China and PMIs
The Chinese economy is in focus as markets wait for oil demand forecasts for 2025. Upcoming reports on industrial production, retail sales, and new loans will show how effective China’s 2024 stimulus is. Last week, Chinese stocks dropped after officials announced that future stimulus plans would be similar to past ones. Despite this, oil prices rose above $70, showing cautious optimism.
In October, the PMI data indicated weak expectations for the manufacturing and services sectors, keeping oil prices close to four-year lows. This week, the flash PMIs from the Eurozone, UK, and US may cause more currency fluctuations, affecting oil markets.
Geopolitical Tensions and US Monetary Policy
Geopolitical risks have risen with Donald Trump’s re-election as president. His plans to handle ongoing conflicts in the Middle East have increased tensions, particularly around Iranian proxies and the Assad regime in Syria. These geopolitical uncertainties pose risks for commodities, especially oil.
At the same time, the US Federal Reserve will announce a 25 basis point rate cut in its last decision in 2024. Recent inflation data shows a slight rise, with the Consumer Price Index (CPI) increasing from 0.2% to 0.3% monthly and from 2.6% to 2.7% annually. Traders are closely watching for policy signals that could affect the economy in 2025.
Pound Sterling vs. Euro: Impact of Inflation
A softer-than-expected UK inflation figure temporarily stabilized the Pound Sterling against the Euro. However, a surprising undershoot in US inflation further fueled the recovery. Consequently, the GBP/EUR exchange rate, stocks, and bonds experienced gains.
The US reported an annual CPI inflation rate of 2.9%, while core inflation eased from 3.3% to 3.2%. This outcome increased market speculation about a potential rate cut by the Federal Reserve in June, temporarily lowering US bond yields.
Despite the recent rally, analysts at Oxford Economics caution that a return to 2024 highs for GBP/EUR is unlikely, given disappointing UK economic data and concerns over the country’s ability to fund its large deficits.
Gold Weekly Outlook
- For the second consecutive trading session, gold prices are moving higher, with gains extending to the resistance level of $2684 per ounce, which is stable around it at the time of writing the analysis.
- This is amid cautious anticipation of the gold bullion market until the announcement of US inflation figures, which will strongly and directly affect the future of the US Federal Reserve’s policies under the leadership of Trump, who will be inaugurated next week as President of the United States of America with an agenda that usually stimulates higher US inflation rates.
Gold prices climbed to a multi-week high above $2,680, spurred by reduced concerns over President-elect Trump’s tariff plans. Key data from China and the US could impact its value. The 10-year US Treasury yield rose to about 4.79%, its highest in 14 months, following a robust US jobs report indicating that December saw 256,000 jobs added, surpassing expectations.
The unemployment rate also unexpectedly fell to 4.1%.
However, reports mid-week about possible new tariffs made the market cautious. This strengthened the US Dollar and limited gold’s gains. Gold remained stable despite positive reports on job openings and initial jobless claims in the US.
Analysts believe that US inflation data and China’s fourth-quarter GDP figures could significantly affect gold prices. A higher-than-expected inflation report may boost the US Dollar and pressure gold, while strong GDP growth in China could help gold prices increase further.
Crypto Market Developments
World Liberty Financial Crypto Losses
Data from Lookonchain shows that the DeFi platform World Liberty Financial (WLFI), backed by Donald Trump, lost $4.84 million because of a recent drop in the crypto market. The platform’s total assets fell from $51.7 million to $46.85 million.
WLFI changed its assets, including essential transactions with Ethereum and Wrapped Bitcoin. These changes are part of the platform’s regular efforts to stabilize its treasury. The platform assured investors that these actions are typical and do not indicate any trouble.
Bitcoin Weekly Forecast Bitcoin had a slight recovery, trading near $94,700 after a 6% drop earlier in the week. The resignation of Michael S. Barr, the Federal Reserve’s Vice Chair for Supervision, helped improve market sentiment. Barr’s departure may reduce regulatory pressures on the crypto sector and encourage more institutional investment.
Despite an initial rise, Bitcoin experienced a 9.5% drop in the middle of the week due to harmful US economic data. This correction caused significant liquidations in the market, totaling $1.49 billion.
The upcoming US Consumer Price Index (CPI) data and Trump’s administration could affect Bitcoin. Analysts say a positive inflation report might lead to a short-term rally, but traders should stay cautious as volatility is expected to continue.
Bitcoin Price Forecast: Recovery mode or continuation of the pullback
Bitcoin had a slight recovery, trading near $94,700 after a 6% drop earlier in the week. The resignation of Michael S. Barr, the Federal Reserve’s Vice Chair for Supervision, helped improve market sentiment. Barr’s departure may reduce regulatory pressures on the crypto sector and encourage more institutional investment.
Despite an initial rise, Bitcoin experienced a 9.5% drop in the middle of the week due to harmful US economic data. This correction caused significant liquidations in the market, totaling $1.49 billion.
BTC/USD has risen for four consecutive days and is on the verge of breaking above the 100K level, a key psychological mark supported by the daily Ichimoku cloud top and a downward trendline.
This rise shows strong market confidence, mainly due to expectations that President Trump may ease crypto regulations and announce a Bitcoin Reserve soon after taking office.
A recent drop below the 90K support level worried traders, but strong buying quickly pushed the price back up, indicating a potential recovery with a bear-trap pattern forming.
The daily Tenkan/Kijun-sen lines are set to create a bullish crossover, adding strength to the trend. The price is expected to close above 100K this week, with targets at 102770 (the lower peak from January 7) and 103830 (the 76.4% Fibonacci level of 108400/89038).
A sizeable bullish candle with a long tail signals positive momentum as BTCUSD recovered over 61.8% of the 108400/89038 decline.
Bitcoin’s price growth will depend on Trump’s actions in the crypto market. If expectations align, Bitcoin could approach its all-time high (108400) and rise even further if excitement builds.
The S&P 500’s early reaction after the 2024 election is similar to its response in 2016, but it changed direction after the Federal Reserve meeting on December 18. In 2016, the S&P 500 stabilized at its mid-December highs and had low volatility before Trump’s inauguration, which led to a year-long rise.
Bitcoin bull aims for its all-time high of $108,353
Bitcoin’s price rose after testing its $90,000 support level on Monday. It increased by 5.77% and closed above $100,000 within three days. As of Friday, it is trading at around $102,000.
If Bitcoin keeps rising, it may reach its all-time high of $108,353 on December 17, 2024.
The RSI on the daily chart is at 61, indicating bullish momentum. The MACD showed a bullish crossover on Wednesday, suggesting a buying opportunity and a possible upward trend. However, if BTC closes below the $100,000 support level, it may decline to the next support at $90,000.
Conclusion
This week’s financial report highlights risks from geopolitical events, decisions by central banks, and essential data releases affecting market attitudes. With changes in the oil, gold, foreign exchange, and cryptocurrency markets, investors need to stay alert and prepare for possible ups and downs in the coming weeks. Factors like China’s stimulus, US monetary policy, and Trump’s presidency suggest that markets will have an exciting start to 2025.