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Good news was bad news yesterday and they even wiped out the optimism that Nvidia initially created around AI with the announcement of new products.

The US released a set of higher-than-expected ISM data, suggesting that non-manufacturing activity was better than expected in December – in contradiction to the S&P’s PMI data released a day before. But what really dampened the market mood was that prices paid by companies unexpectedly - and meaningfully - jumped to the highest levels since 2023. Separately, JOLTS data hinted at an unexpected jump in job openings in November to above 8 mio jobs openings. The better-than-expected US data fuelled the hawkish Federal Reserve (Fed) expectations, pushed the US yields higher and kicked the expectation of the next Fed cut further down the road.

The US dollar rebounded against most majors as the latest US data fuelled the Fed hawks. Due today, the ADP report is expected to print a relatively soft number of new private job additions last month.

In Europe, the CPI reading came in line with expectations, fuelled the European Central Bank (ECB) doves, pulled the euro lower and pushed stocks higher. Across the Channel, the UK’s 30-year gilt yield advanced to the highest level since 1998.

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Early year worries that the AI rally would fizzle out were rapidly wiped out at the start of this week by several news, including Microsoft’s announcement to be willing to spend $80bn on data centers – which pushed the stock up to 1.4% yesterday and Foxconn’s announcement of a 42% surge in its December sales thanks to AI-driven demand.

But mood beyond tech was murkier. The Dow Jones for example was slightly lower on Monday, as US yields spiked.

The US dollar couldn’t benefit from higher yields as Washington Post reported that Trump’s policies wouldn’t be as harsh as promised. But Trump rapidly denied the news and the dollar rebounded. The USDCAD sharply fell on Trudeau’s resignation – and probably on the back of a rally in US crude, the EURUSD – which tanked to 1.0224 in the early hours of the new year - rebounded past the 1.04 level, and Cable successfully threw itself back above the 1.25 mark. The rising energy prices in Europe ease the dovish Fed expectations as inflation in the EZ ticks higher. European nat gas prices rallied 30% since mid-December, as US crude hit $75pb mark.

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Here we are, the last day and the last trading day of the year. It’s now been about two years that ChatGPT was launched and it’s been two years that the AI buzz pushed some US Big Tech companies to ... the sky, really.

The consensus is that 2025 should be a good year, that the easing central bank policies and falling yields should help the US Big Tech rally to further broaden toward the non-tech pockets of the market, and beyond the US.

In FX, the US dollar index is having its best year since 2015 and could continue to extend gains on the back of a gradually less dovish Federal Reserve (Fed) outlook, while the euro is seen weakening against the dollar and sterling.

In commodities, gold had a stellar year and could see more gains in case of a downside correction in global equity markets. While crude oil will likely close the week in the bearish consolidation zone, below the $72.85pb level, as the expectation of an average 1mbpd supply glut next year and China’s inability to reverse weakness will probably limit the upside potential.

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Last week ended on a positive note for the European stocks and negative note for the US stocks. Friday saw the S&P500 dive more than 1%, while the Stoxx 600 closed 0.67% higher. We can’t drive major conclusions in a holiday-shortened and thin-trading-volume week, but last week’s price action looked pretty close to the narrative of rotation from tech to non-tech stocks that many investors expect to be the theme of next year.

Asian markets opened the week on a negative note. The Japanese Nikkei index and Australian stocks were offered this Monday with trading volumes nearly 20% lower the Japanese market, and 55% lower for their Australian peers (Bloomberg). Futures point at an unappetizing start for the last Monday of the year both in Europe and in the US, and the price moves could be exaggerated with low trading volumes.

In the FX, the US dollar is flat. The EURUSD sees resistance into 1.0435, while Cable is offered into 1.26 level. The USDJPY continues to flirt with the 158 resistance as traders and government officials are getting caught up in heated debates.

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Those glued to their screens, hoping for Santa’s arrival, were left disappointed. The major US indices weren’t in good shape yesterday even after a mixed bag of US jobs data. The major US equity indices were softer as Bitcoin gave back Xmas day gains.

In China, equities are better bid since Chinese authorities pledge on Tuesday to sell a record amount of 3 trillion yuan worth of special treasury bonds next year to give support to the economy. In Japan, the Nikkei index surged past the 40’000 mark on the back of a weakening yen as the bears are out and selling the yen since the Bank of Japan (BoJ) bypassed a rate hike earlier this month.

Elsewhere, in the FX, the US dollar index was mostly steady this week. The EURUSD is under pressure on French political uncertainties. Across the Channel, hope that 2025 will bring good health to the UK economy - ideally with improved relations with once-loved and cherished ones - persists, but the path remains shaky.

In energy, the barrel makes an attempt above the 50-DMA, but remains topped by offers before reaching the 100-DMA – which currently stands near the $71.30pb level.

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Investors on Monday were shrugging off the bad news of past week – especially the one that suggested that the Federal Reserve (Fed) would cut its rates only two times in 2025 due to a too resilient US economy.

But even though the equity markets looked joyful on Monday, the US 2-year papers remained offered and the US dollar erased earlier losses to finish the session higher against most majors.

Meagre news and data flow should keep the focus on a more hawkish Fed. The pullbacks in the US dollar are probably good opportunities to buy the dips against most majors. As per equities, the rally extends but the questions regarding the ballooning valuations of Big Tech stocks become louder, too. Two stellar years of more than 20% gains for the S&P500 definitely calls for correction. But no one is willing to leave the festive table, just yet. Merry Xmas!

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US stocks rebounded and the US dollar retreated on Friday on the back of softer-than-expected PCE numbers from the US and in the absence of major economic data, this Xmas-shortened week could see a further rebound in the US equities – no one wants to miss the Santa rally – and a further retreat in the US dollar in favour of its major counterparts. Yet, beyond tactical trades based on last week’s softer-than-expected PCE measures, the story remains unchanged. The core PCE in the US has been moving up since the summer dip and settled at 2.8% for the second consecutive month, and – I can never repeat this enough but – Trump’s pro-growth policies, tariffs, mass deportations hint that the US inflation risks are tilted toward the upside.

In commodities, US crude is better bid above the 50-DMA – few cents below the $70pb level – but without a strong conviction to extend this rebound. Gold is better bid this morning. Lately, the yellow metal has been pressured by the rising US yields that increase the opportunity cost of holding the non-interest-bearing gold - but an accelerated selloff in global equities could drive capital into the safe-haven metal regardless of the upswing in yields. Copper is at an interesting dip-buying level for those betting for recovery in 2025 on the back of softer global financial conditions.

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A week packed with central bank decisions is coming to an end with a sour taste in everybody’s mouth. The Federal Reserve (Fed)’s decision to cut rates by 25bp was fully meaningless and the incoming data is a proof. The US Q3 growth was revised to 3.1% from 2.8% printed earlier, the sales growth was revised higher from 3 to 3.3% and core PCE priced – though lower than the quarter before – was also revised slightly higher to 2.20%, raising worries that even the two rate cuts from the Fed next year would be too much. In the UK, the Bank of England (BoE) held rates but refrained from committing to a plan, and the People’s Bank of China (PBoC) also opted for a no change despite telling investors earlier this month that they will moderately loosen their monetary policy.

As such, the US dollar extends gains, major currencies struggle, appetite for risky assets is waning and crude oil is down.

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Sometimes, the truth is hard to say—and even harder to hear. The Federal Reserve (Fed) announced another 25bp cut as widely expected and priced in, but hinted that there will be just about two rate cuts throughout next year.

The market reaction was very aggressive, of course. The US yields and the dollar jumped, the S&P500 sold off nearly 3%. The Fed probably spoiled this year’s Santa rally, as its hawkish shift could trigger a deeper correction across US equity markets.

In commodities, oil sold off and gold tipped a toe below the $2600 per ounce and below its 100-DMA. Higher US yields increase the opportunity cost of holding the non-interest bearing gold, yet an accelerated selloff and a prolonged weakness in equity markets could drive capital toward the safety of the yellow metal.

Elsewhere, the Bank of Japan (BoJ) refrained from announcing a rate cut and the Bank of England (BoE) is expected to do nothing, too.

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