Amid growing worries over the UK's swelling debt and the implications of former U.S. President Donald Trump's protectionist policies, UK 30-year gilt yields saw a significant surge on Friday. This rise in yields comes as financial markets grapple with the uncertainty surrounding the UK's economic outlook and global trade policies. Despite these challenges, Treasury Minister Darren Jones assured that the price of gilts remains variable, and financial markets continue to operate smoothly.
In the currency markets, the Euro (EUR) faced pressure against the U.S. Dollar (USD), with the EUR/USD pair trading below 1.0300 during the American session on Friday. Meanwhile, on-chain metrics suggested a potential rally for SUI, as its long-to-short ratio reached a monthly high, with open interest also on the rise.
Market participants have been offloading UK gilts due to concerns over the country's economic growth prospects. These concerns are exacerbated by uncertainty over potential restrictive U.S. trade policies under President-elect Donald Trump and the UK's mounting national debt. The Japanese Yen (JPY), however, demonstrated resilience, performing strongly on Friday as the Bank of Japan (BoJ) deliberated its interest rate decision in anticipation of its January monetary policy review.
The BoJ is contemplating an increase in its inflation forecast due to the weakening Yen, with considerations to upgrade core-core inflation views for FY2024 and FY2025. Concurrently, the GBP/USD pair extended its weekly decline, trading at its weakest level since November 2023, dropping below 1.2250. Contributing to this trend, Nonfarm Payrolls rose by 256,000 in December, propelling a rally in the U.S. Dollar and adding pressure on currency pairs linked to it.
In commodity markets, gold managed to regain momentum, climbing above $2,680 after initially slipping towards $2,660. This recovery occurred in response to strong U.S. employment data for December, with risk aversion in the market supporting XAU/USD despite renewed USD strength.
The USD has capitalized on positive employment figures, maintaining its robust position against other currencies as the weekend approached. The GBP/JPY pair found temporary support near 194.00 in Friday's North American session following a two-day downturn amid widespread weakness in the Pound Sterling (GBP).