Indeed, the market is concerned that Donald Trump’s proposed immigration and trade policies could have inflationary consequences, which could prompt the Federal Reserve (Fed) to adopt a less accommodative monetary policy. As a result, differences between the Fed and other major central banks in investors’ monetary policy expectations have widened, leading to greater capital inflows into the US dollar.
Furthermore, the US economy has outperformed other advanced economies in 2024 and is expected to continue to outperform the rest in 2025. According to the International Monetary Fund (IMF), advanced economies’ real gross domestic product (GDP) growth will average just 1.8% in 2024, while U.S. GDP is expected to grow by 2.8%..
As the dollar has moved higher, most major currencies are poised to end the year with a negative performance. The only exception is the British pound, which is expected to end the year virtually unchanged from 2023. “The relative strength of the US dollar is just one of many reasons why most other major currencies underperformed in 2024. Other factors, however, are specific to individual countries and a major bearish factor this year has mainly been the lack of political certainty that currencies do not like’ said Kar Yong Ang, a financial market analyst at Octa Broker.
EURUSD, the world’s most liquid and widely traded currency pair, has been weakened by political uncertainty in the eurozone’s largest economies – France and Germany – where political deadlock led to high-profile resignations and early elections. When British Prime Minister Rishi Sunak called snap parliamentary elections, GBPUSD suffered one of the biggest single-day falls of 2024.
Moreover, sluggish growth in the eurozone and the United Kingdom has prompted investors to anticipate additional interest rate cuts from both the European Central Bank (ECB) and the Bank of England (BoE). In contrast, the Fed is expected to slow its easing cycle, further widening the interest rate differential between the US dollar and the euro and sterling.
Despite its safe-haven status, the Japanese yen (JPY) was the most volatile among major currencies. The three-month implied option volatility for the yen, a measure of traders’ demand for hedging, averaged about 9.73% in 2024, while the overall average for seven major currencies was 7.46%. “USDJPY traders have had a wild ride in 2024. It’s been a total rollercoaster, to be honest. I think fortunes were made and lost here very quickly. This Outgoing Year Was Truly Historic for the JPY said Kar Yong Ang, a financial market analyst at Octa Broker. During the first half of the year, bullish dollar momentum has pushed the pair to a multi-decade high.
As rumors of a possible intervention by the Japanese authorities to support the yen began to spread, the USD/JPY pair began to decline. A massive sell-off accelerated in late July after the Bank of Japan (BoJ) raised interest rates to a 15-year high and announced details of how it will scale back its massive bond purchases. Kar Yong Ang explains: ‘At the time it seemed that the BoJ was taking a surprisingly aggressive stance. The decision has shaken markets and caused investors to reassess popular JPY carry trades.”
The performance of the commodities varied wildly, and each deserves its own story to tell, but coffee, lithium, gold and silver were certainly the biggest stories in 2024.
Recently, the prompt-month arabica coffee futures contract traded on the Intercontinental Exchange (ICE) hit an all-time high. The price has risen by approximately 70% year-on-year, making it the best performing commodity in 2024 among the twenty other commodities that Octa Broker tracks. ‘Like many other soft commodities, futures on both Arabica and Robusta coffee are determined almost entirely by the vagaries of the weather.
This year Brazil, [the world’s largest coffee producer]experienced its worst drought in seventy years, while Vietnam, [another key producer] was confronted with both drought and heavy rainfall,’ said Kar Yong Ang, a financial market analyst at Octa Broker. According to official customs data, Vietnam’s coffee exports in the first half of this year amounted to 893,820 tons, down 11.4% from a year earlier. Traders are very concerned about the global crop outlook for 2025, and prices are reflecting these concerns.
In contrast, lithium was the worst-performing commodity in 2024, when electric vehicle (EV) sales began to level off while capital investments from previous years increased production capacity and led to oversupply. According to Refinitiv, the price of lithium hydroxide futures contracts trading on the Commodity Exchange (COMEX) had fallen 42.3% year-on-year as of December 13, 2024.
When it comes to precious metals, 2024 has been a record year, especially for gold. The price for the yellow metal has hit new all-time highs virtually every month through 2024. Kar Yong Ang, a financial market analyst at Octa Broker, outlines three key factors that have contributed to such a rapid rise in gold prices. ‘It all comes down to three sources of demand: safe haven demand as a result of rising geopolitical tensions, investor demand as a result of loosening monetary policy globally, and structural demand from global central banks as part of the de-dollarization and diversification efforts.”
As so many times before, gold has once again proven its underlying value as a protective asset in times of uncertainty and could continue to shine in the coming months. Although the price of silver did not set new records, its year-over-year performance was even more impressive than that of gold: +28.6% (as of December 13).
‘Perhaps surprisingly, despite rising geopolitical tensions, crude oil prices have fallen annually. This is mainly because non-OPEC members – especially the US – have managed to increase production, but also because investors have been concerned about the health of the Chinese economy, the main importer of crude oil. said Kar Yong Ang, a financial market analyst at Octa Broker.