Markets saw major swings on Monday as rumors about Trump’s trade policy plans dominated headlines, with a Washington Post report suggesting targeted tariffs initially sparking a rally before Trump’s “fake news” denial trimmed gains.

The Fed’s policy outlook also remained in focus as officials Kugler and Daly emphasized the inflation fight isn’t over, while German inflation data and Trudeau’s resignation announcement drove significant currency moves.

How did the major assets trade in the last trading sessions? Have a look!

Headlines:

• Chinese Caixin Services PMI for December: (51.1 forecast; 51.5 previous)
• FOMC voters Kugler and Daly say the inflation fight isn’t over but oppose more labor market pain
• Germany preliminary CPI for December: 0.4% m/m (0.3% expected, -0.2% previous); Annual CPI hotter from 2.2% to 2.6%
• Switzerland retail sales grew by 0.8% m/m in November (1.3% expected, 1.5% previous)
• France final services PMI revised higher from 48.2 to 49.3 in December; Employment declined for the first time in four years
• Germany final services PMI revised higher from 51.0 to 51.2 in December
• Euro Area final services PMI revised higher from 51.4 to 51.6 in December
• Euro Area Sentix investor expectations worsened slightly from -17.5 to -17.7 in January
• U.K. final services PMI revised slightly lower from 51.4 to 51.1 in December
• FOMC voting member Lisa Cook sees more gradual rate cuts ahead as previous cuts “have notably reduced the restrictiveness of monetary policy”
• U.S. final services PMI revised higher from 58.5 to 58.6 in December
• U.S. factory orders fell by 0.4% m/m (-0.3% expected, 0.5% previous) in November
• BRC: U.K. retail sales up 3.2% in December on Black Friday boost, but rising taxes and wages could challenge shoppers in 2025
• Australia building approvals for November: -3.6% m/m (-0.9% expected, 5.2% previous)

Broad Market Price Action:

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

The major assets were all over the place on Monday as the markets digested rumors about Trump’s trade policy plans. A Washington Post report suggesting softer tariffs sparked a rally, but the momentum fizzled after Trump slammed the report as “fake news” on Truth Social.

U.S. 10-year Treasury yields hit their highest levels in eight months, driven by positive U.S. economic data and lingering inflation worries, keeping “higher for longer” Fed interest rate expectations in play. Gold lost ground despite a weaker dollar, pressured by the yield surge.

Tech stocks stole the show during the U.S. session, with the Nasdaq jumping 1.24% after Microsoft announced a major AI investment. The S&P 500 added 0.55%, while the Dow slipped just below the flatline.

Meanwhile, U.S. crude oil prices gave up early gains as demand concerns outweighed Saudi Arabia’s price hikes for Asian buyers. Bitcoin soared past $100,000 as traders bet that a softer tariff stance could fuel risk-on sentiment, though it pulled back slightly after Trump’s denial.

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

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar started trading lower at the start of the European session, possibly due to risk-taking at the start of the year and some USD-selling ahead of this week’s NFP reports.

The Greenback swung even lower shortly before the U.S. session and saw another downswing after the Washington Post cited three sources hinting that Trump would pare back its tariff policies. USD recovered soon enough, aided by Trump calling WaPo’s story as “fake news.”

The U.S. factory orders data came in slightly weaker than expected, but didn’t derail the greenback’s recovery from early lows. Fed Governor Lisa Cook helped support the dollar by emphasizing the need for cautious rate cuts given sticky inflation and solid economic footing. Fed Governor Michael Barr’s announcement of his resignation from the banking supervision role had minimal market impact.

Meanwhile, the euro climbed on German inflation data, and USD/CAD dropped 0.84% following PM Trudeau’s resignation news. USD/JPY bucked the trend, rising 0.17% to 157.53 as the BOJ signaled a patient approach to rate hikes.

Upcoming Potential Catalysts on the Economic Calendar:

• U.K. construction PMI at 9:30 am GMT
• Euro Area CPI reports at 10:00 am GMT
• Italy preliminary CPI at 10:00 am GMT
• Euro Area unemployment rate at 10:00 am GMT
• FOMC member Barkin to give a speech at 1:00 pm GMT
• Canada trade balance at 1:30 pm GMT
• U.S. trade balance at 1:30 pm GMT
• Canada Ivey PMI at 3:00 pm GMT
• U.S. ISM services PMI at 3:00 pm GMT
• U.S. JOLTS job openings at 3:00 pm GMT

All eyes are on Europe this morning with inflation and unemployment data that could shake up the euro if it stirs up ECB chatter.

Later in the U.S. session, the ISM services PMI and JOLTS job openings are on deck, and they’ll probably give traders a better read on Friday’s NFP reports and what Fed members might do next.

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