The first trading day of 2025 is quiet, with the Asian session sluggish as traders remain in holiday mode. A light economic calendar and holidays in Japan, Switzerland, and New Zealand further dampen activity. However, the US Dollar Index retreats from a two-year high, boosting major currencies, Antipodeans, and key commodities, as market players await more signals to confirm the recent hawkish Fed stance amid mixed US data.
While the US Dollar's pullback gives a temporary break to other major assets, the recovery lacks strength, as central banks outside the US and Japan seem less hawkish. Political tensions, economic struggles, and China’s challenges further weigh on sentiment. That said, the EURUSD stands out as it fluctuates near its yearly low ahead of mid-tier data releases from the US and Eurozone.
The US Dollar bulls are taking a breather as market expectations shift, with traders reassessing the likelihood of slower rate cuts by the Federal Reserve in 2025. This comes ahead of the few active trading days of the week, which include mid-tier US economic data. Adding to the pause in the Greenback’s momentum are headlines hinting at further stimulus from China, along with the absence of concerning PMI data from the country, easing some global growth fears.
As a result, GBPUSD snaps its two-day losing streak, despite economic concerns in the UK. However, USDJPY remains subdued, with traders skeptical about the Bank of Japan’s (BoJ) ability to significantly raise rates, as they consolidate previous moves during Japan's four-day holiday.
Even if the US Dollar’s retreat gives EUR/USD bears a brief pause, buyers remain cautious due to ongoing economic and political challenges in the Eurozone. The dovish outlook on the European Central Bank (ECB) further weighs on the pair. That said, ECB President Christine Lagarde offered some optimism in her New Year speech, highlighting progress on easing inflation and the bank’s commitment to gradually reducing rates.
The US Dollar's retreat, combined with positive China PMI data and hopes for stimulus, supports a corrective bounce in commodity-linked currencies. Leading the way is the Australian Dollar (AUD), recovering from its lowest point since October 2022. Similarly, NZDUSD rebounds from a 26-month low, while USDCAD reverses the previous day's rise from a two-week low.
Gold continues to stay firm for the second consecutive day, benefiting from a softer US Dollar, optimism around physical buying, and central bank actions. The precious metal recorded its biggest yearly gain since 2010 in 2024, as market uncertainty drove traders to its safe-haven appeal. Similarly, Crude Oil kicked off 2025 on a strong note, marking a four-day uptrend and reaching its highest level in two months. However, it pulls back from its multi-day peak as the European session begins, amid mixed signals.
MicroStrategy's year-end Bitcoin (BTCUSD) purchase, along with a surge in long-term Ethereum (ETHUSD) holders, boosts strength in these top-tier cryptocurrencies. However, a cautious mood ahead of Trump’s inauguration limits buying interest in both Bitcoin and Ethereum.
A series of mid-tier data from the Eurozone and the US could engage intraday traders on the first full trading day of 2025. However, the holiday mood in Japan, New Zealand, and Switzerland may limit market reactions. Key catalysts, including the final December PMIs and US weekly jobless claims, will be in focus. If the data supports the Fed's hawkish bias, the US Dollar may reverse early losses and regain momentum, potentially pressuring Antipodeans and weighing on EURUSD. However, Gold is unlikely to reverse its uptrend unless there’s significant buying in the Greenback.
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