The major assets took cues from individual catalysts, with U.S. equities taking hits from a pullback in tech stocks, while commodities like gold and oil found support from supply and demand-related headlines.

In the FX scene, the U.S. dollar saw a U-turn, losing pips to its counterparts early in the day but recovering after the release of strong U.S. labor market-related data during the U.S. session.

Wanna see how the major assets traded on Tuesday? Read on!

Headlines:

• Switzerland monthly CPI remained at -0.1% as expected in December; Average annual inflation hit 1.1% in 2024
• France preliminary CPI improved from -0.1% m/m to 0.2% (0.3% expected) in December
• S&P Global U.K. construction PMI for December: 53.3 (54.3 expected, 55.2 previous)
• Euro Area CPI flash estimate for December: 2.4% y/y as expected (2.2% previous); Core CPI steady at 2.7% y/y as expected
• Canada trade deficit shrank to 0.3B CAD in November as exports (+2.2%) outpaced imports (+1.8%); October deficit revised from 0.9B CAD to 0.5B CAD
• U.S. trade deficit widened from $73.6B to $78.2B in November as imports (+3.4%) outpaced exports (+2.7%)
• Canada IVEY PMI for December: 54.7 (55.4 expected, 52.3 previous)
• U.S. ISM services PMI for December: 54.1 (53.5 expected, 52.1 previous); Employment slipped from 51.5 to 51.4; Prices grew from 58.2 to 64.4
• U.S. JOLTS job openings in November: 8.10M (7.73M expected, 7.84M previous)
• ANZ: New Zealand commodity prices rose by 0.2% m/m in December after a 2.9% increase in November

Broad Market Price Action:

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

The major assets traded mixed, with commodities trading on individual headlines while U.S. stocks and bitcoin took hits. Nasdaq felt the most pain as Nvidia, the AI superstar, dropped over 6% from its record high, pulling other tech names down with it. Across the pond, European markets were a mixed bag—Germany’s DAX and France’s CAC 40 managed small gains, but the UK’s FTSE 100 slipped just enough to stand out.

In the U.S., stronger-than-expected economic data shook things up, pushing the dollar higher and U.S. 10-year bond yields to an eight-month high. See, the ISM services and JOLTS job openings reminded everyone the economy’s still holding strong, which took some of the steam out of expectations for Fed rate cuts anytime soon.

Gold kept climbing, even with the dollar flexing its muscles. It got a boost after China’s central bank added to its gold reserves for the second month in a row, and safe-haven demand stayed solid with geopolitical tensions bubbling in the background.

Oil prices joined the party too, with news that China’s Shandong ports are turning away U.S.-sanctioned vessels, potentially messing with Russian oil flows. Russia’s December output also came in below OPEC+’s target, while forecasts for colder weather in the U.S. added a little extra fuel (pun intended) for oil buyers.

Meanwhile, bitcoin took a sharp dive from record highs above $102,000, echoing the weakness in tech stocks. With risk appetite taking a hit across the board, even crypto couldn’t dodge the wave of selling.

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

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar had a mixed day on Tuesday, starting weaker during the Asian and early European sessions as commodity currencies like the Aussie and Kiwi made solid gains.

The euro struggled after Eurozone inflation hit 2.4% in December, fueling concerns about sticky inflation above the ECB’s 2% target. Meanwhile, the yen briefly weakened past 158.40 before Japan’s Finance Minister Kato stepped in with verbal warnings against excessive currency moves, which pulled USD/JPY back below 158.15.

The tides turned for USD after stronger-than-expected ISM services PMI and JOLTS job openings data reignited talks about the U.S. economy’s resilience. This sparked a brief rally across major dollar pairs, with the greenback staying strong into the U.S. session as traders recalibrated expectations for future Fed rate cuts.

By the end of the day, the Swiss franc and euro took the biggest hits against the dollar. AUD and NZD held onto some of their earlier strength, reflecting their solid gains from the Asian session. The dollar’s late-day resilience underscored shifting rate cut expectations as strong economic data pointed to less urgency for policy easing.

Upcoming Potential Catalysts on the Economic Calendar:

• Germany factory orders at 7:00 am GMT
• Germany retail sales at 7:00 am GMT
• France trade balance at 7:45 am GMT
• Germany PPI at 10:00 am GMT
• U.S. ADP report at 1:15 pm GMT
• U.S. initial jobless claims at 1:30 pm GMT
• U.S. FOMC member Waller to give a speech at 1:30 pm GMT
• U.S. final wholesale inventories at 3:00 pm GMT
• U.S. crude oil inventories at 3:30 pm GMT
• U.S. FOMC meeting minutes at 7:00 pm GMT
• Japan average cash earnings at 11:30 pm GMT
• U.K. BRC shop price index at 12:01 am GMT (Jan 9)

Traders will be watching German data early in the European session, with factory orders and retail sales likely setting the tone for the euro amid concerns about Germany’s economic outlook.

In the U.S. session, labor market data, FOMC meeting minutes, and energy inventory reports could drive dollar and equity market moves as traders assess the Fed’s next steps and overall risk sentiment.

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