Chicago PMI, Pending Home Sales

The EUR/USD pair rose on Friday, with thin trading conditions persisting after the Christmas and Boxing Day holidays. The pair advanced as the US Dollar (USD) softened, even as expectations remain strong for the Federal Reserve (Fed) to maintain a gradual policy-easing trajectory in light of a modest rebound in inflation over the past three months.

Last week, ECB President Christine Lagarde voiced her opposition to retaliatory trade measures in an interview with the Financial Times, arguing that trade restrictions and tit-for-tat responses are detrimental to the global economy. On the economic front, investors are looking ahead to Spain's preliminary Harmonized Index of Consumer Prices (HICP) data for December.

Gold prices ended the week lower on Friday, pressured by a rise in Treasury yields following the U.S. Federal Reserve’s hawkish stance.

Trading volumes in gold tend to be lighter toward the end of the year, as many institutional traders and market participants wind down operations ahead of the holiday season. Additionally, fewer economic data releases and policy decisions at year-end typically lead to subdued market activity and reduced volatility.

Gold prices also faced significant downward pressure after the Fed’s recent policy meeting, where officials indicated that only two interest rate cuts were likely in 2025, contrary to previous expectations of four cuts. Higher interest rates tend to diminish the appeal of gold, as investors seek more attractive returns from interest-bearing assets.

Oil prices ended higher on Friday after data revealed that U.S. crude inventories fell more than anticipated.

The U.S. Energy Information Administration (EIA) reported Friday that U.S. crude stockpiles fell by 4.2 million barrels for the week ending December 20, significantly exceeding expectations of a 700,000-barrel decline.

This unexpected drawdown signals a tightening of supply in the U.S. crude market, which has global implications for oil prices. Following the American Petroleum Institute (API) report earlier in the week, oil prices had already edged higher, buoyed by expectations of additional fiscal stimulus in China and the sharp reduction in U.S. crude inventories.

The future outlook for oil demand remains closely tied to hopes for a recovery in China, the world’s largest oil importer. However, concerns about a potential oversupply persist, particularly with anticipated increases in production from non-OPEC countries.

U.S. main indexes ended the session on Friday posting huge losses with technology stocks leading the selloff, pressured by a sharp rise in Treasury yields.

The pullback in tech stocks came amid a rise in the benchmark 10-year Treasury yield, which reached 4.64%, its highest level since early May. The increase in yields is attributed to expectations of a more hawkish Federal Reserve in 2025, driven by concerns over inflation.

Higher Treasury yields often lead to increased borrowing costs, which can dampen spending on innovation and expansion, putting additional pressure on the profit margins of tech companies.