Key U.S. Data and Fed Minutes to Shape the Outlook for Commodity Market

Traders are in for an event-packed week as the U.S. jobs report, FOMC meeting minutes, and key Fed speeches take centre stage. But how will these developments shape the interest rate narrative for 2025? 

After two quiet holiday-shortened weeks, markets are bracing for an action-packed period ahead, where crucial economic data and policy cues will dominate the narrative. Commodity traders, in particular, are gearing up to decipher the Federal Reserve’s 2025 interest rate outlook as several pivotal events unfold, including the release of FOMC meeting minutes, speeches from key Fed officials, the U.S. services PMI data, and the much-anticipated U.S. jobs report. 

Mixed Start for Commodities in 2025 -The commodity markets began the year on an uneven footing, grappling with ongoing economic uncertainty in China, fluctuating oil prices, and renewed political dynamics in the U.S., including the potential impact of Donald Trump’s return to the White House. 

Dollar Resilience Amid Economic Optimism - The U.S. dollar continued its winning streak, marking its fifth consecutive week of gains, supported by robust economic data and expectations of pro-growth policies under Trump’s administration. The U.S. Dollar Index briefly crossed 109.5, its highest level since late 2022. Weekly jobless claims dipped to 2,11,000, a figure not seen since April, underscoring the labour market’s resilience. Similarly, the ISM Manufacturing PMI climbed to 49.3 in December, the strongest reading since March, signalling economic stabilisation. 

Gold and Oil Ride the Volatility Wave - Gold shone brightly in the opening days of 2025, with COMEX futures touching a two-week high of USD 2,683 per ounce. The yellow metal’s safe-haven appeal was bolstered by geopolitical uncertainties, robust central bank purchases, and expectations of a shift in global monetary policy. However, hawkish signals from the Fed and improved U.S. economic data tempered gains, with gold closing the week at USD 2,654, up 0.87 per cent. 

Oil markets witnessed a bullish run, with WTI crude surging over 5 per cent to close above USD 74 per barrel. Factors such as colder weather in Europe and the U.S., optimism surrounding China’s economic stimulus, and a sixth consecutive week of U.S. inventory drawdowns supported the rally. On the technical front, MCX Crude Oil futures showed a bullish trend, trading above key support levels. Analysts expect crude prices to oscillate between ₹6,100 and ₹6,570 in the near term. 

Base Metals Weighed Down by Strong Dollar - Base metals on the London Metal Exchange (LME) struggled, with copper nearing its lowest levels since August 2024 and aluminium hovering near two-month lows. A stronger U.S. dollar and subdued growth in China’s Caixin Manufacturing PMI for December contributed to the downward pressure. Nonetheless, downside risks may be mitigated by China’s pledge for proactive economic stimulus throughout 2025. 

Key Data to Watch: Jobs Report and Fed Minutes This week’s spotlight will be on the U.S. labour market data, a crucial barometer of economic health. The December jobs report and weekly jobless claims will offer traders fresh insights into employment trends. Additionally, the FOMC meeting minutes and speeches from Fed officials will shed light on the central bank’s policy stance amid growing speculation about rate cuts. 

Swap contracts currently anticipate less than a half-point reduction in interest rates for 2025, down from earlier expectations of 1 per cent. Any signs of labour market weakness could prompt a recalibration of market expectations, heightening volatility across asset classes. 

Outlook for Traders - As commodity markets navigate this pivotal week, traders will closely monitor how the interplay of economic data and policy cues shapes sentiment. With lingering uncertainties around global growth and inflation, the outcomes of this week’s events could set the tone for commodities and broader markets in the months to come.