US Markets Push Higher Again – S&P up 0.6%
US stocks advanced again in trading yesterday, buoyed by news of a significant AI investment plan from the new government and strong earnings reports, which propelled the S&P 500 to fresh record levels. The Dow closed the day up 0.30%, the S&P 500 gained 0.61%, and the Nasdaq rose by 1.28%. The US dollar regained some of its recent losses against major currencies, with the DXY rising by 0.25% to 108.26. Treasury yields also moved higher, with the 2-year adding 2.3 basis points to reach 4.298% and the 10-year climbing 3.5 basis points to 4.611%.
Oil prices fell further, with Brent crude dropping 0.38% to $78.91 and WTI declining 0.48% to $75.38. Meanwhile, gold prices moved higher again, gaining 0.41% on the day to close at $2,755.38.
Central Banks Coming into Trader Focus in FX
As expected, FX market movements this week have been largely influenced by updates from Donald Trump and his new team in the White House. However, traders are now refocusing on underlying fundamentals as several key central bank rate announcements are scheduled over the next week. Rate adjustments are anticipated, potentially providing longer-term traders with opportunities as interest rate differentials come into play.
The Bank of Japan is first up on Friday, with markets pricing in an 80% probability of a rate rise. This will be followed next week by key updates from the Bank of Canada, the European Central Bank, and the Federal Reserve. While the FOMC is less likely to adjust rates, there is a strong chance of action from the other central banks, which could result in significant movements in their respective currencies.
Calm Before the Volatility Storm Again Today
Today is expected to begin with calm, range-bound trading conditions due to a relatively light macroeconomic calendar during the first two sessions. However, this tranquillity may give way to increased volatility later in the day, particularly with the New York market open.
Early in the session, key Canadian retail sales data (expected to show a 0.2% month-on-month increase) and the usual weekly US unemployment claims figures are set to be released. Later, President Trump is scheduled to address the World Economic Forum in Davos via satellite, which is likely to dominate market sentiment. Additionally, the release of US crude oil inventory data is expected around the same time, though Trump’s commentary is anticipated to take centre stage.
