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03/01/2025 - 08:43 UTCThe U.S. dollar exhibited notable strength on Thursday in the foreign exchange markets, reaching a two-year high against the euro and an eight-month high against the British pound. This appreciation was reflected in the U.S. Dollar Index (DXY), which measures the dollar against a basket of major currencies. The index rose by 0.74% marking its highest level since October 2022.
The dollar's rise was underpinned by robust U.S. economic indicators, including strong jobs data that reinforced confidence in the U.S. economy. Additionally, expectations that the Federal Reserve may limit interest rate cuts, coupled with anticipated pro-growth policies from the incoming Trump administration, further supported the dollar's strength.
Conversely, weaker manufacturing data from the UK and Eurozone, along with rising energy prices, exerted downward pressure on the euro and pound. These factors contributed to the dollar's relative outperformance against these currencies.
U.S. main indexes declined on Thursday, reversing early gains amid recent security incidents across the country. The cautious start to 2025 follows strong market performances in 2024, with the US Tech 100 surging over 28%, supported by AI-driven tech rallies. Meanwhile, the Atlanta Fed downgraded its Q4 GDP growth estimate to 2.6% from 3.1%, citing weaker investment and manufacturing trends.
On the energy front, Oil prices climbed more than $1 per barrel on Thursday, the first trading day of 2025, buoyed by optimism around China’s economic prospects following President Xi Jinping's pledge to implement growth-focused policies. Geopolitical risks and U.S. tariff concerns remain key factors for future price movement.
Today, markets will focus on the release of the U.S. ISM Manufacturing PMI, providing critical insights into the manufacturing sector's performance, alongside remarks from FOMC member Thomas Barkin, which could shed light on the Federal Reserve's monetary policy outlook.
EUR/USD started the new year with another sharp decline, falling by 0.8% and touching the 1.0250 mark—its lowest point since November 2022, representing a nearly 26-month low. The Euro’s struggles were compounded by disappointing European Manufacturing Purchasing Managers' Index (PMI) data released on Thursday, followed by dovish comments from European Central Bank (ECB) policymaker Yannis Stournaras later in the day.
Stournaras, a member of the ECB Governing Council, suggested that the ECB is on track to gradually reduce interest rates throughout 2025. He projected rates could dip to around 2% later this year.
In economic data, December's Pan-European PMI survey showed a slight dip to 45.1, falling short of expectations of a stable reading at 45.2. Looking ahead to Friday's economic calendar, the focus will be on the US ISM Manufacturing PMI for December, with analysts expecting a steady reading of 48.4, signaling ongoing contraction in the US manufacturing sector.
Gold prices rose on Thursday as traders kicked off 2025 with optimism over potential economic stimulus measures, particularly from China, and growing geopolitical risks that continue to support the precious metal as a safe-haven asset.
In addition to economic factors, geopolitical risks continue to be a significant driver for gold. With tensions in the Middle East and ongoing uncertainty surrounding U.S. economic policies under President-elect Donald Trump, investors are seeking refuge in gold as a hedge against potential market volatility.
Oil prices saw a significant boost on Thursday, rising by more than $1 per barrel as investors returned for the first trading day of 2025 with renewed optimism about China's economic recovery and potential fuel demand growth following President Xi Jinping's commitment to promoting growth. However, rising gasoline and distillate inventories in the U.S. capped gains and put pressure on prices.
In the U.S., oil stockpile data from the Energy Information Administration (EIA) released Thursday, a day later than usual due to the New Year holiday, showed an increase in gasoline and distillate inventories. Crude oil stockpiles fell by less than anticipated, dropping by 1.2 million barrels to 415.6 million barrels, compared to analysts' expectations for a 2.8 million-barrel draw.
U.S. stock index futures declined on Thursday after Wall Street experienced a weak start to 2025, driven by losses in tech giants Apple and Tesla. Investor sentiment was also dampened by expectations of slower interest rate cuts and uncertainty over economic policies under incoming President Donald Trump.
Apple experienced a 2.64% drop during the session after the company announced discounts of up to 500 yuan ($68.50) on its flagship iPhone models in China. The move reflects ongoing struggles in the Chinese market, where heightened competition and weaker sales have become significant challenges.
Tesla, on the other hand, dropped 6.13% after reporting that its fourth-quarter deliveries fell short of expectations. Weaker demand in North America and Europe, coupled with intense competition in China, led to Tesla’s first annual decline in deliveries in over a decade.
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