December 24, 2024

“Major currency pairs moved in tight ranges early Tuesday as trading slowed down with the holidays approaching. US stock and bond markets will close early on Christmas Eve and stay shut on Christmas Day. There won’t be any major economic data releases until Thursday.”

Tim Hallinan – Trading Director

USD

Data released in the US on Monday revealed that the Conference Board’s Consumer Confidence Index fell to 104.7 in December, down from a revised 112.8 in November (previously 111.7). Meanwhile, Durable Goods Orders dropped by 1.1% month-on-month in November, while New Home Sales rose by 5.9%. Despite the mixed nature of the data, the US Dollar struggled to gain momentum, though the USD Index recorded modest gains on Monday. In other developments, the Bank of Japan indicated in its Monetary Policy Meeting Minutes that gradual interest rate hikes might be achievable if inflation progresses in line with expectations. One participant suggested incrementally raising rates to 1.0% by the second half of fiscal 2025 to facilitate a more comprehensive economic analysis. After gaining nearly 0.5% on Monday, the USDJPY pair traded within a narrow range this morning.

GBP

During European trading hours this morning, GBPUSD is consolidating within a narrow range, remaining close to its lowest level since May, reached last week. The US Dollar remains steady near a two-year high, bolstered by the Federal Reserve’s (Fed) hawkish stance, signalling a slower pace of interest rate cuts in 2025. In contrast, the British Pound faces pressure due to the Bank of England’s (BoE) split decision to hold interest rates steady and its dovish forward guidance. The continued recovery of the US Dollar and the prevailing technical outlook indicate that the pair remains vulnerable to further declines.

EUR

The Euro edged lower on Monday following comments from European Central Bank (ECB) President Christine Lagarde in an interview with the Financial Times (FT). Lagarde stated that the ECB is “very close” to confirming that inflation has been sustainably reduced to its medium-term target of 2%. However, she cautioned that the central bank must remain alert to inflationary pressures in the services sector. While headline inflation in the Eurozone has fallen to 2.2%, services inflation remains elevated at 3.9%. Dovish expectations for the European Central Bank in 2025 persist, supported by solid anticipation that Eurozone inflation will align with the bank’s 2% target. Market participants forecast a 25 basis point reduction in the ECB’s Deposit Facility rate at each of the next four policy meetings.

Markets

European markets began Tuesday’s shortened trading session on a strong footing ahead of Christmas Eve. The pan-European Stoxx 600 climbed about 0.3% at the start of trading, with every sector posting gains. Technology shares were among the top performers, benefiting from Monday’s solid rally in U.S. tech stocks. European stocks closed Monday’s session with modest gains as investors digested further discouraging economic data from the U.K. The Stoxx 600 index was supported by a rebound in the share price of pharmaceutical giant Novo Nordisk.

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