Trump Calls to 'Open Up' North Sea, Get Rid of Windmills

Political

Economic

Summary:

(Jan 3): US President-elect Donald Trump called to "open up" the North Sea and get rid of windmills in a post on his social medi

(Jan 3): US President-elect Donald Trump called to "open up" the North Sea and get rid of windmills in a post on his social media platform Truth Social on Friday.

Oil companies have been steadily exiting the North Sea in recent decades with production declining from a peak of 4.4 million barrels of oil equivalent per day at the start of the millennium to around 1.3 million boed today.

Trump's post was in response to a report about US oil and gas producer APA Corp's unit Apache's plans to exit North Sea by year-end 2029. The company expects North Sea production to fall by 20% year over year in 2025.

In October last year, the British government said it would increase a windfall tax on North Sea oil and gas producers to 38% from 35% and extend the levy by one year. The government wants to use the revenue from oil and gas to raise funds for renewable energy projects.

Britain has a target to largely decarbonise its power sector by 2030 which will mean reducing its reliance on gas-fired power plants and rapidly increasing its renewable power capacity.

North Sea producers have warned that the higher tax rate could lead to a sharp drop in investments and are exiting from the ageing basin ahead of the new tax increases.

Top British North Sea producer Harbour Energy wants to sell stakes in North Sea oilfields and is reviving plans for a US listing, Reuters has previously reported. US oil major Exxon completed its exit from the North Sea region in July last year.

The North Sea has seen major wind farm development by Britain and European countries, but the rapidly-growing offshore wind sector has had a tough few years as costs ballooned due to technical and supply chain problems as well as higher interest rates, leading many companies to review investments.

Companies are reconsidering their investments in offshore wind, or have assumed impairments, due to the rising cost of developing wind farms that can be more than 100km (62 miles) offshore.

Orsted, the world's biggest offshore wind farm developer, trimmed its investment and capacity targets last year.

Source: The Edge Markets

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Warren Takunda

Stocks

Asian markets rose on Friday after U.S. stock indexes slipped as Wall Street’s weak end to last year carried into 2025.

U.S. futures and oil prices rose.

Japan’s market is closed for the New Year holiday. The dollar remained steady on Friday, trading at 157.26 Japanese yen, down from 157.51 yen. In early December, it had been hovering around 150 yen.

Hong Kong stocks rallied from Thursday’s slump amid worries that U.S. President-elect Donald Trump might raise tariffs from China and other Asian countries once he takes office this month. The Hang Seng added 0.4% to 19,692.80, while the Shanghai Composite index dropped 1.6% to 3,211.43.

China has placed 28 U.S. entities, including General Dynamics, on its export control list to “safeguard national security and interests,” according to a statement from the Commerce Ministry on Thursday.

The ministry also announced it was adding export restrictions on specific technologies used in manufacturing battery components and processing critical minerals such as lithium and gallium.

The Kospi jumped 1.8% to 2,441.92, with the giant SK Hynix Inc. up 6.4% and Samsung Electronics Co. gaining 1.7%. As the political crisis in South Korea entered a new phase, investigators arrived at the presidential residence with a warrant to detain impeached President Yoon Suk Yeol.

Australia’s S&P/ASX 200 climbed 0.6% to 8,250.50.

On Thursday, the S&P 500 fell 0.2% to 5,868.55, extending the four-day losing streak that dimmed the close of its stellar 2024. The index pinballed through the day between an early gain of 0.9% and a later loss of 0.9% before locking in its longest losing streak since April.

The Dow Jones Industrial Average fell 0.4% to 43,392.27, after an early gain of 360 points disappeared, and the Nasdaq composite lost 0.2% to 19,280.79.

Tesla helped drag the market lower after disclosing it delivered fewer vehicles in the last three months of 2024 than analysts expected. The electric-vehicle company’s stock slumped 6.1%.

Tesla was one of the big winners of 2024, particularly after Donald Trump’s Election Day victory raised speculation that Elon Musk’s close relationship with the president-elect could help the company. But critics have been warning that prices all across the stock market have run too high, too quickly and are at risk of a pullback.

Constellation Energy jumped 8.4% for the one of the biggest gains in the S&P 500 after announcing it won more than $1 billion in combined contracts with the U.S. General Services Administration to supply power and perform energy savings and conservation measures.

Some Big Tech stocks also helped limit the market’s losses. Nvidia, whose chips are powering the world’s move into artificial-intelligence technology, rose 3% after following up its nearly 240% surge in 2023 with a better than 170% jump last year.

Some investors and analysts are counting on the AI rush to continue, even though critics say it’s made stock prices too expensive. As the calendar flips to a new year, Wedbush analyst Dan Ives says it’s the ”same tech playbook in year 3 of this tech AI driven bull market,” for example.

Some pages of the playbook do seem to be changing. Investors have ratcheted back expectations for how many cuts to interest rates the Federal Reserve may deliver in 2025, for example.

Inflation has remained stubbornly above the Fed’s 2% target, and Trump’s pushing for tariffs and other policies has raised worries about potentially more upward pressure on prices that U.S. consumers have to pay. That drove the Fed to say recently it will likely deliver fewer of the economy-juicing cuts to interest rates in 2025 than it had earlier thought.

In energy trading, benchmark U.S. crude rose 2 cents to $73.15 a barrel. Brent crude, the international standard, added 1 cent to $75.94 a barrel.

In currency trading, the euro cost $1.0279, up from $1.0268.

Source: AP

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Warren Takunda

Economic

The two-year bond yield has pulled back to 4.35% from its Christmas highs near 4.50% in a move that looks to be taking the Pound lower.

"Sterling has started the year on the defensive," says Jeremy Stretch, an analyst at CIBC Capital Markets. "The UK’s growth outlook has shifted from among the best in the G10 in H1 2024, to among the weakest in H2 2024. GBP front-end rates have yet to reflect that change."

Falling yields signal investors are pricing in more interest rate cuts from the Bank of England in 2025 than was anticipated during the closing stages of 2024. Bond yield changes can significantly influence the performance of GBP and other currencies due to the relationship between bond yields, investor sentiment, and capital flows.

The current market cycle is particularly focused on bond yield differentials and central bank policy. The general rule of thumb is that falling bond yields should weigh on a currency's performance, explaining why the Pound starts the new year on a softer footing.

The Pound to Euro exchange rate is lower by a quarter of a per cent at 1.2066, and the Pound to Dollar rate is nearing its six-month lows at 1.2445 again.

Yet, UK bond yields still remain elevated relative to other countries as investors continue to see the Bank of England cutting interest rates at a slower pace than elsewhere in the coming months. It is for this reason that Sterling was the second-best performing G10 currency in 2024.

Most analysts we follow think the outperformance can continue in the coming year, which suggests that the soft start to the year should still be viewed as a pullback within a broader trend of outperformance.

However, a return to outperformance would require the UK economy to recover from a moribund second half of 2024. Risks on the horizon include a slowdown induced by the new government's hike in business taxes. From April, taxes on employer contributions to national insurance will rise, potentially raising unemployment and prompting the Bank of England to accelerate the pace of its interest rate cuts.

This would drag on yields and bring the Pound down alongside. "We could see BoE pricing shift more dovishly and drag GBP with it," says Stretch.

Economists have also warned that Chancellor Rachel Reeves might have to raise taxes at the spring spending review as a recent rise in the cost of financing UK debt means she is on course to miss her fiscal rules.

"The UK's debt dynamics are among the worst of the advanced economies, and higher market interest rates have already eaten some of the headroom against the fiscal rules. The Chancellor will come under pressure to implement further tax hikes," says Andrew Goodwin, Chief UK Economist at Oxford Economics.

Dollar Strength a Sign of Intent

GBP/USD is approaching six-month lows, underscoring the ominous strengthening of the U.S. Dollar as 2025 begins.

"The fundamental landscape for the U.S. currency remains the same. A hawkish Fed, scaling back its rate cut projections to signal only two quarter-point reductions by December, resulted in narrowing yield differentials between the US and other major economies, whose central banks began leaning towards a more dovish stance towards the end of 2024," says Charalampos Pissouros, Senior Market Analyst at XM.com.

The Federal Reserve cut interest rates in December but indicated it would likely only cut rates on two more occasions in 2025. This puts the Fed firmly in the slow lane regarding rate cuts, which can bolster the U.S. currency. Pound Dumped as New Year Gets Underway_1

Pound Dumped as New Year Gets Underway_1

Above: Only the USD outperformed the GBP in 2024.

Some economists think there may be just one further cut from the Fed, which implies further USD strength ahead if correct.

January is also traditionally a period that favours the U.S. Dollar, meaning it could also benefit from seasonal tailwinds in the opening stages of the year.

Martin Miller, a Reuters market analyst, says the U.S. dollar looks set to rise further in January due to a combination of seasonal, fundamental and technical factors.

"FX traders should note that the dollar is usually in demand at the start of each year. An analysis of the January performance since 2000 of the USD index shows it has risen in 15 of the past 25 years," he says.

Rising U.S. Treasury yields have been a tailwind for the dollar, with the benchmark 10-year note hitting a more than seven-month high last week.

"The USD index, which tracks the dollar against a basket of six major currencies, has scope for an eventual probe of the major 108.962 Fibo, a 61.8% retrace of the 114.78 to 99.549 (2022 to 2023) drop. Fourteen-week momentum remains positive, reinforcing the overall bullish market structure," says Miller.

A move to such highs in the Dollar index would prompt the GBP/USD rate to seek fresh multi-month lows.

Source: Poundsterlinglive

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Alex

Forex

Economic

The EUR/USD pair pauses its four-day losing streak, trading near 1.0270 during the Asian session on Friday. A review of the daily chart suggests a persistent bearish bias, with the pair moving downward within a descending channel pattern.

The 14-day Relative Strength Index (RSI), a crucial momentum indicator, hovers near the 30 level, indicating an oversold condition and the possibility of an upward correction in the near term. However, the nine-day Exponential Moving Average (EMA) remains below the 14-day EMA, signaling weaker short-term price momentum and reinforcing the overall bearish sentiment.

The EUR/USD pair could find the primary resistance level around the nine-day Exponential Moving Average (EMA) at 1.0350, followed by the 14-day EMA at 1.0379. If the pair breaks above these levels, it could aim for the descending channel's upper boundary at 1.0470, with further gains potentially extending to the seven-week high of 1.0630.

On the downside, the EUR/USD pair may navigate the region around the psychological support level of 1.0000, followed by the lower boundary of the descending channel at 0.9970. A decisive break below 0.9970 could intensify the bearish bias, potentially driving the pair further down to test 0.9730, the lowest level seen since November 2022.

EUR/USD: Daily Chart

EUR/USD Price Analysis: Finds Support Near 1.0250 within Oversold Territory_1

Source: FXSTREET

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Justin

Commodity

Silver price (XAG/USD) extends its gains for the third successive day, trading around $29.60 per troy ounce during the Asian hours on Friday. This sustained rally is attributed to strong safe-haven demand amid persistent geopolitical tensions in the Middle East and the prolonged Russia-Ukraine conflict.

Axios referenced three sources, indicating that US President Joe Biden reportedly explored contingency plans to target Iran’s nuclear facilities if Tehran advanced significantly in developing a nuclear bomb before Donald Trump's inauguration on January 20. These talks underscore the growing concerns over Iran’s nuclear aspirations during the transition between administrations.

Reuters cited that Russia launched a drone strike on Ukraine's capital, Kyiv, on New Year's Day early Wednesday, resulting in two deaths, at least six injuries, and damage to buildings in two districts. Meanwhile, the Israeli military maintained pressure on northern Gaza, and carried out strikes in a suburb of Gaza City on Wednesday, according to medics. Airstrikes in Shejaia, a suburb of Gaza City, killed at least eight Palestinians.

A Financial Times report noted that the People's Bank of China (PBoC) anticipates an interest rate cut this year at an appropriate time. Traders are closely monitoring the potential recovery in China’s economy and its effect on the industrial demand for Silver. President Xi Jinping reaffirmed his commitment on Tuesday to prioritizing economic growth, promising more proactive policies to bolster China's economy in 2025.

While China's manufacturing activity showed minimal growth in December, services and construction sectors have recovered. The data indicates that policy stimulus is beginning to impact certain sectors, as China prepares for new trade risks stemming from tariffs proposed by US President-elect Donald Trump.

Source: FXSTREET

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Forex

AUD/USD falls amid challenging market conditions

Australian dollar/United States dollar (AUD/USD) finished lower last week at 0.6217, a fall of 0.55% for the week. As we enter the closing stages of 2024, AUD/USD is trading nearly 9% below its starting point for 2024 (around 0.6810) and is poised for its weakest monthly close since the challenging days of the Covid-19 pandemic in 2020.

Offshore factors impacting AUD/USD

The downturn in AUD/USD can be largely attributed to offshore factors, including Donald Trump's election victory. This is expected to lead to US fiscal expansion characterised by increased spending and tax cuts. Consequently, this is likely to result in stronger US growth, higher inflation, and subsequently, higher interest rates, all contributing to a stronger USD.Furthermore, Trump's election victory is anticipated to result in tariffs on imports from countries including China, Mexico, Canada, and the European Union (EU). These tariffs will dampen growth expectations outside the US and weigh on commodity prices.

Currency depreciation and global tariffs

Some countries, such as China, have already allowed their currencies to depreciate to mitigate the impact of US tariffs, further weighing on AUD/USD. It is viewed as a more liquid proxy for the Chinese yuan (CNY). The relationship between AUD/USD and USD/CNY is not exact; however, if CNY falls by 2 - 3%, AUD tends to fall by approximately 3 - 5%.

Monetary policy and future outlook

The expected inflationary impact of US tariffs has led to a more cautious outlook regarding Federal Reserve (Fed) rate cuts. This was evident during the last Federal Open Market Committee (FOMC) meeting, where the Fed indicated it expects only two additional 25 basis point (bp) rate cuts in 2025, down from the four it had previously signalled. Expectations of fewer Fed rate cuts in 2025 have provided an additional boost to the US dollar.In Australia, the Reserve Bank of Australia’s (RBA) dovish shift in December and the larger budget deficits projected in the Australian Federal Government's Mid-Year Economic and Fiscal Outlook (MYEFO) report have weighed on the Aussie side of the AUD/USD equation.

What does the outlook for 2025 hold for AUD/USD?

The market's response to Trump's election victory was largely in line with expectations, with the US dollar gaining significantly, especially against the New Zealand dollar (NZD) and AUD. Both of these currencies are vulnerable to risks associated with China tariffs.The fate of AUD/USD in 2025 will largely depend on developments following Trump's inauguration on 20 January. Particular interest will focus on which of Trump's policies are implemented, their timelines, and how they compare to his pre-election promises.In the lead-up to the US election, Trump hinted at raising tariffs on Chinese imports to 60% or higher if re-elected. Currently, approximately 60% of imports from China are subject to tariffs averaging 17%. The market consensus is that Trump's tariffs on China may rise to around 40%. If the actual tariffs are lower than this, it should provide some relief for AUD/USD, however, any increase beyond 40% is likely to weigh heavily on AUD/USD.

AUD/USD technical analysis

In late September, AUD/USD rejected multi-month downtrend resistance at 0.6900 - 0.6910, coming from the 0.8007 high of February 2021 and the 1.1081 high from July 2011.

The sell-off accelerated earlier this month after breaking below multi-month trend line support at approximately 0.6370 - 0.6350.

AUD/USD monthly chart

How Will Trump's Fiscal Policies Impact AUD/USD in 2025?_1

From its late September 0.6942 high to the 0.6199 double low that formed last week, AUD/USD has fallen more than 10% over the past 13 weeks.

In that context, it would be fair to say AUD/USD has priced in a lot of 'bad' news in quick time. If AUD/USD can hold above the 0.6199 double low and the 0.6170 low of October 2022, the tentative bounce that commenced today has scope to extend towards resistance at 0.6350 - 0.6370 ahead of the 20 January inauguration.

Aware that should the 0.6170 support level now fall, it would open the way for a test of the psychologically significant 0.6000 level.

AUD/USD daily chart

How Will Trump's Fiscal Policies Impact AUD/USD in 2025?_2

Source：IG

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Daily News

Economic

[Quick Facts]

1. European natural gas prices climb.

2. ECB's Stournaras says rates will reach about 2% around autumn.

3. South Korean authorities enter impeached President Yoon's compound in an arrest attempt.

4. Biden discussed plans to strike Iran's nuclear sites.

[News Details]

European natural gas prices climb

European gas gained on the first trading day of the year as the loss of a key supply route coincided with freezing temperatures across the north of the region and an unplanned disruption in Norway. Benchmark prices on Thursday rose to close at the highest since October 2023.

Russian gas deliveries across Ukraine halted on New Year's Day after a transit contract between the two warring nations expired, with no alternative in place. While traders had been expecting the loss of Russian flows — an important source of supply for several central European countries — a squeeze in supply this week may trigger quicker withdrawals from storage sites that act as a buffer. Inventories across the continent are already falling at the fastest pace since 2021 when the gas crisis was just starting to brew.

Benchmark gas for February delivery in the Netherlands climbed as much as 4.3%, and closed 2.8% higher at €50.27 a megawatt-hour at 6 p.m. in Amsterdam. Futures topped €50 on Dec. 31 in anticipation of the halt in flows.

ECB's Stournaras says rates will reach about 2% around autumn

The European Central Bank's (ECB) base interest rate should drop to around 2% by the fall of 2025, said Yannis Stournaras, ECB Governing Council member and Bank of Greece Governor, in an interview with Greece's Skai Radio on Thursday. However, he noted that this prediction could be affected by "unforeseen circumstances," highlighting risks in Europe and the U.S.

Economists and investors expect the ECB to cut rates at each meeting until mid-2025 as inflation stabilizes at the 2% target, while the region's economy continues to struggle.

South Korean authorities enter impeached President Yoon's compound in an arrest attempt

Authorities entered impeached South Korean President Yoon Suk Yeol's compound on Friday to execute an unprecedented arrest warrant, evading a crowd of protesters outside, but were confronted by presidential security forces inside. This marks the first-ever arrest attempt of a sitting South Korean president, an unprecedented event.

Approximately 2,700 police officers were deployed near Yoon's residence as his supporters gathered to oppose the move. Investigators managed to reach the main gate of the residence but were stopped by a military unit from proceeding further. A physical altercation occurred between the arrest team and presidential guards, preventing them from entering the building housing Yoon.

It remains unclear whether the Presidential Security Service will attempt to block the arrest. The agency has previously prevented investigators with a search warrant from entering Yoon's office and residence. Reports indicate that authorities moved to execute the arrest warrant, approved on Tuesday, after Yoon refused to respond to a summons.

Biden discussed plans to strike Iran's nuclear sites

President Joe Biden and his team discussed plans to strike Iran's nuclear sites, according to U.S. news site Axios, citing three sources familiar with the matter.

National Security Advisor Jake Sullivan presented options to President Biden, suggesting that the U.S. might target Iran's nuclear sites if Iran takes steps toward developing nuclear weapons before January 20. This discussion occurred in a previously undisclosed meeting.

Biden has not made a final decision on the matter. The sources noted that the discussion was not triggered by new intelligence but aimed at exploring possible scenarios.

[Today's Focus]

UTC+8 23:00: U.S. ISM Manufacturing PMI (Dec)

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Trump Calls to 'Open Up' North Sea, Get Rid of Windmills

Source: The Edge Markets

Stock Market Today: Asian Stocks Gain After Wall Street Opens 2025 With Modest Losses

Source: AP

Pound Dumped as New Year Gets Underway

Above: Only the USD outperformed the GBP in 2024.

Source: Poundsterlinglive

EUR/USD Price Analysis: Finds Support Near 1.0250 within Oversold Territory

EUR/USD: Daily Chart

Source: FXSTREET

Silver Price Forecast: XAG/USD Surges to Near $29.50 Due to Increased Safe-haven Demand

Source: FXSTREET

How Will Trump's Fiscal Policies Impact AUD/USD in 2025?

AUD/USD falls amid challenging market conditions

Offshore factors impacting AUD/USD

Currency depreciation and global tariffs

Monetary policy and future outlook

What does the outlook for 2025 hold for AUD/USD?

AUD/USD technical analysis

AUD/USD monthly chart

AUD/USD daily chart

Source：IG

January 3rd Financial News

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[News Details]

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