Market momentum on Monday was slow, influenced by mixed geopolitical news, a holiday mood among traders, and a light economic calendar. Traders are anticipating more rate cuts in 2026, which has pressured the U.S. Dollar.
However, news from China helped limit the greenback’s losses. Silver was volatile, surging to a record high before stabilizing around $80.
Elon Musk commented on rising silver prices, warning that higher costs could harm industries, especially since silver is critical in electric vehicles (EVs), which use about twice as much silver as traditional cars due to its importance in power electronics, inverters, high-voltage contacts, and fast-charging systems. This highlights how silver is increasingly tied to electrification and AI cycles.
Geopolitics also remained a factor, with Ukraine peace talks gaining momentum. U.S. President Donald Trump and EU leaders made positive remarks after speaking with Ukraine's President Zelenskyy. However, territorial disputes still limit any real peace progress.
China’s military drills, known as “Justice Mission 2025,” around Taiwan raised persistent geopolitical risks. The exercises simulated a blockade-style operation and could impact shipping, semiconductors, and regional currencies if tensions rise further.
China’s industrial profits plunged 13.1% year-over-year in November, marking the largest decline in 14 months, due to weak domestic demand and persistent deflation. This raised expectations for additional fiscal support in 2026 to boost consumption and innovation, with a growth target of 5%. The People’s Bank of China (PBoC) also set the USDCNY fixing at its strongest level since late September 2024 to stabilize the yuan.
The Bank of Japan (BoJ) signaled more rate hikes in 2026, with policymakers noting that Japan’s monetary policy is still far from neutral, even after last week’s rate hike. The BoJ’s December Summary of Opinions showed confidence that further tightening is needed to avoid falling behind on inflation control, even though real rates remain deeply negative.
A key story in 2025 was OPEC+ shifting its strategy, abandoning efforts to maintain oil prices and instead focusing on market share. This change started in the spring of 2025, when Saudi Arabia and its allies signaled they would no longer cut production while non-OPEC nations like the U.S., Brazil, and Guyana ramped up output. Tensions within OPEC, particularly with Iraq and Kazakhstan overproduction, pushed the organization to let oil prices fall to force stricter compliance with future production quotas.
In the currency market, the U.S. Dollar Index (DXY) struggled to extend its two-day recovery. Major currency pairs showed mixed results: AUDUSD edged higher, benefiting from positive fiscal guidance from China, while NZDUSD and USDCAD remained pressured. Gold and Silver continued to hit all-time highs, while crude oil paused its two-day losing streak. Bitcoin (BTC) and Ethereum (ETH) saw price increases as part of year-end market consolidation. The Asia-Pacific market remained cautious after Wall Street’s slightly weaker performance on Friday, though it still showed yearly gains.
EURUSD and GBPUSD both failed to benefit from the market's cautious optimism about the Ukraine-Russia peace talks and a lackluster trading session. Both pairs declined for the third consecutive day, although without strong downward momentum. Meanwhile, the Bank of Japan’s (BoJ) Summary of Opinions and recent comments from BoJ officials, along with rising inflation in Japan, indicate that further rate hikes are likely in 2026. This weighed on USDJPY, particularly as the U.S. Federal Reserve is expected to keep rates lower, contributing to a stronger Japanese Yen.
AUDUSD remained strong for the fifth consecutive day, reaching its highest level since October 2024, supported by hopes for stimulus in China, despite mixed market sentiment. In contrast, NZDUSD dropped for the third day in a row. USDCAD faced pressure from a recovery in crude oil prices, a key Canadian export, and also fell for the third straight day. Additionally, concerns about a hawkish Bank of Canada (BoC) and a dovish Federal Reserve kept USDCAD sellers optimistic.
Gold prices eased slightly from their record high as traders took a breather after a strong 70% annual gain, partly due to year-end inaction and a mixed market mood. Meanwhile, Silver remained strong, reaching new all-time highs each day during its six-day winning streak. By press time, Silver hovered around $80.15, after hitting a record high of $84.00 earlier in the day.
WTI Crude Oil posts the first daily gain in three, after a positive weekly performance, as traders prepare for the Ukraine-Russia peace deal and the U.S.-Venezuela tensions. That said, growing concerns about the Israel-Iran war and mixed performance of the OPEC+ members, coupled with hopes of increased Chinese energy demand, seemed to have favored the black gold buyers, despite facing the biggest yearly loss since 2020, as well as a five-month downtrend.
Bitcoin (BTC) and Ethereum (ETH) both rose over 2.0% on Monday as market participants consolidated yearly losses amid year-end consolidation and a sluggish U.S. Dollar. Meanwhile, Asia-Pacific shares traded mixed, influenced by disappointing data from China and expectations of more rate hikes from the Bank of Japan (BoJ). U.S. equities closed with modest losses on Friday but remain on track to finish the year with gains.
U.S. Pending Home Sales, the Dallas Fed Manufacturing Survey, and speeches from FOMC members could capture the attention of intraday traders, but the year-end holiday mood might limit market momentum. Tuesday’s release of the FOMC Minutes and Friday’s final December PMI readings from major economies will also be key events. Thursday’s New Year holiday could further restrict market moves, with a light economic calendar adding to the lack of activity. If the Ukraine peace deal progresses, the U.S. Dollar (USD) may face additional downside pressure, potentially boosting Cryptocurrencies and Equities.
May the trading luck be with you!
