Macro Mondays | REPLAY | Dollar Surges, Tesla Slips, and Oil Spikes to Start 2025! | 06|01|25

World of Oil Derivatives

This week brought a range of notable market and economic developments.
The U.S. dollar started the year on a strong note, reaching new cycle highs above 109. This strength pushed the EUR/USD to its lowest levels in over two years and led to significant discussions around global currency stability, with the USD/CNY breaking above 7.33—a move interpreted as a deliberate policy decision by China to weaken its currency.
In manufacturing data, the U.S. ISM Manufacturing Index rose slightly to 49.3 in December, exceeding expectations of 48.2. While prices paid and new orders showed resilience, employment weakened significantly, heightening anticipation for Friday's key payrolls report. Globally, manufacturing PMI momentum remains weak, with the sector contracting for the fifth time in six months.
China's economic signals were mixed. Bond yields continued to drop, reflecting underlying weakness, despite modest improvements in December’s Caixin Manufacturing PMI at 50.5. Meanwhile, Tesla sales fell for the first time in over a decade, and BYD became the second-largest automaker worldwide, driven by strong sales in China.
Oil markets started the year with a sharp spike, driven by aggressive buying from China. Brent crude closed above $77, signalling potential breakouts ahead. In contrast, Bitcoin hovered just below the $100,000 mark, continuing to correlate closely with broader risk assets.
Looking to Europe, economic divergence with the U.S. remains pronounced. The Eurozone faces potential deflationary risks, as indicated by the 5y5y inflation swap rate falling to 2%. Additionally, weak UK mortgage approvals and retail data compounded concerns, contributing to GBP weakness.
Key events for this week include:
Tuesday: ISM services data and JOLTS job openings
Wednesday: ADP payrolls, FOMC minutes, and Eurozone PPI
Thursday: Jobless claims and Eurozone retail sales
Friday: U.S. payrolls, consumer sentiment, and Canadian employment data
As we move deeper into 2025, markets will closely monitor the evolving dynamics of global economies, with Friday’s payroll data poised to shape near-term expectations.