THE ETERNAL SOVEREIGN

Tag: inflation

  • AUD Declines Despite Careful Messaging from RBA’s Hauser

    • The Australian Dollar weakens after the trade surplus narrowed to 2,936M MoM in November.
    • The Australian Dollar weakens after the trade surplus narrowed to 2,936M MoM in November.
    • The US ISM Services PMI climbed to 54.4 in December, up from 52.6 and above the 52.3 forecast.

    The Australian Dollar (AUD) edges lower against the US Dollar (USD) on Thursday following Australia’s Trade Balance data, which showed that the trade surplus narrowed to 2,936M MoM in November versus 4,353M (revised from 4,385M) in the previous reading.

    The Australian Bureau of Statistics (ABS) reported on Thursday that Exports fell by 2.9% MoM in November from a rise of 2.8% (revised from 3.4%) seen a month earlier. Meanwhile, Imports grew by 0.2% MoM in November, compared to a rise of 2.4% (revised from 2.0%) seen in October.

    Australia’s mixed November Consumer Price Index (CPI) has left the Reserve Bank of Australia’s (RBA) policy path unclear, shifting attention to the quarterly CPI release later this month for stronger direction.

    RBA Deputy Governor Andrew Hauser commented Thursday that November’s inflation figures were broadly in line with expectations, and noted that rate cuts are unlikely in the near term.

    Data from the Australian Bureau of Statistics (ABS) on Wednesday showed annual inflation easing to 3.4% in November from 3.8% in October. The figure came in below the 3.7% forecast but remained above the RBA’s 2–3% target band. It was the lowest print since August, with housing costs rising at their weakest pace in three months.

    US Dollar steadies amid market caution

    • The US Dollar Index (DXY), which tracks the Greenback against six major peers, is holding steady near 98.70 at the time of writing.
    • The Dollar is firm as soft recent data highlights a fragile US economy ahead of Friday’s pivotal jobs release, keeping sentiment subdued.
    • Traders are watching Thursday’s Initial Jobless Claims data, with focus shifting to Friday’s Nonfarm Payrolls report, expected to show a slowdown to 55,000 new jobs in December from 64,000 in November.
    • The ISM reported Wednesday that the US Services PMI strengthened to 54.4 in December from 52.6, beating forecasts of 52.3.
    • ADP data showed private payrolls increased by 41,000 in December, following a revised drop of 29,000 in November and slightly below the 47,000 consensus.
    • Fed Governor Stephen Miran said Tuesday the Federal Reserve may need to cut rates aggressively this year to sustain economic momentum, while Minneapolis Fed President Neel Kashkari cautioned that unemployment could “pop” higher.
    • Richmond Fed President Tom Barkin, who is not voting on policy this year, said Tuesday that rate adjustments will need to be carefully calibrated to incoming data, highlighting risks to both inflation and employment, per Reuters.
    • CME FedWatch pricing suggests an 88.9% chance the Fed will leave rates unchanged at its January 27–28 meeting.
    • China’s RatingDog Services PMI slipped to 52.0 in December from 52.1, while last week’s Manufacturing PMI ticked up to 50.1 from 49.9. Shifts in the Chinese economy are closely watched due to Australia’s deep trade ties with China.
    • November CPI in Australia was flat month-on-month, matching October. The RBA’s Trimmed Mean rose 0.3% MoM and 3.2% YoY. Seasonally adjusted Building Permits surged 15.2% MoM to nearly four-year highs of 18,406 units, rebounding sharply from October’s revised 6.1% drop. Annual permits climbed 20.2%, overturning a revised 1.1% decline.
    • The Australian Financial Review reported that the RBA may still have tightening ahead, with economists expecting sticky inflation and penciling in at least two further rate hikes.

    The Australian Dollar is holding close to 0.6700 after retreating from its 15-month peak, with AUD/USD trading near 0.6720 on Thursday.

    Daily chart signals show the pair staying inside an ascending channel, maintaining a bullish structure. The 14-day RSI at 64.42 reinforces positive momentum.

    On the upside, AUD/USD could retest 0.6766 — its highest level since October 2024 — and possibly climb toward the channel’s upper boundary near 0.6840.

    Initial support is located around 0.6720 at the channel’s lower boundary, followed by the nine-day EMA at 0.6706. A break beneath that confluence area could expose downside toward the 50-day EMA at 0.6626.

    AUD/USD: Daily Chart.

    Sources: Fxstreet

  • USD/CAD climbs past 1.3850 amid ongoing worries about Canadian oil demand

    • The USD/CAD pair strengthened as the commodity-linked Canadian dollar struggled amid growing concerns over demand for Canadian oil.
    • Canada’s Prime Minister Mark Carney stated that Canadian crude remains low risk and competitive despite increasing Venezuelan exports.
    • Meanwhile, the U.S. dollar held steady as cautious market sentiment prevailed ahead of Friday’s key jobs report, influenced by fragile economic data.

    USD/CAD extended its winning streak to a fifth consecutive day, trading near 1.3860 during Asian session on Thursday. The pair strengthened as the commodity-linked Canadian dollar faced pressure following U.S. President Donald Trump’s indication of plans to resume Venezuelan crude imports, raising concerns about increased supply and intensified competition for Canadian oil demand.

    Despite this, Prime Minister Mark Carney affirmed that Canadian crude remains low risk and competitive even amid potential growth in Venezuelan exports. Carney’s office also announced his upcoming visit to China from January 13–17, aiming to diversify Canada’s export markets beyond the United States amid ongoing uncertainty over U.S. trade policy.

    Canada’s seasonally adjusted Ivey Purchasing Managers’ Index (PMI) rose to 51.9 in December 2025 from 48.4 in November, exceeding the expected 49.5 and marking a return to expansion after a month of contraction. Canada’s Trade Balance data for October is scheduled for release on Thursday.

    The U.S. dollar (USD) remained steady amid a fragile U.S. economic outlook ahead of Friday’s key jobs report, which has moderated market sentiment. The U.S. Nonfarm Payrolls (NFP) for December are forecasted to show a gain of 55,000 jobs, down from 64,000 in November.

    On Wednesday, the Institute for Supply Management (ISM) reported the U.S. Services PMI increased to 54.4 in December from 52.6 in November, beating the expected 52.3. Additionally, the Automatic Data Processing (ADP) Employment Change showed an increase of 41,000 jobs in December, following a revised loss of 29,000 jobs in November, though this was slightly below market expectations of 47,000.

    Sources: Fxstreet

  • Federal Reserve could accelerate rate cuts amid rising deflation risks

    The ISM service index suggests potential positive revisions for fourth-quarter GDP growth. On Wednesday, the Institute for Supply Management (ISM) reported that its non-manufacturing service sector index increased to 54.4 in December from 52.6 in November, marking the third consecutive month of expansion and the fastest pace of growth in over a year.

    The new orders sub-index rose sharply to 57.9 from 52.9, while business activity climbed to 56 from 54.5. Additionally, new export orders improved to 54.2, up from 48.7 in November. Out of 16 surveyed service industries, 11 showed expansion in December.

    Conversely, the ISM manufacturing index fell to 47.9 in December from 48.2 the prior month, continuing its contractionary trend for the tenth straight month (a reading below 50 indicates contraction). Only 2 of 17 manufacturing industries—Electrical Equipment, Appliances & Components, and Computer & Electronic Products—reported growth, likely supported by strong data center demand.

    ADP’s December report showed private payrolls increasing by 41,000, missing economists’ expectation of 48,000. This follows a loss of 29,000 private jobs in November, meaning just 12,000 private jobs were created over the last two months. Manufacturing shed 5,000 jobs in December, while education and health services added 39,000, and leisure and hospitality gained 24,000 jobs. Regionally, the West lost 61,000 private sector jobs, while the South led with a gain of 54,000.

    Residential investment acted as a 5.1% drag on GDP growth during the second and third quarters. Strengthening GDP going forward will depend largely on stabilizing the residential real estate market, which remains sluggish due to high mortgage rates, rising insurance costs, and an oversupply in several key areas. According to the Intercontinental Exchange, prices for U.S. condominiums dropped 1.9% in September and October, with high homeowners association (HOA) fees and insurance expenses cited as major factors. In nine major metropolitan regions, over 25% of condominiums have fallen below their original sale prices. While multiple Federal Reserve rate cuts could help support home prices, the current weakness is fueling deflationary concerns that the Fed needs to address.

    If deflation emerges from (1) weak housing and rental prices, (2) low crude oil prices, and (3) deflation imported from China and other struggling global economies, the Fed may need to implement rapid interest rate cuts totaling around 100 basis points. With President Trump expected to nominate a new Fed Chair soon, current Chair Jerome Powell is likely to become a lame duck. Minutes from the December Federal Open Market Committee (FOMC) meeting indicated at least one more 0.25% rate cut is probable, but any further deflationary signals could prompt the Fed to enact much larger reductions in key rates in the coming months.

    President Trump is expected to nominate a new Federal Reserve Chair in January who will likely reverse the Fed’s current restrictive policies and adopt a more pro-business stance. Should Kevin Hassett, the current Chair of the Council of Economic Advisors, be appointed, the Fed would gain a strong economic advocate, a development that many find promising and exciting.

    Sources: Investing

  • US Dollar: Key Data Once Again Driving the Market

    Markets are increasingly overlooking geopolitical issues—including developments in Venezuela and Greenland—while economic data is set to reclaim its role as the primary market driver in the latter half of the week. Today’s releases of ADP, JOLTS, and ISM services carry downside risks for the US dollar. Expectations of further rate cuts also point to softer FX performance in Central and Eastern Europe.

    USD: Data May Weigh on Momentum

    The impact of the Venezuela shock has largely dissipated. Although oil prices eased yesterday, they remain close to pre-4 January levels, equities continued to advance, and FX markets have shifted focus away from geopolitics. This reflects a post-“Liberation Day” tendency to ignore headlines and adopt a more measured outlook.

    The dollar recovered modestly yesterday, likely supported by seasonal inflows and a slight rise in front-end swap rates rather than geopolitical factors. Unless the US intensifies its stance on Greenland or intervenes again in Venezuela, markets are expected to re-center on macro data in the second half of the week.

    Today’s ISM services index is anticipated to be weak, but price action will likely be driven more by ADP (consensus: 50k) and the JOLTS job openings data. Notably, ADP has undershot expectations in seven of the past ten releases. Given our dovish view on the US labor market, we see upcoming employment data as carrying asymmetric downside risks for the dollar.

    Looking beyond today, our near-term outlook remains neutral to slightly constructive on the greenback.

    EUR: Inflation Risks to the Downside, but ECB Outlook Largely Unchanged

    German inflation undershot consensus yesterday, decelerating to 1.8% YoY (2.0% in EU harmonised terms). As our economist notes here, the disinflation appears broad-based – i.e., beyond the base effect – with prices falling in leisure, clothing, and food.

    That raises the chance of a sub-2.0% print today (consensus is at 2.0%) for the eurozone CPI flash estimate. Expectations are for the core CPI to remain unchanged at 2.4%, though; that is a measure that needs to start trending lower more decisively to revive any dovish dissent within the ECB.

    For now, implications for ECB rate expectations are likely to be limited unless inflation starts undershooting materially and consistently. By extension, the euro may not be taking many cues from the print and will remain almost entirely driven by the US dollar leg.

    Sources: Think.ing

  • The Australian Dollar reaches new 14-month highs, shrugging off easing inflation pressures

    • The Australian Dollar gains ground amid a hawkish outlook on the Reserve Bank of Australia (RBA).
    • Australia’s CPI slowed to 3.4% year-over-year in November, below expectations but still above the RBA’s target range.
    • Traders now turn their attention to Wednesday’s US ISM Services PMI and JOLTs job openings reports for further market cues.

    The Australian Dollar (AUD) extended its winning streak for the fourth consecutive session on Wednesday, gaining against the US Dollar (USD) despite easing inflation figures for November. Traders are now focused on the upcoming full fourth-quarter inflation report due later this month. Analysts caution that a core inflation increase of 0.9% or more could prompt the Reserve Bank of Australia (RBA) to consider further tightening at its February meeting.

    Meanwhile, the Australian Financial Review (AFR) highlighted that the RBA may not be finished with its rate hikes this cycle. A recent poll suggests inflation is likely to remain persistently high over the coming year, supporting expectations for at least two more rate increases.

    The Australian Bureau of Statistics (ABS) reported on Wednesday that Australia’s Consumer Price Index (CPI) rose 3.4% year-over-year (YoY) in November, easing from 3.8% in October. This figure missed market expectations of 3.7% but stayed above the Reserve Bank of Australia’s (RBA) target range of 2–3%. It marked the lowest inflation rate since August, with housing costs rising at their slowest pace in three months.

    Month-on-month (MoM), Australia’s CPI remained flat at 0% in November, matching October’s reading. Meanwhile, the RBA’s Trimmed Mean CPI increased 0.3% MoM and 3.2% YoY. In a separate report, seasonally adjusted building permits surged 15.2% MoM to a near four-year high of 18,406 units in November 2025, bouncing back from a downwardly revised 6.1% decline the previous month. Annual approvals jumped 20.2%, reversing a revised 1.1% drop in October.

    US Dollar declines ahead of ISM Services PMI

    The US Dollar Index (DXY), which tracks the US Dollar’s value against six key currencies, is slightly declining after posting small gains in the previous session, currently hovering near 98.50. Market participants are awaiting US economic releases that may influence Federal Reserve (Fed) policy outlooks. Later today, attention will be on the ISM Services Purchasing Managers’ Index (PMI) and JOLTs job openings data. The upcoming US Nonfarm Payrolls (NFP) report, due Friday, is forecasted to show an increase of 55,000 jobs in December, a decrease from 64,000 in November.

    Fed Governor Stephen Miran stated on Tuesday that the central bank should pursue aggressive interest rate cuts this year to bolster economic growth. Conversely, Minneapolis Fed President Neel Kashkari cautioned that unemployment could unexpectedly rise. Richmond Fed President Tom Barkin, who is not voting on this year’s rate decisions, emphasized that rate changes will need to be carefully calibrated to incoming data, pointing to risks affecting both employment and inflation targets, per Reuters.

    According to CME Group’s FedWatch tool, futures markets assign roughly an 82.8% chance that the Fed will keep rates steady at the January 27–28 meeting.

    On the geopolitical front, the US launched a significant military strike on Venezuela last Saturday. President Donald Trump announced that Venezuelan President Nicolas Maduro and his wife were captured and removed from the country. However, Maduro pleaded not guilty on Monday to US narcotics-terrorism charges, signaling a high-stakes legal confrontation with wide geopolitical consequences, Bloomberg reports.

    Traders anticipate two more Fed rate cuts in 2026. Markets also expect Trump to nominate a new Fed chair to succeed Jerome Powell when his term expires in May, potentially steering monetary policy toward lower rates.

    In China, the Services PMI from RatingDog fell slightly to 52.0 in December from 52.1 in November, while Manufacturing PMI rose to 50.1 from 49.9 the previous month. Given China’s close trade ties with Australia, shifts in the Chinese economy may affect the Australian Dollar.

    The Reserve Bank of Australia’s December meeting minutes revealed readiness to tighten monetary policy further if inflation does not ease as expected. Greater attention is now on the Q4 Consumer Price Index report scheduled for January 28, with analysts warning that a stronger-than-anticipated core inflation figure could prompt a rate hike at the RBA’s February 3 meeting.

    The Australian Dollar has reached new 14-month highs, climbing above the 0.6750 level

    On Wednesday, AUD/USD is trading near 0.6750. Technical analysis of the daily chart shows the pair moving upward within an ascending channel, indicating a continued bullish trend. However, the 14-day Relative Strength Index (RSI) at 70 signals that the pair may be overbought.

    Since October 2024, AUD/USD has hit new highs and is now aiming for the upper boundary of the ascending channel around 0.6830.

    Initial support is found at the nine-day Exponential Moving Average (EMA) near 0.6708, followed by the lower boundary of the ascending channel at about 0.6700. A drop below this combined support zone could push the pair down toward the 50-day EMA level at approximately 0.6625.

    AUD/USD: Daily Chart

    Sources: Fxstreet

  • EUR/USD slips as weak Eurozone data pressures the euro, with markets awaiting US jobs figures

    EUR/USD retreats toward 1.1710 after being rejected near 1.1740, giving back recent gains as downward revisions to Eurozone PMIs and softer German inflation renew selling pressure on the euro. With investors now awaiting key US labor market data, expectations for Federal Reserve monetary policy remain a major driver for the euro dollar exchange rate.

    EUR/USD trades in a volatile market on Tuesday, hovering around 1.1710 at the time of writing, down 0.15% on the day. The pair has surrendered earlier gains as weaker Eurozone economic data revives concerns over the region’s growth outlook.

    Selling pressure on the euro intensified after the downward revision of the Eurozone HCOB Services Purchasing Managers Index (PMI). The index was revised to 52.4 for December, below the preliminary estimate of 52.6 and down from 53.1 in November, signaling a slowdown in services sector activity—one of the main drivers of the European economy.

    Meanwhile, German inflation data released on Tuesday point to a clear easing in price pressures. Annual CPI inflation slowed to 1.8% in December from 2.3% in November, while the Harmonized Index of Consumer Prices (HICP) dropped to 2.0% from 2.6%, coming in below market expectations. These readings reinforce expectations of a more subdued inflation environment across the Eurozone, limiting near-term upside for the euro.

    On the US front, economic releases have also added to volatility in EUR/USD trading. The Services PMI was revised down to 52.5 in December, its lowest level in eight months, while the Composite PMI slipped to 52.7. According to S&P Global, softer demand, weaker new orders, and slower employment growth signal that the US economy is losing momentum, even as cost pressures remain elevated.

    As a result, expectations for US monetary policy remain a key driver of the euro-dollar pair. Fed Governor Stephen Miran said on Tuesday that upcoming data are likely to support further interest rate cuts, arguing that the Federal Reserve could lower rates by more than 100 basis points this year as current policy remains restrictive and continues to weigh on economic growth.

    Overall, EUR/USD continues to trade amid mixed macroeconomic signals from both sides of the Atlantic. With no clear near-term catalyst, price action remains uneven, while investors now turn their focus to upcoming US labor market data to better gauge the timing of potential Federal Reserve easing and the short-term direction of the US dollar.

    Sources: Fxstreet

  • Gold extends rally on Venezuela concerns, closing in on historic highs

    Gold continued its strong rally in Asian trading on Tuesday, moving back toward record territory as rising geopolitical tensions after a U.S. strike on Venezuela boosted safe-haven demand for the metal.

    Spot gold inched up 0.2% to $4,458.20 an ounce at 01:22 ET (06:22 GMT), while U.S. gold futures gained 0.4% to $4,469.10 per ounce.

    Bullion had jumped 2.7% in the previous session—its biggest one-day advance in weeks—as investors sought refuge in precious metals amid growing global market uncertainty.

    Although prices reached a record high of $4,549.71 per ounce last week before retreating on profit-taking, gold has since recovered and is again trading close to those peak levels.

    Gold jumps as U.S. action in Venezuela and Fed rate-cut expectations fuel demand

    The surge was mainly sparked by events in Venezuela, where U.S. troops carried out a surprise operation over the weekend that led to the arrest of President Nicolás Maduro, sharply intensifying geopolitical risks and unsettling commodity markets.

    Officials said Maduro was taken to the United States to face long-standing narcotics-related charges and entered a not-guilty plea in a New York court on Monday.

    According to Reuters, U.S. President Donald Trump is preparing to meet with executives from major American oil companies to discuss measures to increase Venezuela’s oil output.

    Expectations of prolonged geopolitical tensions and potential policy changes have further strengthened gold’s role as a hedge against market volatility.

    Gold also drew support from growing expectations that U.S. interest rates will continue to decline in 2026.

    Markets are now factoring in two additional Federal Reserve rate cuts this year, an environment that typically benefits non-yielding assets like gold.

    On Monday, Minneapolis Fed President Neel Kashkari noted that U.S. inflation has been easing gradually, strengthening the view that the central bank could have room to ease policy if price pressures keep moderating.

    Investors are closely tracking upcoming U.S. economic data for further signals on the Fed’s policy direction. December’s nonfarm payrolls report, due Friday, is expected to be a crucial gauge of labor market strength and could shape rate expectations in the months ahead.

    Silver and platinum climb as copper sets a new record

    Other precious and industrial metals also traded firmly higher on Tuesday.

    Silver surged 3% to $78.78 an ounce, while platinum gained 2% to $2,331.25 per ounce.

    On the London Metal Exchange, benchmark copper futures rose 2.2% to a record $13,331.0 per ton. U.S. copper futures also advanced 1.5% to $6.07 a pound, marking their highest level on record.

    According to ING analysts, copper’s continued rally has been driven by disruptions to mine supply and shifts in trade flows caused by tariffs imposed by U.S. President Trump.

    Sources: Investing