![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-27.png\")
<\/figure>\n\n\n\nGBP \u2013 Elon Musk plots to overthrow the UK Government<\/h2>\n\n\n\n
On a fundamental level, the Financial Times article about Musk plotting to overthrow the UK Government before the next General elections made an international sensation. It seems that the Musk is favouring the far right party REFORM to get into power in the UK and overall the political turbulence may weigh on the pound. Furthermore we also highlight the rise off UK Government borrowing costs as gilt yields are on the rise. The rise of Gilt yields may be another indication for the pessimistic opinions in the market about the UK economic outlook. The issue is expected to lead to even less spending in the fiscal policy and could weigh on the sterling. On a monetary level, we highlight the market\u2019s expectations for BoE to proceed with a rate cut in its next meeting and see it as weighing on the pound. The macroeconomic outlook may expedite any loosening of the bank\u2019s monetary policy until Q2 25. Hence we highlight the UK financial releases next week which concern inflation, growth, demand and manufacturing activity in the UK economy. Especially the release of December\u2019s CPI and November\u2019s GDP rates are to be closely watched by pound traders and should they accelerate the pound may get some support as the release may contradict market expectations and could force pound traders to reposition themselves.<\/p>\n\n\n\n JPY has eased its decline, yet remains at dangerously low levels against the USD. The weakening of the JPY may continue to feed carry trade selling positions for the JPY, thus deepening the negative spiral. Hence we issue a warning for a possible market intervention to the Yen\u2019s rescue by the Bank of Japan, as the Japanese currency has entered the zone at which such interventions took place in the past year. Please note that a market intervention could also take the form of statements by BoJ officials. On a monetary level, the failure of the Bank of Japan to raise its interest rates in an effort to normalise its monetary policy may have enhanced bearish tendencies for the JPY. For the time being the market seems to expect BoJ to remain on hold in the January meeting and proceed with a rate hike in the March meeting. Any statements enhancing the market sentiment for a possible delay of a potential rate hike may provide weigh on JPY. Also please note that on a fundamental level the safe haven qualities of the JPY should not be underestimated, thus should we see uncertainty rising in the international markets, JPY could be getting some support. On a macroeconomic level, in the coming week, we note the release of Japan\u2019s PPI rate of December for inflation, January\u2019s Tankan indexes for economic activity and November\u2019s current account balance.<\/p>\n\n\n\n Fundamentally, we note the wide uncertainty on a political level given the weak government in France and the looming elections in Germany. The load for the EUR became even greater as US President elect Donald Trump, expressed his willingness for the US to buy Greenland from Denmark and has not excluded the possibility of a military intervention to that end. France and Germany reacted to Trump\u2019s intentions and the whole issue sends shockwaves in the Euro Zone. Also we note Elon Musk\u2019s intervention in the German elections in favor of the far right AfD, which also created controversy within Germany. Also the intentions of Trump to impose tariffs on EU products exported to the US, tend to weigh on the EUR. On a monetary level, the market\u2019s expectations for the ECB to continue cutting rates at an even faster pace potentially, also tend to weaken the common currency. On a macroeconomic level despite the acceleration of Germany\u2019s industrial output growth rate for November, providing possibly some comfort, the outlook remains rather bleak, with expectations for the Eurozone to suffer a continuous contraction of economic activity, especially in the manufacturing sector which could weaken the EUR. Please note that given the low number of high impact financial releases from the Euro Zone, maybe with the exception of the final HICP rate of the Euro Zone for December, we expect fundamentals to lead the single currency in the coming week.<\/p>\n\n\n\n On a macroeconomic level we note the release of the Australian employment data for November next Thursday. Should the employment data show a tighter Australian employment market, we may see the Aussie getting some support as it may cause the RBA to turn more hawkish. Please note that on Wednesday, we got the November CPI rates which showed an acceleration and may have allready turned RBA more hawkish. On the other hand, on a monetary level, we note the market\u2019s expectations for the bank to cut rates in its next meeting in February, which could be weighing on the Aussie. On a fundamental level, we note the influence of developments in China have on the Aussie, given the close Sino-Australian trading ties. The stalling of inflationary pressures in the Chinese economy was a signal of weak demand. Please note that in the coming week, on Tuesday, we get China\u2019s December trade data and Aussie traders\u2019 focus is expected to be on the imports growth rate. Furthermore, we note the release of China\u2019s industrial output for December and the GDP rate for Q4. Should the GDP rate show an acceleration beyond 5% we may see the Aussie getting some support as it would imply that the Chinese economy has reached its target for growth of 5% by the end of the year and thus support the Aussie.<\/p>\n\n\n\n We make a start for the Loonie by noting that the Canadian employment data for December are still to be released as these lines are written and could alter the mood for the CAD. On a fundamental level, the whispered resignation of Canadian PM Trudeau past week, ahead of the October elections, was realised on Tuesday and dominated Loonie fundamentals. The Liberal Party has now to elect a new leader, yet the New Democratic Party that has supported the Trudeau Government, is expected to withdraw its backing thus leading the country to elections. The conservative party is expected to win, according to opinion polls as it leads currently by a two digit difference. The prospect of a conservative government seemed to support the Looney as the Conservative party is considered as a more business friendly political power in Canada. Also on a fundamentals level, we note that oil prices slightly rose over the past week yet remain for the time being unconvincing for their bullish tendencies and thus remain also unable to provide support for the Loonie. On the flip side on a monetary level market\u2019s expectations for a dovish Bank of Canada, tend to weigh on the CAD. We note the lack of high impact financial releases in the coming week stemming for Canada, thus we expect fundamentals to lead the Canadian Dollar in the days to come.<\/p>\n\n\n\n Overall we expect the dominance of the USD over the FX market to continue in the coming week, given the gravity and frequency of US financial releases but also the gravity of US fundamentals with US President-elect Trump and the Fed leading the way. As for US stockmarkets, we expect market interest to increase in the coming week as we start with the earnings season. Major US banks such as JPMorgan (#JPM), Wells Fargo & Co (#WFC), Goldman Sachs (#GS) and Citigroup (#C) are to release their earnings reports on Wednesday and on Thursday we note the earnings releases of Bank of America (#BAC) and Morgan Stanley (#MS). The importance of the releases relies also in that the earnings reports show not only how well each bank performed over the past quarter, but are also a barometer for the US financial sector as a whole and may set the market mood for earnings reports to come. So should we see the earnings reports being better than estimates, we may see the market sentiment getting a lift and major US equities indexes being in the greens. As for gold, we note that its price rises despite the strengthening of the USD and the rise of US bond yields and thus the negative corelation of the USD with gold seems to have been interrupted. Overall we see the case for further advances of the precious metal\u2019s price, yet currently it still remains fragile. Also lets not underestimate the possible ripple effects of the release of the US employment report for December and the US CPI rates for the same month on US stockmarkets and gold\u2019s price.<\/p>\n\n\n\n![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-28.png\")
<\/figure>\n\n\n\nJPY \u2013 JPY dangerously low<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-29.png\")
<\/figure>\n\n\n\nEUR \u2013 Political uncertainty, easing monetary policy and economic outlook all point downwards<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-30.png\")
<\/figure>\n\n\n\nAUD \u2013 December\u2019s employment data to rock the Aussie<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-31.png\")
<\/figure>\n\n\n\nCAD \u2013 PM Trudeau resigned, elections ahead<\/h2>\n\n\n\n
![\"\"](\"\/wp-content\/uploads\/2025\/01\/image-32.png\")
<\/figure>\n\n\n\nGeneral Comment<\/h2>\n\n\n\n