The Rising Star 03/01/2025

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Euro Makes A Short Rally Amongst The Dive EUR rallied by just 0.45% today, following a decline to its lowest levels against the US dollar since November 2022. This drop brings the EUR/USD exchange rate down 8% since October 2024, having broken through, retested, and then rejected key levels at 1.03723. Parity is now the next level to watch, as the Euro's negative outlook continues to develop in anticipation of upcoming US tariff hikes and aggressive interest rate cuts by the European Central Bank (ECB).

US Equities Rise As Manufacturing Data Beats Expectations In a promising turn of events, the US manufacturing sector demonstrated signs of recovery in December, with the ISM Manufacturing PMI climbing from 48.4 in November to a solid 49.3. This uptick marked an improvement, surpassing the market expectation of 48.4. As a result, consumer durables led the way with an industry gain of 5.83%, alongside electronic tech and producer manufacturing, which both gained 2%. As a whole, US Equities rose, with the S&P gaining 1.26% and the Nasdaq 1.67%. Eurozone Government Bonds Continue To Rise

Euro 10Y Gilts advance 0.071% to 2.434% as the prospect of tariffs accelerates the effects of economic stagnation in the Eurozone. Germany and France are facing challenges from shrinking manufacturing sectors and weak demand. Investors are worried about Europe's prospects for 2025, especially due to ongoing conflicts and the potential reduction of American support, which is increasing pressure for military spending. This raises concerns about future funding needs, growth impacts, and who will cover the costs. As a result, government borrowing costs have risen, and equity returns have been disappointing, with the euro dropping 0.6% over the past six months. It may be a bleak winter of gains over here in Europe…