Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Bank of Japan Governor Signals Gradual Progress Toward 2% Inflation Target 
China’s Growth Faces Structural Challenges Amid Doubts Over Data 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
China Holds Benchmark Loan Prime Rate Steady for Tenth Consecutive Month 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
2025 Market Outlook: Key January Events to Watch 
Bank of Japan Eyes April Rate Hike Despite Inflation Dip, ING Says 
BOJ Holds Interest Rates Steady Amid Middle East Uncertainty 
Global Central Banks Hold Rates Amid Iran War-Driven Energy Price Surge 
U.S. Banks Report Strong Q4 Profits Amid Investment Banking Surge 
J.P. Morgan Now Expects Two ECB Rate Hikes Amid Inflation Pressures 
 forwards - EconoTimes)
We maintain a neutral forecast for EURUSD over the coming quarter, and indeed continue to recommend tactical short option trades in EURUSD for the next month or two on the basis of some fundamental driving forces:
The rationale:
1) Poor European growth is likely to matter slightly more than a now-diffident Fed, and
2) The Fed may be on hold but the absolute level of USD interest rates remains supportive of short term capital flows to USD.
Furthermore, we continue to indicate a mildly constructive forecast for the euro based on the key assumption that growth rebounds above 1.5%. This together with a still robust underlying balance of payments position should allow cautious mean-reversion higher in a is a modestly undervalued EUR (the EUR REER is 4.5% cheap to a 20Y average whereas the dollar is 3.5% expensive).
For shorter-term horizons (up to 3 months), we recommend hedging USD-denominated expenses via FX forwards, as we see a risk of more USD strength. For longer-term maturities (over 3 months), consider incorporating optionality, which enables one to gain from a EURUSD increase; this could be done by means of knock-in forwards, which allow one to sell EURUSD above the current spot should USD weaken over time (as per our call), while still securing a worst-case rate.
Alternatively, on hedging grounds ahead of Fed’s monetary policy that is scheduled for this week who is most likely to maintain status quo in its monetary policy, we advocate shorting futures contracts of mid-month tenors as the underlying spot FX likely to target southwards 1.1175 levels in the medium term.
Writers in a futures contract are expected to maintain margins in order to open and maintain a short futures position. Courtesy: JPM & Danske
Currency Strength Index: FxWirePro's hourly EUR spot index is flashing at 70 levels (which is bullish), while hourly USD spot index was at -96 (bearish) while articulating at (08:24 GMT).
For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex
