Market Drivers; US Session: King USD Rallies Near 2022’s Highs

On the first day of trading in 2025, the US dollar surged to the top of the forex pile as wider markets continue to place a strong bet on the safe haven currency. In a world of unstable economic conditions, traders may not be the largest supporters of the US dollar in terms of policy, but the USD is still the de facto winner by default.

In celebration of the start of the 2025 trading, the US Dollar Index (DXY) saw a strong rally, jumping over eight-tenths of a percent and hitting the 109.50 mark for the first time since November 2022. The US ISM Manufacturing Purchasing Managers Index (PMI) survey results, which are predicted to remain stable at a contractionary 48.4 for December, are the only significant data of significance on Friday’s economic calendar.

Additionally contributing to macro support flows in the greenback was a better-than-expected print in weekly US Initial Jobless Claims. As of the first trading day of the new year, EUR/USD has already dropped more than 1% in January, plunging below 1.0250 and hitting two-year lows. Investors generally anticipate that the interest rate difference between the US dollar and the euro will continue to rise through the first half of 2025, and expectations for the euro are still low.

Gold Expected To Rebound

The price of spot gold is about $2,650 per troy ounce when market players get back to their desks after the New Year’s holiday. Investors sold high-yielding assets due to worries about the prospects for the next year. Speculation that central banks would delay interest rate cuts in response to inflation and geopolitical instability are the main concerns. After a positive start to the day, US indexes quickly went negative, which prompted investors to seek refuge in gold. The XAU/USD pair peaked at $2,655.68 during the mid-American session and stayed near that level. Technical indicators have tempered their falls and turned marginally higher, but not consistently and still far from suggesting robust buying action. The momentum indicator is in motion.

Eurozone

Mid-tier German unemployment figures are due early Friday. GBP/USD stumbled on Thursday, falling 1.15% on the day and cleanly breaking through the 1.2400 handle, hitting a nine-month low in the process. Cable is set to play second fiddle to other, more important market-moving figures with the UK largely absent from the economic calendar over the next week. AUD/USD continues to hold on the low end with price action grappling with the 0.6200 region as the new trading year gets underway.

The Aussie looked for a technical recovery on the day, but broad-market flows into the Greenback kept AUD/USD pinned near 27-month lows. USD/JPY is headed back toward familiar highs near 158.00 after an intraday recovery on Thursday. The Dollar-Yen pairing initially opened up 2025’s trading with a downside push, but the US Dollar’s firm bidding strength from across the wider market helped to reverse course and keep USD/JPY near six-month highs.

Economic Indicator:

The Initial Jobless Claims released by the US Department of Labour is a measure of the number of people filing first-time claims for state unemployment insurance. A larger-than-expected number indicates weakness in the US labor market, reflects negatively on the US economy, and is negative for the US Dollar (USD). On the other hand, a decreasing number should be taken as bullish for the USD.

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