Market Drivers; US Session

Dollar Remains Resilient as Holiday Trading Commences

The US Dollar Index (DXY) edged higher on Monday, extending its recent winning streak, as cautious trading characterized the start of the holiday-shortened week. Investor risk appetite appeared subdued, with market volumes contracting ahead of the Christmas holiday. Key economic data releases this week include the Reserve Bank of Australia (RBA) Meeting Minutes and Japanese Tokyo Consumer Price Index (CPI) inflation.

DXY Holds Ground Near Recent Highs

The DXY maintained its upward trajectory, trading near recent highs above 108.00. The greenback has strengthened in eleven out of the last twelve trading sessions, reflecting the Federal Reserve’s hawkish stance on monetary policy. The recent release of the Fed’s “dot plot” revealed a higher terminal rate and fewer anticipated rate cuts in 2025 than previously expected, bolstering the dollar’s appeal.  

EUR/USD Struggles to Find Uptrend

EUR/USD remained under pressure, struggling to break above the 1.0450 level. The Euro has been weakened by the Fed’s hawkish outlook and a lack of significant economic data or policy pronouncements from the European Central Bank (ECB).

GBP/USD Grinds Near 1.2550

GBP/USD traded sideways near 1.2550. The UK’s third-quarter GDP data came in slightly below expectations, further dampening investor sentiment towards the British Pound.  

AUD/USD Tests Two-Year Lows

AUD/USD continued to languish near two-year lows around 0.6250. The market is awaiting the release of the RBA Meeting Minutes, hoping for further clues regarding the central bank’s future monetary policy path. While the RBA has kept interest rates on hold for nine consecutive months, recent statements have hinted at the possibility of a near-term rate cut.

USD/JPY Tests 157.00

USD/JPY remained firm, testing levels just above 157.00. Japanese Yen traders are focused on the upcoming release of Tokyo Consumer Price Index (CPI) inflation, which is expected to accelerate further.  

The US Dollar maintained its strength as the holiday trading week commenced. Cautious investor sentiment and a lack of major economic data releases contributed to subdued market activity. The upcoming RBA Meeting Minutes and Japanese Tokyo CPI inflation will be key events to watch in the coming days.