Global FX Market Summary: US Dollar Weakness, Global PMI Data, Gold’s Surge  24 January 2025

US dollar weakened due to domestic policies, mixed economic data, and external pressures, while PMI trends shaped currencies, boosting gold.

US Dollar Weakness and Contributing Factors

The US dollar faced significant weakening due to a combination of domestic policies, economic data, and external developments. Trump’s statements had a notable impact on the US dollar. His comment about preferring not to impose tariffs on China eased trade tensions, which reduced the dollar’s appeal as a safe-haven asset. At the same time, Trump’s public call for immediate interest rate cuts by the Federal Reserve added to the downward pressure on the dollar, as markets priced in the likelihood of monetary easing. The US economic picture was further clouded by mixed Purchasing Managers’ Index (PMI) results. While the Manufacturing PMI slightly exceeded expectations by climbing to 50.1, the Services PMI fell short of forecasts, dropping to 52.8. This disparity signaled ongoing economic uncertainty, which weakened investor confidence in the dollar. Adding to the dollar’s struggles was the Bank of Japan’s unexpected interest rate hike. This decision increased the appeal of the Japanese yen, putting additional pressure on the US dollar and further dampening its value relative to currencies with rising interest rates.

Global PMI Data and Currency Movements

PMI data from various regions played a crucial role in shaping global currency movements, reflecting differing levels of economic performance. The Eurozone demonstrated resilience with upbeat preliminary PMI data. The Composite PMI rose to 50.2, signaling growth in the region. Germany, the Eurozone’s economic powerhouse, showed significant improvement in its PMI figures, which strengthened the euro against the weakening US dollar. In the United Kingdom, the PMI data outperformed expectations, with the Composite PMI climbing to 50.9. This stronger-than-expected reading bolstered the pound sterling, further eroding the US dollar’s position in currency pairings. In contrast, the US PMI data painted a mixed picture. While the Manufacturing PMI indicated modest growth, the underwhelming Services PMI reflected economic challenges. This divergence added to the dollar’s weakness and highlighted the economic uncertainties facing the US.

Gold’s Surge Amid Dollar Weakness

Gold prices soared to near all-time highs, reflecting its status as a safe-haven asset during times of uncertainty and dollar weakness. The declining value of the US dollar made gold more attractive to investors holding other currencies. As the dollar weakened, gold’s relative value increased, boosting demand. Trump’s remarks about avoiding tariffs on China contributed to easing global trade tensions, reducing risk aversion. This, paradoxically, also supported gold prices, as it remained a preferred safe-haven asset in an environment of uncertainty. Expectations of further interest rate cuts by the Federal Reserve provided additional support for gold. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, making it a more attractive investment.

Top economic events for next week:

• January 27, 2025, 01:30:00 – NBS Manufacturing PMI (CNY) – HIGH: This Purchasing Managers’ Index (PMI) provides a key snapshot of manufacturing activity in China. A reading above 50 indicates expansion, while below 50 signals contraction. Given China’s role in the global economy, this data has significant implications for global trade and economic growth.
• January 27, 2025, 01:30:00 – NBS Non-Manufacturing PMI (CNY) – HIGH: Similar to the manufacturing PMI, this index focuses on the service sector in China. This is crucial as the service sector is an increasingly important part of the Chinese economy.
• January 28, 2025, 09:00:00 – ECB Bank Lending Survey (EUR) – HIGH: This survey provides insights into lending conditions in the Eurozone. Changes in lending standards, loan demand, and credit terms can significantly impact economic activity and are closely watched by the European Central Bank (ECB).
• January 29, 2025, 00:30:00 – Consumer Price Index (CPI) (AUD) – HIGH: This measures the change in prices of goods and services purchased by households in Australia. CPI is a key indicator of inflation and influences the Reserve Bank of Australia’s (RBA) monetary policy decisions. The multiple readings (QoQ, YoY, Trimmed Mean) provide a comprehensive view of inflation trends.
• January 29, 2025, 14:45:00 – BoC Interest Rate Decision/Monetary Policy Report/Statement/Press Conference (CAD) – HIGH: The Bank of Canada’s interest rate decision and accompanying communications are major events for the Canadian dollar. Changes in interest rates directly impact borrowing costs and influence economic activity. The policy report and press conference provide further context and insights into the central bank’s outlook.
• January 29, 2025, 19:00:00 – Fed Interest Rate Decision/Monetary Policy Statement/FOMC Press Conference (USD) – HIGH: The Federal Reserve’s interest rate decision is arguably the most important economic event globally. Changes in US interest rates have far-reaching effects on global financial markets, capital flows, and exchange rates. The accompanying statement and press conference provide crucial insights into the Fed’s economic outlook and future policy direction.
• January 30, 2025, 09:00:00 – Gross Domestic Product (GDP) (EUR) – HIGH: GDP is the broadest measure of economic activity. This release provides a comprehensive look at the Eurozone’s economic performance and is a key indicator of economic health.
• January 30, 2025, 10:00:00 – Gross Domestic Product s.a. (QoQ/YoY) (EUR) – HIGH: Similar to the previous GDP release, this one offers seasonally adjusted figures, providing another key insight into Eurozone economic performance.
• January 30, 2025, 13:15:00 – ECB Main Refinancing Operations Rate/Monetary Policy Statement/Rate on Deposit Facility (EUR) – HIGH: The ECB’s interest rate decision and accompanying statement are crucial for the Eurozone. Like the Fed’s decision, it has a significant impact on financial markets and the Euro.
• January 30, 2025, 13:30:00 – Gross Domestic Product Annualized (USD) – HIGH: The US GDP release provides a comprehensive measure of the US economy’s performance. It’s a key indicator for investors, businesses, and policymakers

The subject matter and the content of this article are solely the views of the author. FinanceFeeds does not bear any legal responsibility for the content of this article and they do not reflect the viewpoint of FinanceFeeds or its editorial staff.

The information does not constitute advice or a recommendation on any course of action and does not take into account your personal circumstances, financial situation, or individual needs. We strongly recommend you seek independent professional advice or conduct your own independent research before acting upon any information contained in this article.