Market watch: 27th January 2025

The Dollar weakened considerably last week as markets began to question the resolve behind trade tariff posturing. The DXY suffered its worst week since last November, falling the better part of 2% to the mid-107 range. Despite president Trump’s repeated calls to address the trade imbalance, market participants have been waiting for something a little more concrete. Judging by the recent events in Colombia, the wait may be over. The USD made a stand early this morning and the Dollar Currency Index is up 0.2% at the time of writing. Despite everything, interest rate traders have cemented their prediction of zero change during the next Fed meeting on Wednesday.

Gold was all to happy to capitalise on the weakness exhibited by the Greenback, climbing to within a few Dollars of its previous all-time high. The precious metal rose to $2,770 an ounce by Friday’s close, just shy of the record $2,790 from last October. Weakness in the Dollar aside, the uncertainty surrounding tariffs and sanctions is also a contributing factor to the rise in gold. Safe-haven inflows are back on the menu.

The Lunar New Year is just around the corner so trading conditions may be somewhat off this week. Chinese markets will be closed from tomorrow until next Monday. Not much on the economic calendar today or tomorrow but on Wednesday both the Bank of Canada and Federal Reserve will convene to establish interest rates on their respective currencies. The former is expected to lower rates on the Canadian Dollar down to 3% from 3.25% whereas the Fed is expected to keep rates steady at 4.5%. The ECB follows on Thursday and is expected to lower the deposit facility rate on the Euro down to 2.75% from 3%. The big event on Friday is the publication of the PCE price index, the Fed’s preferred inflation metric.

If the first week of Donald Trump’s presidency is anything to go by then the second should make for equally exciting times. Worth keeping an eye on ongoing developments, particularly those relating to tariffs.