Market Drivers; US Session

President Trump’s Inauguration and Market Impacts

The US dollar started the week on a defensive note as market participants closely monitored President Trump’s Inauguration Day. The inactivity in US markets due to Martin Luther King Jr. Day contributed to the sharp decline in the US Dollar Index (DXY). By Monday, the DXY hit new two-week lows, dropping below the 108.00 mark. Investor attention remains fixed on upcoming policy announcements from the Trump administration in the absence of significant data releases on Tuesday.

Currency Movements and International Indicators

EUR/USD: The euro benefited from the dollar’s decline, climbing to two-week peaks just beyond the 1.0400 level. This rise was supported by a generalized bid bias in risk-associated assets and the anticipation of economic sentiment data from the ZEW Institute in Germany and the broader eurozone, alongside an ECOFIN meeting.

GBP/USD: The British pound reclaimed levels above the key 1.2300 barrier, boosted by intense selling of the US dollar. The UK labour market report is the main focus for the foreign exchange markets this week, potentially influencing further movements in GBP/USD.

USD/JPY: The Japanese yen gained strength due to the repricing of rate hikes by the Bank of Japan (BoJ), pushing USD/JPY towards the 155.00 mark. Upcoming events include Japan’s Balance of Trade results on January 23 and weekly Foreign Bond Investment figures.

AUD/USD: Despite the inconclusive movement in the US dollar and a solid jobs report, the Australian dollar traded on the defensive, briefly dipping below the 0.6200 support level. The next significant release will be the Westpac Leading Index for December.

Commodity Prices and Market Reactions

WTI Crude Oil: Oil prices experienced a sell-off to multi-day lows, dropping below $76.00 per barrel as traders remained cautious about potential developments from the Trump administration.

Gold and Silver: Gold prices resumed their upward trend on Monday, maintaining trade above the crucial $2,700 mark per ounce troy. Meanwhile, silver found support around the key 200-day simple moving average (SMA) amid a positive start to the week.

What to Expect Next
As the new administration settles in, market participants will be closely watching for policy changes and their broader economic impacts. The emphasis will be on balancing the protection of key industries with mitigating potential inflationary pressures. Upcoming economic data releases and policy announcements will play a critical role in shaping market dynamics in the weeks ahead.