Global Market Snapshot 30th December 2024

As 2024 draws to a close, the US Dollar Index has slightly retreated but still shows a 6.6% increase for the year, reflecting the strong fundamental support for the dollar. Among other major currencies, the Japanese yen’s rebound has garnered market attention, especially against the backdrop of policy adjustments by the Bank of Japan and uncertainties in the outlook for the US economy. The yen’s trajectory could influence foreign exchange trends in the coming months.

The US Dollar Index (DXY) remains near its highest level in two years in 2024, poised to achieve a 6.6% annual gain. Despite lower liquidity, overall market sentiment remains favourable toward the dollar, particularly after the Federal Reserve recently hinted at a slower pace of rate cuts in 2025. This has left the dollar’s upward trend largely unchallenged.

From the perspective of Federal Reserve monetary policy, while the market broadly expects the Fed to maintain a relatively hawkish stance, the rise in US Treasury yields and persistently high inflation throughout the year have kept demand for the dollar strong. Additionally, policy expectations under the new Trump administration have further fuelled the dollar’s upward momentum. Although some market participants have expressed concerns about Trump’s policies, current US Treasury yields and the dollar’s safe-haven appeal appear to remain dominant factors.

USDJPY The Japanese yen has rebounded from its five-month low against the US dollar, trading at 157.826, slightly retreating from its yearly high of 158.09 but still posting an annual gain of nearly 12%. This recent rebound was primarily driven by the minutes of the Bank of Japan’s December meeting, which revealed a more optimistic stance toward rate hikes among some policymakers. It is anticipated that the Bank of Japan will gradually tighten monetary policy.

Although the central bank did not raise rates this month, some policymakers believe that the conditions for a hike are gradually becoming ripe, given the acceleration in domestic wage growth in Japan and uncertainties surrounding US economic policies. This statement has fueled the yen’s short-term recovery, but the market remains focused on whether the Bank of Japan will implement further monetary tightening measures in early 2025, especially against the backdrop of a slowing global economy.

GBPUSD The British pound (GBP/USD) exhibited a choppy performance toward the end of 2024, closing at 1.258 USD, with an expected annual decline of 1.2%. The pound’s performance has been weighed down by the UK’s sluggish economy and persistent inflationary pressures, while the Bank of England’s (BoE) relatively cautious monetary policy has limited the currency’s room for recovery. Although the BoE has not explicitly indicated a rate hike, the market anticipates that the central bank may adopt a more conservative monetary policy in early 2025, which has contributed to the pound’s weakness.

EURUSD The euro edged slightly higher, closing at 1.042, but it has recorded an annual decline of nearly 5.6%. The European Central Bank (ECB) plans to continue cutting interest rates in 2025 to address the eurozone’s weak economy and uneven growth outlook, which has added further downward pressure on the euro. From a technical perspective, the euro has been consolidating around the 1.0400 level and is likely to remain range-bound in the short term unless significant economic data or policy changes emerge.

BTC Bitcoin dropped $2,695 (-2.81%) to $93,099 and Ethereum declined $7 (-0.21%) to $3,324.