Gold
Gold is currently sitting above $1520, seemingly trying to get comfortable above this level once again. The market has been well supported by several factors including, US election risk, phase 2 uncertainty, January seasonality effect, and a marginally weaker US dollar.
Based on volume and tic data over the past few weeks, gold's relatively orderly price action suggests that while the bias towards being long gold is intact, it's far from a buying frenzy. And implying that many of the big gold traders are taking their time to access the improving macro environment.
Friday’s US manufacturing ISM and the December FOMC minutes could provide an impulse. While the FOMC minutes could largely echo Chair Powell's message, that monetary policy is in the right place barring a "material reassessment." Lately, we've seen a shift to inflation outcome-based forward guidance from several members with a willingness to let the economy overheat. So, it will be essential to see if this type of outlook gains popularity amongst the board and gets mentioned in the minutes, especially with inflation benign and the Fed openness to let the economy overheat.
Currency Markets
The USD is a bit better bid, as risk premium is coming out of curves after an illiquid move over the New Year didn't materialize.
But volumes are still very light with Japan out.
The Euro
Given the apparently bearish USD consensus view among analysts, the reality is the CFTC data shows market positioning in the Euro is still negative. However, with the data in Europe improving into year-end and the euro positions still bearish on the margins, the euro's bullish impulses via improving EU data could become a trend rather than a short-term rebalancing act.
Thai Baht
Thailand's central bank said the baht would remain volatile even as liquidity returns to normal. USD/THB jumped 1.4% from the last close to 30.18 at today's open, likely driven by soft funding conditions.
The conundrum
The Bank of Thailand’s (BoT) efforts to reign in the Baht strength has failed, and even their dismal growth forecasts seemingly ignored. Though they haven't shut the door to a rate cut, the pass-through transmission from lower policy rates to FX these days is negligible. And Governor Santiprabhob is very aware of that, so he's likely unwilling to compromise the domestic financial systems to weaken the currency. Instead, they could try to encourage more outward investment to turn the massive current account surplus. Still, locals risk appetite to shift from a stay at home bias, and their reluctance to make overseas investment via unhedged FX exposure remains low. The barrier for the BoT to change that sedentary behavior is massive. But they are also very reluctant to intervene overtly so as not to raise the ire of the US currency manipulator police (USTR).