Cautious tone as Christmas week begins

Markets approached the start of the Christmas holiday week with muted enthusiasm, as investor sentiment edged toward caution. Trading volumes were predictably thin, reflecting the shortened trading schedule and reduced risk exposure typical of this period. Key economic releases, including the Reserve Bank of Australia’s meeting minutes and Tokyo’s CPI inflation data, are expected to guide sentiment later in the week.

In China, Goldman Sachs analysts remain optimistic about Chinese equities in the medium term. While acknowledging headwinds such as ongoing trade tensions, they point to factors like domestic stimulus efforts, improving corporate fundamentals, and expectations for enhanced consumer-focused policies.

Dollar VS Euro

EUR/USD pair traded in a tight range, reflecting subdued market activity ahead of the Christmas holiday. The Euro struggled to gain traction against the US Dollar as the Federal Reserve’s hawkish messaging continued to provide robust support for the greenback.

The pair remains under pressure due to divergence in monetary policy outlooks. While the European Central Bank (ECB) signals a cautious approach, the Fed’s stance on slowing the pace of rate cuts in 2025 keeps the USD buoyant near multi-year highs.

Commodities

Gold prices climbed during the Asian session, touching a new daily high of $2,620 amid geopolitical uncertainties and modest declines in US Treasury yields. However, further upside may remain limited due to the Federal Reserve’s recent hawkish stance. A strong US Dollar, hovering near multi-year highs, and resilient bond yields add headwinds to the non-yielding metal. Traders are advised to remain cautious as thin volumes and year-end dynamics could induce volatility.

Silver prices edged higher but faced challenges in sustaining gains as subdued trading ahead of the holidays limited momentum. Lingering concerns over potential tariffs and weakened industrial demand contribute to a cautious outlook for Silver.

Energy Markets

WTI Crude Oil
Crude oil prices remained subdued in early-week trading, with West Texas Intermediate hovering around $69.30 per barrel. Holiday-thinned liquidity played a role in capping volatility, though recent US economic data offered some support. Strong capital goods orders in November and a rebound in new home sales underscored the resilience of the US economy, helping stabilize crude prices. However, with broader markets remaining cautious, oil’s short-term trajectory may hinge on geopolitical developments and year-end demand patterns.