had grown confident the Fed would cut rates sooner rather than later. Waller didn’t rule out a cut in the March meeting as inflation “is getting close to what our 2% inflation target would be.”
XAU/USD technical outlook: Gold hold firm near $2,700
Gold prices fell amid the lack of catalysts ahead of the weekend. Nonetheless, buyers must keep XAU/USD’s prices above $2,700, so they can remain hopeful of pushing the yellow metal toward the December 12 high of $2,726. Once surpassed, the next stop would be $2,750, followed by the all-time high at $2,790.
On the other hand, buyers’ failure to achieve the previously mentioned outcome could mean Gold might test the January 13 swing low of $2,656, followed by the confluence of the 50 and 100-day Simple Moving Averages (SMAs) at $2,639 – $2,642.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
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Dollar holds gains against yen, steadies ahead of Trump inauguration By Reuters
By Laura Matthews
NEW YORK (Reuters) – The dollar held gains against the yen on Friday, but ended the week lower after a six-week winning streak, as investors await Donald Trump’s presidential inauguration and clarity on the course of the incoming administration’s policies.
The yen was poised for its strongest weekly performance in over a month as expectations for a Bank of Japan rate hike next week grow, putting the dollar on the back foot.
It climbed more than 1% against the dollar this week, reversing last week’s decline, and touched a one-month high of 154.98 per dollar earlier on Friday.
The greenback was last up 0.68% against the yen at 156.165.
“The yen is going to remain pretty married to U.S. rates,” said Brad Bechtel, global head of FX at Jefferies. “I think this cooling we’ve seen this week has helped take the pressure off dollar-yen. The BOJ seems ready to hike next week, and at the margin, that’ll be positive for the yen. But with interest rate differential still very wide, it’s hard for dollar-yen to really move significantly lower.”
Remarks from BOJ officials along with Japanese data that point to persistent price pressure and strong wage growth have helped boost market confidence that a rate shift is in the offing, with traders pricing in an 80% chance of a hike next week.
Sources also told Reuters that the central bank is likely to hike rates next week barring any market shocks when Trump takes office.
The dollar has surged in the past few weeks on the back of rising Treasury yields, reflecting expectations that President-elect Trump’s policies could boost inflation when the U.S. economy is already strong.
But bond markets got relief from a relentless selloff after softer U.S. core inflation data on Wednesday, plus remarks from Federal Reserve Governor Christopher Waller on Thursday, who said three or four interest rate cuts were still possible this year if the data supported that.
This led markets to up their bets on Fed cuts this year, putting some pressure on the dollar ahead of Trump’s return to the White House next week.
Money markets currently price in about 40 basis points in U.S. rate cuts in 2025.
“In response to softer-than-expected inflation data this past week, market participants increased their rate cut expectations from 25 to 40 basis points,” said Uto Shinohara, senior investment strategist at Mesirow Currency Management.
“Notably, these market expectations have returned to levels seen just before last Friday’s robust employment report, suggesting the two economic releases effectively canceled each other out.”
It’s a pattern that underscores the market’s continued sensitivity to both inflation and labor market data, he added.
And as the Federal Reserve enters its blackout period, with few major U.S. economic releases scheduled next week, Shinohara said “markets will be focused on the beginning of the Trump presidency and its potential market impacts.”
Investors are now awaiting Trump’s inauguration speech on Monday to get a better sense of his policy steps and expecting volatility.
Sterling fell 0.6% to $1.2166, not far from the 14-month low it hit on Monday.
British retail sales fell unexpectedly in December, according to data on Friday that raised the risk of an economic contraction in the fourth quarter.
The euro was down 0.26% at $1.0276.
That left the , which measures the U.S. currency against six other units, up 0.34% at 109.33, away from a more than two-year high touched at the start of the week.
The index was set for a drop of about 0.25% in the week as of the afternoon session, which would snap a six-week run of gains.
was last trading at 7.3249 per dollar after data showed the world’s second-biggest economy grew 5.4% in the fourth quarter, significantly beating analysts’ expectations. The results positioned full-year 2024 growth at 5%, meeting Beijing’s target.
The Chinese currency remains vulnerable to potential tariff risks under a Trump presidency. President Xi Jinping and Trump held a telephone conversation on Friday, state media Xinhua reported on Friday.
“The USD remains solely focused on potential tariff announcements as we move into Trump’s first days back in office,” said Dan Tobon, head of G10 FX strategy at Citi.
“While tariffs are somewhat priced into FX markets, potential for elevated moves in the USD – both higher and lower – remain for next week. … Market participants remain on edge as we await more concrete details on Trump’s tariff policy.”
, which hit a four-week high on Friday, was last up 5.26% at $105,404.13, amid hopes in the crypto industry that the incoming Trump administration will mark a shift in cryptocurrency policies.
Currency
bid
prices at
17
January
08:13
p.m. GMT
Descripti RIC Last U.S. Pct YTD Pct High Low
on Close Change Bid Bid
Previous
Session
Dollar 109.35 108.97 0.37% 0.79% 109.4 108.
index 82
Euro/Doll 1.0274 1.0304 -0.26% -0.73% $1.0331 $1.0
ar 266
Dollar/Ye 156.18 155.21 0.61% -0.76% 156.32 155.
n 035
Euro/Yen 160.48 159.8 0.43% -1.68% 161.01 159.
74
Dollar/Sw 0.9152 0.9111 0.42% 0.81% 0.9153 0.90
iss 96
Sterling/ 1.2165 1.2239 -0.59% -2.72% $1.2245 $1.2
Dollar 161
Dollar/Ca 1.4466 1.4394 0.51% 0.61% 1.4467 1.43
nadian 83
Aussie/Do 0.6194 0.6213 -0.28% 0.13% $0.6227 $0.6
llar 165
Euro/Swis 0.9401 0.9378 0.25% 0.09% 0.9415 0.93
s 68
Euro/Ster 0.8443 0.8415 0.33% 2.05% 0.8453 0.84
ling 15
NZ 0.5582 0.5608 -0.4% -0.19% $0.5615 0.55
Dollar/Do 64
llar
Dollar/No 11.4486 11.3559 0.82% 0.73% 11.4628 11.3
rway 482
Euro/Norw 11.765 11.7036 0.52% -0.03% 11.7732 11.6
ay 95
Dollar/Sw 11.1853 11.1464 0.35% 1.53% 11.2066 11.1
eden 242
Euro/Swed 11.4997 11.486 0.12% 0.29% 11.5088 11.4
en 795
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Trump plans crypto-friendly orders in first few days in power By Reuters
By Gram Slattery, Chris Prentice and Jarrett Renshaw
WASHINGTON (Reuters) – President-elect Donald Trump is planning to use his executive powers to reduce the regulatory burden faced by cryptocurrency companies and promote digital asset adoption in his first few days in office, according to three people briefed on the plan.
Trump, who courted crypto cash on the campaign trail with promises to be a “crypto president,” is expected to sign an executive order creating a crypto advisory council, an idea he first floated in July, said two of the sources who requested anonymity to discuss private deliberations.
Bloomberg News first reported on Thursday that Trump was planning to issue an executive order creating a crypto council, which would help advise the government on crypto-friendly policy. It could have as many as 20 members, according to one of the sources.
Trump’s advisers have also discussed using an executive order to direct the Securities and Exchange Commission to rescind 2022 accounting guidance known as “SAB 121” that has made it too costly for some companies, particularly banks, to hold cryptocurrencies on behalf of third parties, the people said.
Trump is also expected to order the end of “Operation Choke Point 2.0,” the term crypto executives use to describe what they say has been a concerted effort by bank regulators to choke crypto companies out of the traditional financial system by directing banks to deny them services.
Bank regulators deny that such an effort exists.
Reuters could not ascertain if Trump would direct the changes via one or several executive orders, but sources said the goal was to quickly send a strong signal that the new administration broadly supports digital asset adoption.
If implemented by the relevant regulators, Trump’s expected policy directives have the potential to push cryptocurrencies into the mainstream, say regulatory and crypto experts.
That is in stark contrast to President Joe Biden’s regulators which, in a bid to protect Americans from fraud and money laundering, cracked down on crypto companies, suing exchanges Coinbase (NASDAQ:), Binance, Kraken and dozens more in federal court.
Critics of the cryptocurrency industry point to the downfall of leading crypto executives Sam Bankman-Fried, who was sentenced to 25 years for fraud, and Binance founder Changpeng Zhao, who briefly went to prison for money laundering violations, as evidence of the industry’s dangers.
A representative for Trump, who counts multiple crypto advocates among his financial backers and top cabinet picks, did not immediately respond to a request for comment. The SEC did not respond immediately to a request for comment.
Cryptocurrency regulation is just one of several topics that Trump is expected to address with executive orders in the opening days of his second four-year term.
The incoming president’s team has promised dozens of executives orders on topics ranging from energy production to illegal immigration.
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Forexlive Americas FX news wrap 17 Jan: US Supreme Court affirms decision to shut TikTok.
Markets:
- Crude oil: $-0.47 at $77.38
- Gold $-11.90 or -0.44% at $2701.83
- Silver is $0.47 or -1.54% at $30.32
- Bitcoin up $4864 or 4.87% at $104,831
The USD is ending the day higher versus all the major currency pairs.
The largest move is a 0.74% gain versus the JPY. The dollar rose by 0.61% versus the CAD and 0.58% versus the GBP. The greenback was and 0.28% versus the EUR in trading today.
The US economic data was supportive with housing starts and building permits both higher than expectations (although multifamily units helped to increase the numbers).
The industrial production and capacity utilization data was also better than expected with industrial production rising by 0.9% versus 0.3% expectations) and capacity utilization rising to 77.6% from 77% last month.
US yields did move higher and are closing near the highs for the day:
- 2 year yield 4.287%, +4.7 basis points. The high yield this week reached 4.424%
- five year 4.431%, +3.3 basis points. The high yield this week reached 4.624%
- 10 year 4.67%, +2.1 basis points. The high yield this week reached 4.809%
- 30 year 4.856%, +1.2 basis points. The high yield this week reached 5.005%.
However, the gain in US yields did not hurt the stock performance today. All the major indices close higher for the day and also for the week (it was the first up week for the major indices in 2025).
For the day:
- Dow industrial average rose 334.70 points or 0.78% at 43487.83
- S&P index rose 59.32 points or 1.00% at 5996.66
- NASDAQ index rose 291.91 points or 1.51% at 19630.20
- Russell 2000 rose 9.08 points or 0.40% at 2275.88
For the trading week:
- Dow industrial average rose 3.69%.
- S&P index rose 2.91%
- NASDAQ index rose 2.45%
On Monday the bond and stock markets will be close in observance of Martin Luther King Jr. holiday. The presidential inauguration will also take place on that day for Donald Trump. Although it will be a day of celebration and festivities, there is likely to be number of preplanned Executive Orders that may go through including border control.
Also of interest would be any news on TikTok. Today the Supreme Court upheld the decision by Congress which calls for the showing down on Sunday January 19th. The Biden administration has already said that they would kick the can down the road to the Trump administration. Pres. Trump has said that he wants to find a solution.
Nevertheless, will the Chinese shut down the site in the US? Will Pres.Trump have any definitive solutions or “stays of execution” to avoid a total mental breakdown of Tiktokers?
Adam is back next week. Have a fun and safe weekend.
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Markets Weekly Outlook – Trump 2.0 Takes Flight as BoJ Decision Looms
- It was a strong week for US stocks and gold, with the S&P rising about 3% by the end of the week.
- Markets are bracing for potential volatility and policy surprises as Donald Trump is inaugurated as US President.
- The Bank of Japan (BoJ) meeting on January 24th is a key event, with potential for an interest rate hike.
- The S&P 500 is showing positive signs, potentially entering a bullish phase if it closes above a key resistance level.
Week in Review: Moderating US Inflation and Strong Earnings Keep Sentiment Positive
Markets bid farewell to the last trading week before Trump 2.0 as incoming US President Donald Trump will be inaugurated on Monday. Markets have been bracing for volatility and potential surprises in policy as Trump returns to the White House.
US inflation data showed positive signs this week and was backed up by some dovish commentary from Federal Reserve policymakers. However, by the end of next week we could all be singing from a different hymn sheet and thus caution remains.
US Equities enjoyed a positive week as strong corporate earnings from the country’s biggest banks helped propel US indices higher. TSMC also provided a positive outlook for 2025 from a demand perspective that boosted hopes around AI spending and growth prospects. At the time of writing the S&P 500 was up 3% for the week.
The S&P 500 banking index (.SPXBK) and regional banks (.KRX) outpaced the main indexes this week, gaining approximately 6.1% and 7.6%, respectively.
Source: LSEG (click to enlarge)
Gold rose this week and reclaimed the $2700/oz level as the precious metal continues to find demand thanks to global uncertainties. This week the precious metal was also boosted by increased optimism around US rate cuts for 2025.
Oil prices continue to hold the high ground thanks to new Russian sanctions as well potential sanctions on Iran when President Trump assumes office. Oil prices have added 1.87% this week following the successive week of gains. If President Trump reverses the no drilling mandate passed by President Biden recently that could lead to a drop in prices.
On the FX front, the US Dollar has struggled this week but it hasn’t been a smooth move lower. Markets still see a stronger USD in 2025 and that could in part explain the grind lower and why it didn’t gather any real steam.
The crypto market is back on the up this week with Bitcoin eyeing a move above the 105k handle at the time of writing. XRP has continued its rise as markets also bet on a pro crypto policy under President Trump’s administration.
All asset classes and Global markets await the inauguration of Donald Trump as they wait with bated breath for his long promised policy proposals, The proposals are likely to shape market dynamics in the months ahead and remain crucial.
The Week Ahead: Trump Inauguration and BoJ Hold the Keys
Asia Pacific Markets
The main focus this week in the Asia Pacific region is the Bank of Japan’s meeting on January 24. Recent inflation and wage figures look promising and back its plan to increase interest rates at next week’s meeting.
Earlier today we heard rumors from Nikkei that the majority of BoJ board members are set to approve a rate hike next week.
After Friday’s release of data, which saw Chinese GDP come in better than expected. The economy grew by 5.4% in the fourth quarter compared to a year ago, up from 4.6% in the third quarter and higher than the 5.0% estimate. This was the fastest growth since the second quarter of 2023.
Following a data heavy week China’s schedule for new updates slows down. On Monday, the loan prime rates will be announced, but no changes are expected since the People’s Bank of China left key rates the same. Attention will turn to Trump’s inauguration and whether he will announce any immediate tariffs on China.
In the Asia Pacific region New Zealand inflation will be the highest impact data release and could provide the NZD with some impetus moving forward.
Europe + UK + US
In developed markets, the US inauguration will no doubt be at the forefront as well as any immediate moves by the incoming administration. This has the potential to overshadow any data releases.
The US will also be releasing S&P Manufacturing and Services PMI data on Friday.
In Europe and the UK, we also have a S&P manufacturing data which would give further insights into the Euro Area economy. There are also two speeches from ECB President Christine Lagarde on Wednesday and Friday.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)
Chart of the Week
This week’s focus is on the S&P 500as it looks to record a daily candle close above a key level that would put bulls firmly in control.
The S&P 500 is currently trading above the previous swing high at 5980 with a daily candle close above leading to change in structure.
This would be key as the optimism for stocks under the incoming President remains high. The S&P found support at the back end of the week after breaking above the 20-day SMA after strong bank earnings helped the index move higher.
There is more earnings due next week with further strong performances from the likes of Netflix likely to propel the S&P 500 toward its all time highs .
Immediate resistance rests at 6025 before the all time highs of 6094 comes into focus.
On the downside, support rests at the 20-day SMA which lines up with support at 5910 before 5840 and 5757 become areas to focus on.
S&P 500 Daily Chart – January 17, 2025
Source:TradingView.Com (click to enlarge)
Key Levels to Consider:
Support
Resistance
Follow Zain on Twitter/X for Additional Market News and Insights @zvawda
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European indices close higher. Record closing levels for some of the indices.
The major European indices closed solidly higher not only for the day but also the week. The gains have led to record closes for the German DAX, the UK’s FTSE 100 and Italy’s FTSE MIB.
The final numbers for the day show:
- German DAX, +1.20%. For the week the index rose 3.41%. A new record high of 20,924.50 was reached. The index closed at 20,903.40.
- France’s CAC rose +0.98%. For the week, the index rose 3.75%.
- UK’s FTSE 100 rose 1.35% on the day and 3.11% for the week. The high price this week reached 8533.43 a new all-time high. The index closed at 8505.23.
- Spain’s Ibex rose 0.64% for the day and 1.67% for the week.
- Italy’s FTSE MIB rose 1.25% and 3.36% for the week. The index closed at its highest level since January 2008
As London traders head for the exits, the US indices are higher.
- Dow industrial average is up 441 points or 1.03% at 43599.55. At session highs the index was up 472.89 points.
- S&P index is up 70.17 points or 1.18% at 6007.06. At session highs, the index is up 74.61 points
- NASDAQ index is up 310.89 points or 1.61% at 19649.50. That session highs it price was up 341.33 points
Looking at the US debt market, yields are higher now after trading lower earlier in the day:
- 2 year yield 4.274% up 3.6 basis points
- 5year yield 4.418%, +2.1 basis points.
- 10 year yield 4.614%, +0.9 basis points
- 30 year yield 4.843%, -0.2 basis points
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Decline in UK Retail Sales sets stage for BoE rate cuts
Pound Sterling tumbles as decline in UK Retail Sales sets stage for BoE rate cuts
GBP/USD Price Forecast: Remains below 1.2250 barrier near nine-day EMA
GBP/USD snaps two-day win streak, UK Retail Sales in the pipe
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U.S. Industrial Production Jumps In December As Utilities, Mining Output Surges
Industrial production in the U.S. increased by much more than expected in the month of December, according to a report released by the Federal Reserve on Friday.
The Fed said industrial production jumped by 0.9 percent in December after rising by a revised 0.2 percent in November.
Economists had expected industrial production to climb by 0.3 percent compared to the 0.1 percent dip originally reported for the previous month.
The much bigger than expected increase by industrial production partly reflected substantial rebounds by utilities and mining output.
Utilities output surged by 2.1 percent in December after falling by 0.7 percent in November, while mining output jumped by 1.8 percent in December following a 0.5 percent decrease in November.
The report said manufacturing output also climbed by 0.6 percent in December after rising by 0.4 percent in the previous month.
The Fed noted gains in the output of aircraft and parts contributed 0.2 percentage points to total industrial production growth following the resolution of a work stoppage at Boeing (BA).
“December US manufacturing and industrial output data beat expectations and with upward revisions to November and lead surveys pointing to ongoing improvements there might finally be signs of a turn in the sector,” said ING Chief International Economist James Knightley.
He added, “Nonetheless, tariffs will present challenges for those with international supply chains and significant export exposure.”
The report also said capacity utilization in the industrial sector rose to 77.6 percent in December from an upwardly revised 77.0 percent in November.
Economists had expected capacity utilization to inch up to 77.0 percent from the 76.8 percent originally reported for the previous month.
Capacity utilization in the mining and utilities sectors jumped to 90.8 percent and 71.1 percent, respectively, while capacity utilization in the manufacturing sector rose to 76.6 percent.
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Economic News
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Commodity Currencies Slide as Markets Brace for Trump’s Tariff Moves
Sharp selloff in commodity currencies against Dollar is dominating market action as the US session unfolds. While broader trading remains subdued, the sudden weakness in these currencies appears tied to trader caution ahead of President-elect Donald Trump’s inauguration on Monday. Concerns over tariff policies could be the main driver of the moves, in the absence of other clear fundamental catalysts.
Canada, Mexico, and China are widely speculated to be high on Trump’s tariff agenda. The tariffs may serve as leverage to address issues like fentanyl exports or re-exports impacting the United States.
However, the specifics of Trump’s strategy remain a “wild card.” Possible scenarios include blanket tariffs on major trading partners, sector-specific measures, immediate enactment via executive orders, or staggered monthly increases. Or, it could be a mix of these approaches.
For the week, Sterling remains the weakest performer, followed by Loonie and Dollar. On the other hand, Japanese Yen leads gains with the Aussie and Swiss Franc rounding out the top three. Kiwi and Euro are trading in mixed positions. However, the current selling pressure on commodity currencies could alter these rankings as the week comes to the close.
ECB’s Nagel: Should avoid rushing monetary policy normalization
German ECB Governing Council member Joachim Nagel in an interview with Platow Brief, highlighted persistent services inflation and a “high level of uncertainty,” referencing concerns about global trade dynamics as Donald Trump prepares to return to the White House next week.
“We should therefore not rush into anything on the path to monetary policy normalization,” Nagel stated.
Meanwhile, he defended the ECB’s discussions of a more aggressive 50-basis-point rate cut during its December meeting, noting that such debates are a normal part of policy deliberations.
ECB’s Elderson: Rate setting is a question of speed and magnitude
ECB Executive Board member Frank Elderson emphasized the delicate balance the central bank must strike in setting interest rates during an interview with Het Financieele Dagblad.
He warned, “If we lower the interest rate too quickly, dialling down services inflation sufficiently could become complicated.” At the same time, he acknowledged the risks of maintaining rates too high for too long, which could lead to undershooting ECB’s inflation target.
“The markets don’t think we’ve finished easing now that we’re at 3% and I don’t think we have, either,” he added. “Setting interest rates is ultimately a question of how fast and how much.”
Eurozone CPI finalized at 2.4% in Dec, core CPI at 2.7%
Eurozone inflation was finalized at to 2.4% yoy in December, up from November’s 2.2% yoy. Core CPI, which excludes energy, food, alcohol, and tobacco, held steady at 2.7% yoy. Services made the largest contribution to the annual headline inflation rate (+1.78 percentage points), followed by food, alcohol, and tobacco (+0.51 pp), non-energy industrial goods (+0.13 pp), and energy (+0.01 pp).
In the broader EU, inflation was finalized at 2.7% yoy, up from 2.5% yoy in November. Ireland recorded the lowest annual inflation rate at 1.0%, followed by Italy at 1.4%, with Luxembourg, Finland, and Sweden at 1.6% each. On the other end, Romania (5.5%), Hungary (4.8%), and Croatia (4.5%) posted the highest inflation rates.
Across the EU, annual inflation rose in 19 member states, remained unchanged in one, and fell in seven compared to the previous month.
UK retail sales fall -0.3% mom in Dec, down -0.8% qoq in Q4
UK retail sales volumes declined by -0.3% mom in December, significantly missing expectations for 0.4% mom increase. The drop was primarily driven by reduced supermarket sales, partially offset by a rebound in non-food stores such as clothing retailers, which saw recovery after recent declines.
On a quarterly basis, sales volumes in Q4 fell -0.8% qoq compared with Q3, highlighting a slowdown in consumer activity. However, year-on-year, Q4 sales volumes rose 1.9% compared to the same period in 2023.
China’s Q4 GDP growth surpasses expectations, full-year growth hits 5% target
China’s economy ended 2024 on a strong note, with GDP expanding by 5.4% yoy in Q4, beating market expectations of 5.0%. This marked a significant acceleration from 4.6% in Q3, 4.7% in Q2, and 5.3% in Q1. The robust Q4 performance pushed full-year GDP growth to 5.0%, aligning with the government’s target of “around 5%.”
December’s economic indicators also showed positive momentum. Industrial production surged 6.2% yoy, exceeding the forecast of 5.4%. Retail sales grew by 3.7% yoy, marginally beating expectations of 3.5%. However, fixed asset investment lagged, rising only 3.2% year-to-date, just below the 3.3% forecast.
Despite the upbeat data, concerns remain. Statistics Bureau spokesperson Fu Linghui acknowledged lingering weakness in consumer spending and cautioned that in 2025, the “unfavorable impact of external factors may deepen.”
BNZ PMI at 45.9: NZ manufacturing completes 2024 fully in contraction
New Zealand’s BNZ Performance of Manufacturing Index rose marginally in December, increasing from 45.2 to 45.9. While this marks a slight improvement, the sector remains in a prolonged contraction, far below the long-term average of 52.5 since the survey’s inception. December also marked the 22nd consecutive month of contraction, a record-breaking trend for the PMI.
Catherine Beard, Director of Advocacy at BusinessNZ, noted that 2024 was unprecedented, as it was the first year in the survey’s history with all 12 months in contraction. By comparison, the next closest period was 2008 during the Global Financial Crisis, which saw nine months of contraction.
Breaking down the December data, production dropped further, slipping from 42.3 to 41.9. Employment showed modest improvement, rising from 46.9 to 47.6, while new orders also edged up from 44.5 to 46.5. However, finished stocks fell significantly, declining from 49.2 to 45.9, and deliveries dipped slightly below the neutral 50 mark, moving from 50.0 to 49.8.
USD/CAD Mid-Day Outlook
Daily Pivots: (S1) 1.4336; (P) 1.4370; (R1) 1.4427; More…
Immediate focus is now on 1.4466 resistance with current strong rally ins USD/CAD. Decisive break there will resume larger up trend to 1.4667/89 long term resistance zone. On the downside, break of 1.4279 support will bring deeper correction. But downside should be contained by 55 D EMA (now at 1.4187) to bring rebound.
In the bigger picture, up trend from 1.2005 (2021) is in progress for retesting 1.4667/89 key resistance zone (2020/2015 highs). Medium term outlook will remain bullish as long as 1.3976 resistance turned holds (2022 high), even in case of deep pullback.
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Go long USD/CNY ahead of Trump’s inauguration
Investing.com – Donald Trump’s inauguration is right around the corner, and UBS has advised its clients to go long the pair to hedge policy risks before the big day.
In a light data week, Trump’s inauguration will take center stage next week, according to analysts at UBS, in a note dated Jan. 16.
“While we don’t know what his first moves will be, we doubt it will be to levy big tariffs on day one. But that doesn’t mean markets won’t stop focusing on it. FX markets are not priced for large tariffs. Big tariff moves could still weaken the CNY more meaningfully, hurting pro-growth currencies such as the EUR,” the Swiss bank said.
Given the risks, volatility is likely to increase in the months ahead. Option volatility has already risen, though this is more due to diverging economic growth expectations between the US and the rest of the world and to country- specific issues like those in the UK and Canada. This means any market-negative developments should still lead to higher actual and implied volatility.
USD/CNY has reached new highs of late, trading at the upper limit of the fixing range, the Swiss bank said.
“We expect the yuan to face increased pressure once Trump firms up his tariff plans targeting China, which may lead the People’s Bank of China (PBoC) to permit further depreciation of the currency,” UBS added.
A weaker CNY against the dollar could help mitigate some of the negative impacts of any tariff hikes. Additionally, vulnerable domestic economic fundamentals are likely to weigh on yuan sentiment, contributing to higher FX demand and investment outflows.
“Overall, we like to be long , targeting a move toward 7.50 in the coming which could also provide positive carry of 2.1% p.a. We believe a stop-loss of 7.20 is prudent,” UBS said.
At 09:10 ET (14:10 GMT), USD/CNY traded marginally lower at 7.3289.
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Canada Canadian Portfolio Investment in Foreign Securities up to $17.85B in November from previous $-2.65B
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XAU/USD: Elliott wave analysis and forecast for 17.01.25 – 24.01.25
The article covers the following subjects:
Major Takeaways
- Main scenario: Consider long positions from corrections above the level of 2576.36 with a target of 2880.00 – 2976.66. A buy signal: the price holds above 2576.36. Stop Loss: below 2570.00, Take Profit: 2880.00 – 2976.66.
- Alternative scenario: Breakout and consolidation below the level of 2576.36 will allow the pair to continue declining to the levels of 2464.30 – 2282.23. A sell signal: the level of 2576.36 is broken to the downside. Stop Loss: above 2585, Take Profit: 2464.30 – 2282.23.
Main Scenario
Consider long positions from corrections above the level of 2576.36 with a target of 2880.00 – 2976.66.
Alternative Scenario
Breakout and consolidation below the level of 2576.36 will allow the pair to continue declining to the levels of 2464.30 – 2282.23.
Analysis
The ascending fifth wave of larger degree 5 is presumably developing on the weekly chart, with wave (5) of 5 forming as its part. The third wave of smaller degree 3 of (5) appears to continue forming on the daily chart, with wave iii of 3 developing inside. Wave (v) of iii is developing on the H4 time frame. If this assumption is correct, the XAU/USD pair will continue to rise to 2880.00 – 2976.66. The level of 2576.36 is critical in this scenario as a breakout will enable the pair to continue declining to the levels of 2464.30 – 2282.23.
This forecast is based on the Elliott Wave Theory. When developing trading strategies, it is essential to consider fundamental factors, as the market situation can change at any time.
Price chart of XAUUSD in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.
