Gold hits new highs; stocks and bitcoin bid

• ECB cuts rates as growth falls, more reductions likely in months ahead
• US economy moderates in Q4, solid consumer spend cushions imports slide
• USD/CAD spikes higher on Trump headline havoc about tariff announcement
• Gold hits record high on looming US tariff fears

FX: USD was choppy and eventually printed higher just above 108. The Fed is on hold for an extended period, as we highlighted in our meeting preview. It needs time to assess Trump’s policies, with eyes on any signed tariffs on Canada and Mexico on Saturday. There were some inevitable headlines late in the sessions out of the White House about this, but nothing has been confirmed. That gave a bid to the buck. GDP surprised to the downside with Q4 printing at 2.3% versus 2.6% estimates.

EUR continues to trade around the pivot level of the October 2023 low at 1.0448. As expected, the ECB cut rates and looks set to continue to do so again due to weak growth and the US tariff threat. Markets didn’t really budge from expectations of a terminal rate of around 2%. That is considered the “neutral” level which neither fuels nor dampens economic activity. The deposit rate is now at 2.75%. President Lagarde expressed confidence that the ECB will reach its 2% inflation target in 2025. The 21-day SMA should be initial resistance 1.0354.

GBP ended lower after selling off towards the end of the session on tariff chatter. Gilt yields continue to slide after the recent spike higher. Interestingly, data showed strong foreign demand for UK government bonds in December. This scotches worries over the government’s fiscal sustainability plans.

USD/JPY slipped with the yen outperforming. This came after news that BoJ Deputy Governor Himino repeated the outlook for higher rates. The bank is also expected to shrink its balance sheet. The next major level is at 153.40 – that is the Fib retracement (61.8%) marker of the summer drop. The 200-day SMA is 152.80.

AUD fell for a fourth straight day and fell below its 21-day SMA at 0.6229. USD/CAD spiked higher late in the US session on Trump tariff threats. The recent BoC meeting showed it is seemingly braced for tariffs, with the Saturday deadline imminent. Its report noted that much of the CAD’s recent depreciation could be explained by uncertainty and the increased risk premium applied to the currency around the tariff outlook. A postponement to tariffs would see a range breakdown through 1.43, while a sign-off on tariffs likely sees 1.46.

US stocks: The benchmark S&P 500 closed in the green, up 0.53% at 6,071. The tech-laden Nasdaq settled higher, up 0.45% at 21,508. The Dow Jones finished up 0.38% at 44,882. Gains were led utilities and healthcare. On the downside, tech was the only sector in the red. IBM jumped nearly 13% after its Q4 earnings late Wednesday. Apple topped sales estimates even as China was weaker than expected with an 11% drop. iPhone revenue missed expectations. The stock price was just over 1% lower after hours.

Asian stocks: Futures are mixed. Stocks were mixed amid the ongoing mass closures in the region and after the choppy performance stateside post-FOMC. Mag 7 earnings were also varied. The ASX 200 posted a fresh record high amid broad strength across sectors. A February RBA rate cut is fully priced in. the Nikkei 225 swung between gains and losses amid earnings while the firmer yen was looked through.

Gold broke higher from another bullish consolidation pattern, to a fresh all-time high at $2798. Yields have inched lower this week with two Fed rate cuts now priced in.

Day Ahead – US Core PCE inflation data

The Fed’s favoured inflation gauge is expected to come in at 0.2%, similar to the December print and one-tenth below the November reading. Several months of prints like this are needed to bring the annual rate to the central bank’s target of 2%. The headline PCE is forecast at 0.3% m/m, stronger than the core due to gasoline inflation.

Fed Chair Powell downplayed the small hawkish tweak in the Fed’s statement on Wednesday regarding inflation, which had left out the part about inflation making progress. All told, it was a relatively quiet meeting, with the market currently looking for two 25bp cuts this year – one in June and one in December. Policymakers, like all of us, are awaiting any concrete information on the tariff story for their next big cues. 

Chart of the Day – Apple rebounds

The legendary iPhone maker has had a rough time this year. Heading into its Q4 results release, the stock had fallen around 15% since its record high in late December at $260.10. Falling phone shipments in China due to rising domestic competition saw increased investors’ worries about Apple continuing to lose market share. But the stock price has bounced strongly amid the DeepSeek-driven sell-off due to the company’s lower AI capex, certainly relative to its megacap peers like Meta and Microsoft. There has been a relatively quiet reaction to the just released Q4 earnings.

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