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02/01/2025 - 08:27 UTCThe U.S. dollar recorded moderate gains on Tuesday, closing the session up by 0.40%, and concluded the year with substantial overall appreciation. The currency's strength has been supported by the Federal Reserve's measured stance on rate cuts and heightened market optimism surrounding the incoming administration of Donald Trump.
The Federal Reserve’s decision to scale back projections for rate cuts in 2025 has fortified the dollar, driving the 10-year Treasury yield to its highest level in over seven months last week. Further boosting the dollar, Donald Trump’s election victory has reignited expectations of pro-growth, inflationary policies. His proposed measures, including deregulation, tax reductions, tariff increases, and stricter immigration policies, are expected to influence the Fed’s cautious stance.
On Tuesday, U.S. main stock indexes saw subdued movements as trading volumes thinned ahead of the holiday. The US 500 edged 0.27% lower, while the US 30 slipped 0.11%, and the US Tech 100 declined 0.73%, weighed down by tech stocks.
Despite the day's muted performance, all three major indexes posted solid annual gains for 2024, with the US 500 up nearly 15%, the US 30 rising 10%, and the US Tech 100 surging 25% on the back of robust growth in technology and AI-driven sectors. Investor sentiment throughout the year was buoyed by resilient corporate earnings, cooling inflation, and cautious monetary policy adjustments by the Federal Reserve.
On the energy front, Oil prices declined by approximately 3% in 2024, marking their second consecutive year of losses. The drop was driven by a stalled post-pandemic demand recovery, economic challenges in China, and increased crude output from the U.S. and other non-OPEC producers, which contributed to a well-supplied global market.
Today's news highlights the release of U.S. jobless claims and ISM manufacturing PMI data, which will offer insights into the labor market and industrial activity as the year ends. Tomorrow, market attention will shift to European inflation figures and remarks from Federal Reserve officials, providing further clues about the monetary policy outlook for 2025.
The EUR/USD pair ended the session on Tuesday with moderate losses of 0.51%. The Euro faces persistent pressure as the European Central Bank (ECB) maintains a dovish stance on interest rates for 2024.
ECB President Christine Lagarde reiterated on Wednesday that the bank is committed to achieving its 2% inflation target by 2025. “We made significant progress in 2024 in bringing down inflation, and we are optimistic that 2025 will be the year we reach our target,” she stated, emphasizing the ECB’s determination to stabilize inflation sustainably at the medium-term goal.
Meanwhile, the US Dollar climbed to multi-year highs, supported by the Federal Reserve's hawkish stance. The Fed's cautious approach to further rate cuts in 2025 reflects uncertainties tied to potential policy shifts under the incoming Trump administration’s economic agenda.
Gold prices closed a record-breaking year on a strong note, driven by robust central bank buying, geopolitical uncertainties, and easing monetary policies.
With a year-to-date gain of over 26%, gold has achieved its best annual performance since 2010, reaching a record high of $2,790.15 on October 31 after a series of rallies throughout the year. Key drivers of the surge included heightened geopolitical risks, strong central bank demand.
Looking ahead to 2025, gold is expected to remain resilient despite potential headwinds from a stronger U.S. dollar and a slower pace of Federal Reserve rate cuts.
Oil prices rose in Asian trading on Thursday after data revealed a decline in U.S. oil inventories last week, though traders remained cautious about the outlook for 2025.
Despite a modest yearly loss for oil prices in 2024, the market remains cautious entering 2025, with concerns about an oversupplied market this year. The American Petroleum Institute (API) reported a 1.4 million-barrel drop in U.S. oil inventories, signaling increased demand for crude, which could support prices. The U.S. Energy Information Administration (EIA) will release official inventory data later today, and traders are watching closely for confirmation of the API’s report.
U.S. stock index futures slipped on Wednesday evening, signaling a cautious start to 2025 after a strong year driven by artificial intelligence enthusiasm and lower interest rates. However, these gains tapered off toward the end of 2024, with a much-anticipated “Santa Rally” failing to materialize in December. Concerns over slower interest rate cuts by the Federal Reserve and uncertainty surrounding the policies of incoming President Donald Trump led investors to lock in profits.
Looking ahead, market attention will shift to President Trump’s economic and international policies once he takes office in January.
The materials contained on this document should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. For the full disclaimer click here.
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