Uncertainty Dominates Early 2025 Amid Security and Economic Risks  In the relatively quiet past two weeks regarding the economic calendar, market pricing had largely focused on expectations for 2025. In the early days of 2025, markets continue to search for direction amid uncertainties about the period ahead.  The U.S. was shaken on the first day of the new year by two separate attacks in different states. During New Year’s celebrations in New Orleans, an attack targeted revelers. Just a few hours later, a Tesla Cybertruck exploded outside the Trump Hotel in Las Vegas. Former President Donald Trump, current President Joe Biden, and several congressional leaders described these incidents as acts of terrorism, with Trump blaming undocumented immigrants for rising crime in the U.S.  These incidents, occurring just weeks before Trump assumes the presidency, have heightened concerns over domestic security in the U.S. This uncertainty has fueled increased demand for safe-haven assets.  On the economic front, the threat of a dockworkers’ strike has resurfaced. Back in early October, the International Longshoremen’s Association (ILA) reached a tentative agreement that included a 62% wage increase over six years, temporarily suspending strike actions until mid-January.  Association leaders and employer representatives are expected to resume contract talks on January 7. The possibility of a new strike remains on the table, as one key issue remains unresolved: the ILA’s demand for protecting workers from the threat of automation.  If no agreement is reached and a strike ensues, companies may face cargo delays and higher freight rates, which could likely translate into increased consumer prices. Consequently, a potential strike could add further pressure to already heightened inflation risks in the U.S.  Meanwhile, labor data released on Thursday showed the U.S. labor market closing 2024 at an eight-month low. Initial jobless claims fell by 9,000 to 211,000 in the week ending December 27, well below the median estimate of 222,000. Additionally, the number of continuing claims, which measure the total number of people receiving unemployment benefits, dropped to a three-month low of 1.84 million.  The figures highlight that employers are largely retaining their workers, with layoffs remaining low, although it’s taking longer for unemployed individuals to find new jobs. This aligns with the view that the U.S. labor market is cooling but remains healthy overall.  Markets will closely monitor next week’s payroll data for clearer signals about the state of the labor market.  Global Currencies Face Pressure as US Dollar Strengthens  The US dollar continues its upward momentum amid expectations that Trump's policies will widen fiscal deficits and boost US inflation, while the Federal Reserve is anticipated to slow its rate cuts this year. The dollar has reached its highest value against its biggest rival, the euro, in over two years. Following a rally in the last trading session, the euro's loss against the dollar has reached approximately 8% since October.  The euro continues to weaken due to concerns that the region's export-driven economies will be impacted by Trump's trade tariffs and expectations that the European Central Bank (ECB) will lower interest rates more aggressively than the Fed. Swap market data indicates that traders are pricing in a total of 115 basis points of cuts by the ECB in 2025. Additionally, many strategists predict the euro will reach parity with the dollar—or even fall below it—during 2025. The last time parity was breached was in 2022.  Meanwhile, on Thursday, the flow of Russian gas through Ukraine to Europe was halted, raising fears of a new energy crisis in the region. European countries may need to source more expensive gas from elsewhere, which could exert upward pressure on inflation as it approaches target levels. Although ECB President Lagarde reiterated confidence in reaching the 2% inflation target by 2025, a sudden spike in inflation could force policymakers to adopt a more cautious stance.  At the same time, the pound fell to its lowest level since April, reaching 1.2360 on Thursday. The main headwind for the pound stems from weak growth figures and subsequent contraction reported in manufacturing activity, which have bolstered expectations of deeper rate cuts by the Bank of England (BoE). The UK economy showed no growth in the third quarter, and the BoE has forecast no growth for the fourth quarter either.  According to swap market data, the BoE is expected to cut rates by 62 basis points in 2025, with a 70% chance of a quarter-point cut in February. These expectations could lead to further weakness for the pound against the strong dollar.  Gold Rallies to $2,665 Despite Strengthening US Dollar  Gold started the new year with upward momentum, climbing to as high as $2,665 per ounce despite the strengthening US dollar. This rise was likely supported by safe-haven demand triggered by attacks in the US and other geopolitical developments.  In 2025, expectations of a relatively hawkish stance from the Federal Reserve and further strengthening of the US dollar may continue to weigh on gold prices.   However, some analysts argue that despite the Fed's cautious approach, strong central bank purchases and heightened uncertainties could keep gold demand resilient. Additionally, Asian demand will be a critical factor in the coming months.