Forexlive Americas FX news wrap: The US dollar picks up where it left off | Forexlive
Markets:
- USD leads, GBP lags
- WTI crude oil up $1.39 to $73.11
- US 10-year yields down 1.6 bps to 4.56%
- Gold up $34 to $2658
- S&P 500 down 0.2%.
The US dollar was a strong performer to start the new year, it came out, I think it was more about the moves in capital flows than about economic data though. Initial jobless claims were lower than expected, which is a good sign for the US jobs market, but it’s a holiday distorted week. Numbers on construction spending and the latest PMI were both a tad on the soft side. Again, I don’t think those were drivers of the market move. The big driver of the move in the US dollar today was, and it was a broad, strong move in the US dollar today, were capital flows.
Inventors are surveying the picture from 2024 and into 2025 and all the winners were USD-denominated like the Mag7 and AI trades.
Surprisingly, commodity currencies held up well despite a rough start in Chinese markets, suggesting capital flows are the key driver. That said, oil and gold were strong as well proving that there are some hopes for global growth even without China’s help.
The USD/JPY pair was a bit reluctant to push higher, even with Treasury yields starting lower and then bouncing, likely due to concerns about potential intervention or rate hikes by Japanese authorities. It was the trade of 2024, and we’ll see if it holds up this year.
The big losers were the euro and the pound, which both fell around 1%. The pound was particularly hard hit as stops below the December low of 1.2475 gave way and the pair fell another 100 pips from there with hardly a bounce. The same thing unfolded in the euro a bit later as it fell all the way to 1.0226 before a 40 pip bounce.
Both of those will be under the microscope early in the year but the rush out of Europe and into the US shows how much of the market is positioned.