Economic data was relatively light on Monday, but that didn’t stop major asset classes from making big moves while the dollar saw a rally-and-reverse kind of day.

Risk assets appeared to take cues from market-specific catalysts, as crude oil stayed elevated due to geopolitical tensions while U.S. equities had a mixed run.

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Headlines:

• Chinese Balance of Trade: 104.84 B in Dec (85.0B forecast; 97.44B previous)
• Chinese imports: 1.0% YoY in Dec (-2.0% forecast, -3.9% previous)
• Chinese exports: 10.7% YoY in Dec (7.1% forecast, 6.7% previous)
• Australia MI inflation gauge: 0.6% MoM in Dec (0.2% previous)
• Australia ANZ job advertisements: 0.3% MoM in Dec (-1.8% previous)
• Australia Westpac consumer sentiment: -0.7% MoM in Dec (-2.0% previous)
• Switzerland SECO consumer climate index: -30 in Dec (-38 expected, -37 previous)
• European Central Bank Governing Council member Ollie Rehn says ECB plans to continue lowering interest rates and expects to exit restrictive monetary policy in the coming months
• Federal Reserve Bank of New York survey: Median inflation expectations for the one-year horizon were unchanged at 3.0 percent, three-year forecasts increased to 3.0% from 2.6%
• New U.S. sanctions targeted Russian oil firms (Gazprom Neft, Surgutneftgas) and their export chains, impacting 30% of Russian crude transported via tankers in 2024

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

Financial markets showed mixed performance, as investors paid close attention to U.S. CPI expectations, which then drove Treasury yields to fresh highs. The benchmark 10-year yield touched 14-month high of 4.805%, as number crunchers anticipated stronger inflationary pressures that could weigh on Fed rate cut odds.

Meanwhile, crude oil showed significant strength following new U.S. sanctions on Russian oil firms, targeting major players like Gazprom Neft and Surgutneftgas. In addition, weekly Russian crude exports reportedly decreased by 190,000 bpd to 2.88 million bpd while crude stored on stationary tankers dropped 4.8% to 50.59 million barrels, keeping global supply levels subdued.

U.S. equities also turned out mixed, with the Dow Jones outperforming thanks to strong gains in the healthcare sector, particularly UnitedHealth Group. The S&P 500 managed to eke out a modest gain after touching a two-month low while the tech-heavy Nasdaq Composite remained under pressure.

The cryptocurrency market faced headwinds, with BTC/USD retreating below the psychologically significant $90,000 level, trading down 4.74% at $89,845, before pulling close to open prices.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar started the day off on a mixed note, as it weakened to the yen, Aussie and Kiwi during the first few hours of the Asian session before turning slightly higher after China released its trade balance.

The currency tried to keep its head above water for the most part of the London session, except against the much stronger yen, before edging back down as U.S. markets opened.

Although there were no major economic releases on deck, some say that the dollar’s declines could partly be attributed to expectations of sticky inflation and some pessimism about the job market as revealed in the NY Fed Survey.

As a result, USD ended mixed as it closed in the red versus commodity currencies and the yen while holding on to meager gains versus the European currencies.

Upcoming Potential Catalysts on the Economic Calendar:

• Japan’s Economy Watchers Sentiment index at 5:00 am GMT
• BOE MPC Breeden’s speech at 8:30 am GMT
• Chinese new loans and M2 money supply data coming up
• U.S. headline and core PPI at 1:30 pm GMT
• FOMC member Schmid’s speech at 3:00 pm GMT
• FOMC member Williams’ speech at 8:05 pm GMT

It’s still a data-light day based on the economic schedule, but still keep an eye out for additional volatility around the release of U.S. PPI data, as these could provide a preview for the upcoming CPI release.

In addition, USD volatility could come in around the speeches of FOMC members Schmid and Williams since their thoughts on inflation and monetary policy could influence Fed interest rate expectations.