The EUR closed 0.56% lower against the USD during the week, as a combination of mixed economic data from the Eurozone and solid US economic performance led to increased volatility.

In the Eurozone, December’s economic sentiment index unexpectedly declined to its lowest level in over a year, highlighting concerns about industrial, construction, and consumer sentiment. Additionally, the eurozone's producer price index (PPI) surged in November, exceeding expectations, suggesting that inflationary pressures remain stubborn despite weaker demand in certain sectors. Consumer confidence also slipped in December, further indicating a cautious outlook across the region. The region’s weak retail sales data underscored the ongoing struggles in household spending, with food and fuel contributing most to the gains.

The USD rose 0.50% against the JPY during the week, supported by strong US economic data, despite mixed signals from Japan.

In the US, the ISM services PMI for December exceeded expectations, rising to 54.1, indicating a robust services sector. Additionally, initial jobless claims fell to an eleven-month low, signaling continued strength in the labor market. These positive economic indicators reinforced expectations for the Federal Reserve to maintain its hawkish stance, boosting the US dollar.

In Japan, the economic outlook was more mixed. While the Jibin Bank services PMI for December showed slight growth, it came in below expectations.

The GBP closed 1.76% lower against the USD during the week, pressured by disappointing UK economic data and the ongoing strength of the US dollar.

In the UK, December’s manufacturing PMI showed contraction, reaching its lowest level in nearly a year, signaling persistent weakness in the manufacturing sector. Retail sales data for November also missed expectations, reflecting continued struggles in consumer spending amid rising inflation. The Bank of England’s cautious outlook on interest rates added to the bearish sentiment around the pound.

Meanwhile, the US economy showed resilience, the US economy showed strength, with December non-farm payrolls surpassing expectations by adding 250,000 jobs. December’s ISM services PMI exceeded expectations and initial jobless claims fell to an eleven-month low, signaling a strong labor market.

The GBP closed 1.23% lower against the JPY during the week, as a combination of weak UK economic data.

In the UK, the manufacturing PMI in December showed contraction, reaching its lowest level in nearly a year, signaling persistent weakness in the manufacturing sector. Retail sales in November also missed expectations, reflecting ongoing struggles in consumer spending. The Bank of England’s cautious outlook added further bearish pressure on the pound.

In Japan, services PMI for December showed marginal growth, but it came in below market expectations, signaling a slower-than-anticipated recovery in the services sector. Additionally, Japan’s industrial production and trade data remained subdued, highlighting ongoing challenges in the country’s manufacturing sector and export-driven economy.

Oil prices advanced during the week, amid concerns over potential supply disruptions from Russia as the US plans to impose additional sanctions targeting Russia oil revenues, including action against tankers carrying Russian crude.

Additionally, cooler-than-normal weather in the US and Europe boosted fuel demand from the region and contributed to the rise in oil prices during the week. Each degree of temperature drop led to an estimated increase of 113,000 barrels per day (bpd) in heating oil demand.

Further, supporting the oil prices the Energy Information Administration reported that US crude inventories fell more than expected in the last week.

Gold prices advanced during the week, after China’s central bank expanded its gold reserves for the second consecutive month in December. The ongoing gold purchases by the Chinese central bank contributed to the rise in gold prices during the week. Additionally, uncertainty surrounding the US President-elect Donald Trump's policies boosted demand for the safe-haven asset.

Additionally, investors looked ahead to the US consumer and producer inflation data as well as the Federal Reserve’s (Fed) Beige book, to be released in the next week, for further clues on the Fed’s rate path.

Bitcoin’s price dropped last week, after the US FOMC meeting minutes signalled that the Fed would slowdown in the pace of interest rate cuts amid elevated inflation risks. The slower-than-expected pace of monetary easing implied in the FOMC minutes dampened crypto market sentiment as high interest rates increase the opportunity cost of holding cryptocurrencies that do not typically yield interest. Additionally, strength in the US Dollar and rise in the Treasury yields weighed on Bitcoin price.

Moreover, the Crypto Fear & Greed Index, a measure of Bitcoin and the broader crypto market sentiment, fell 19 points in a day to its lowest score since 14 October 2024