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20/01/2025 - 08:26 UTCThe US dollar gained against most major currencies on Friday, with the dollar index (USDX) up by 0.40%, closing in on a recently hit two-year high as markets are gearing up for Donald Trump's presidential inauguration. Investors will possibly look for further clarity on the course of the incoming administration's policies.
Expectations for a less confrontational approach towards China increased following the absence of any mention of trade tariffs during the latest Trump rally in Washington on Sunday. However, the president elect reaffirmed the new government’s intention to tighten immigration policies and diminish government regulation of domestic businesses. Trump also held a call with Chinese President Xi Jinping last week, spurring hopes that Sino-U.S. relations will improve under the incoming President. The President-elect had vowed to impose an up to 60% duty on all Chinese imports, while also targeting Mexico and Canada with heightened tariffs.
Wall Street sentiment improved in the past week, with all three main stock indices posting consecutive daily gains as investors eye the new administration’s proposed measures on trade, taxation, and deregulation, which are expected to influence market dynamics significantly. On his first day, Trump plans to sign more than 200 executive orders addressing key issues such as border security and energy policy, media reports have shown. These measures encompass the declaration of a national border emergency and the implementation of measures to enhance security at the southern border. Furthermore, Trump intends to fully exploit Alaskan energy resources, indicating a change in energy policy.
Positive earnings reports released by major banks last week also bolstered market optimism. Investor attention now turns to key earnings releases scheduled for this week which include Netflix Inc and United Airlines Holdings Inc on Tuesday, Johnson & Johnson and Procter & Gamble Company on Wednesday, and Verizon Communications and American Express Company on Friday.
For the week ahead markets will most likely be focusing on the U.S. Flash Manufacturing and Flash Services PMIs, the University of Michigan revised consumer sentiment survey and U.S. jobless claims and existing home sales. Some price action could also be observed upon the release of Canada’s inflation and retail sales numbers while Eurozone and the U.K also release their Flash Manufacturing and Flash Services PMIs.
The EUR/USD pair ended the session with losses on Friday but managed to start the week on the upside early on Monday. However, the pair's upward momentum may face limitations as the US Dollar (USD) is poised to strengthen amid market caution surrounding President-elect Donald Trump’s inauguration later today. With the US markets closed on Monday in observance of Martin Luther King Jr. Day, trading activity is expected to be subdued.
Investor focus remains on Trump’s proposed policies, including potential tariffs, tax cuts, and stricter immigration measures, which have driven up US Treasury yields and bolstered the USD in anticipation of their impact. All eyes are on Trump's expected executive orders, anticipated shortly after he takes office.
Meanwhile, the Euro (EUR) is contending with challenges stemming from ongoing dovish expectations for the European Central Bank (ECB).
Gold prices edged lower on Friday but managed to close the week with gains as market participants remain cautious ahead of the US presidential inauguration of Donald Trump. Political uncertainty has continued to drive demand for gold as a safe-haven asset.
Geopolitical factors and US political developments remain key drivers for gold's price movements. Although US Treasury bond yields in the belly of the curve remained steady, bullion buyers were unable to sustain upward momentum to secure additional gains heading into the weekend.
Oil prices settled lower on Friday, but despite these declines, Brent gained 1.3% this week, while WTI climbed 1.76%, marking their fourth straight weekly gains.
Market sentiment was influenced by the Biden administration's expanded sanctions targeting Russian oil producers and tankers, further tightening supply conditions.
Investors are also weighing the potential implications of President-elect Donald Trump’s return to the White House today. Trump’s Treasury secretary nominee has indicated readiness to impose tougher sanctions on Russian oil, heightening concerns over supply disruptions.
U.S. stocks surged on Friday, capping off a robust week as optimism over the economy’s resilience and expectations of Federal Reserve rate cuts buoyed investor sentiment. Markets also prepared for potential policy shifts under the incoming Trump administration, set to begin with his inauguration today.
The US 500 and US 30 posted their largest weekly percentage gains since early November, while the US Tech 100 saw its best performance since early December. Positive economic data this week eased concerns about a resurgence of inflation and bolstered hopes for an accelerated pace of interest rate reductions.
The corporate earnings season kicked off on a positive note, particularly in the banking sector. In the tech space, Nvidia and Broadcom gained 3.19% and 3.5%, respectively, following price target increases by Barclays.
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