The week was dominated by major central bank decisions and shifting policy divergence. The Federal Reserve cut rates by 25 basis points to 3.50%–3.75% on Wednesday in a 9-3 vote, with Chair Powell characterising inflation as partly tariff-driven and transitory—a dovish tone that markets hadn't fully priced in.
The Swiss National Bank held rates steady but signalled resistance to negative rates, while the Reserve Bank of Australia surprised with hawkish guidance on tightening in 2026.
Softer US jobs data and revised upward GDP forecasts supported the easing narrative, whilst weakening jobless claims later in the week reinforced expectations for fewer cuts ahead.
FX Market Reactions
US Dollar: The greenback weakened sharply following Powell's dovish press conference, reversing earlier strength and sliding into Friday as policy divergence expectations grew. The dollar index finished the week lower, reflecting expectations for fewer Fed cuts than previously priced.
Euro: The EUR rallied as the ECB signalled its rates might stay higher for longer—ECB officials Simkus and Villeroy suggested December growth projections could be revised upwards, supporting the euro. EUR/USD posted strong gains, ending as the second-best performer on the week.
Swiss Franc: The CHF rallied to multi-week highs on safe-haven demand ahead of the SNB decision, with Governor Schlegel's hawkish tone on negative rates maintaining franc strength. CHF rallied strongly against most majors.
Australian Dollar: The AUD surged on Governor Bullock's hawkish commentary suggesting February could be "live" for potential tightening, despite the RBA holding rates as expected. The Aussie reversed initial weakness to finish as the week's best performer.
Japanese Yen: The JPY underperformed as risk appetite surged post-Fed, though USD/JPY remained around 155 levels as traders awaited the Bank of Japan's decision.
Commodities Market Reactions
Gold & Silver: Precious metals consolidated near record highs as lower US real yields supported demand, though profits were taken ahead of the Bank of Japan decision and holiday positioning. Silver continued tracking higher amid safe-haven flows.
Oil: Crude remained subdued, with WTI trading in the low-to-mid-USD-60s and Brent in the USD-60s as softer growth signals and OPEC+ discipline kept a cap on prices.
Copper: Industrial metals held firm, with copper near record levels as supply tightness continued to underpin prices amid structural demand from electrification and data centre expansion.
Indices Market Reactions
US Equities: Market rotation was the defining feature. The S&P 500 fell 0.63%, the Nasdaq Composite dropped 1.62%, but the Dow Jones Industrial Average surged 1.05% to a fresh record as cyclicals and value outperformed growth and tech. The Russell 2000 small-cap index also hit new highs. Wednesday's post-Fed rally gave way to profit-taking in mega-cap tech on Thursday.
European Indices: The MSCI EAFE Index rose 0.89%, supported by policy divergence expectations and stronger cyclical demand. European financials and industrials led gains.
Asia-Pacific: Mixed sentiment prevailed ahead of major central bank decisions. Chinese and Hong Kong equities lagged on growth concerns, while Japanese shares awaited the BOJ meeting.
The policy divergence dominated trading as the Fed shifted dovish whilst the ECB, SNB, and RBA signalled steadier-or-tighter stances. The dollar sold off sharply, commodity prices held their own, and equities rotated from mega-cap tech into cyclicals and value—marking a significant shift in year-end momentum.
Get ready for the week ahead
Visit our market calendar to see all the key economic data, earnings, and events that could move the markets. Plan your trades before the action starts.
Trading forex and futures is high-risk and may result in total loss. Use risk capital only and assess your experience before trading with ATC Brokers.
While ATC Brokers Limited takes reasonable care to ensure the information provided is reliable, no warranty is given as to its accuracy or completeness, and no liability is accepted for any errors or omissions.
