On the first working day of 2025 (January 2nd), the market is currently focusing on the final PMI data for the Eurozone, the United States, and the United Kingdom. Due to the early release of the initial data in December, analysts believe that the final data may have a greater deviation than before, so it is worth closely monitoring.

Geopolitics and Energy Dynamics: After Ukraine refused to renew the transit agreement, Russia's natural gas exports to Europe through Ukraine have been completely halted. Russian energy company Gazprom stated that despite this, the interruption will not have a significant impact on energy prices in Europe as European countries have arranged alternative supply channels or purchased natural gas through other pipelines.

European Economic Dynamics: Spain's HICP inflation rate rose to 2.8% year-on-year in December, higher than market expectations of 2.6%, and core inflation also exceeded expectations, rising from 2.4% in November to 2.6%. This indicates that inflationary pressures may once again become the focus of the eurozone. The market expects the HICP inflation data released by the Eurozone on January 7th to show a year-on-year inflation rate of 2.4% in December, up from 2.2% in November.

Asian market, Japanese economic signal: Tokyo CPI core inflation rose to 2.4% year-on-year in December, higher than 2.2% in November. This data is of great significance to the market as it may provide signals for the Bank of Japan's next interest rate adjustment. The market believes that the probability of a rate hike in January is 40%, while the probability of keeping the interest rate unchanged is 60%.

Emerging market dynamics, Türkiye's monetary policy adjustment: Türkiye's central bank sharply cut the benchmark interest rate by 250 basis points in December, from 50.0% to 47.5%. Although Türkiye's inflation rate has dropped to 47%, it is still far above the target of 5%. Türkiye's central bank predicts that by the end of 2025, the inflation rate will drop to about 21%. This bold monetary easing policy reflects the trade-off between high inflation and growth demand in Türkiye's economy.

In terms of technology, analysts have provided the following interpretation:

Fixed income market: steepening of yield curve

At the end of 2024, the global bond market is showing a trend of steepening yield curves, especially with a significant increase in long-term bond yields. The spread between asset swaps (ASW) between the United States and Europe has narrowed, and the market still expects the Federal Reserve and the European Central Bank to implement interest rate cuts in 2025. However, the market demands higher maturity/risk premiums for long-term bonds, mainly because it is expected that bond supply will reach a new high in 2025, and market activity will be exceptionally busy.

According to the issuance outlook, there may be intensive new bond issuances in the first quarter of 2025, with Eurozone countries such as Ireland and Portugal typically being the first sovereign bond issuers to enter the market, and the market is expected to be very active next week.

Foreign Exchange Market: Continued Strong US Dollar Performance

The performance of the US dollar in 2024 is very strong, with an annual increase of 8% achieving its best performance since 2015. The following is a technical analysis of the main currency pairs:

The EUR/USD fluctuates within the range of 1.0350-1.0450 and is currently trading at the lower edge of the range, with a weak trend. In the short term, the currency pair may continue to be affected by US dollar buying, but attention should be paid to the potential impact of this week's PMI data and January 7th Eurozone inflation data on the euro.

The USD/JPY has stabilized below 158, but market concerns about possible intervention by the Bank of Japan remain high. Technically, the currency pair may fluctuate within the range of 155-160, but the possibility of a short-term downward breakthrough is relatively small.

Commodity currency performance: The Australian dollar, New Zealand dollar, and Swiss franc have performed the worst against the US dollar since the holiday, mainly dragged down by the strong US dollar and weakened risk sentiment.

Market outlook: After entering 2025, the core of market attention will be further clues on major central bank policies and the performance of economic data. The expectation of interest rate cuts by the Federal Reserve and the European Central Bank may have a significant impact on the market; At the same time, the market is concerned about the impact of global supply chains, geopolitical events, and inflation trends on foreign exchange.