The first full trading week of 2026 was marked by renewed risk‑on sentiment, threats to Federal Reserve independence that rattled bonds mid‑week, and continued AI‑driven optimism that pushed US indices back toward record territory. The Fed's December minutes revealed the rate‑cut decision was a closer call than expected, tempering near‑term easing hopes and keeping yields elevated. Meanwhile, softer European inflation readings, mixed services PMIs, and choppy Treasury trading injected volatility into an otherwise constructive macro backdrop.
Market Reactions – FX Market Major Changes
- US Dollar: The greenback rallied early in the week, then reversed sharply on Monday 12 January after headlines raised concerns over Fed independence, leaving the dollar weaker on the day while maintaining a moderately bullish longer‑term posture.
- Japanese Yen: The yen weakened further despite 10‑year JGB yields hitting fresh multi‑decade highs, as markets continued to question how far the Bank of Japan can tighten without triggering a debt crisis.
- Aussie & Scandies: The Australian dollar surged to its highest level since late 2024 above 0.67, while the Swedish krona and Norwegian krone extended recent gains, with EUR/SEK falling to April 2025 lows and EUR/NOK hitting its lowest since early December.
- Sterling & Euro: Both were relatively muted; GBP/USD showed structurally bearish options flows, while EUR/USD upside demand softened in the near term but remained supported at medium‑term horizons.
Market Reactions – Commodities Market Major Changes
- Gold & Silver: Precious metals jumped on Monday as threats to Fed independence revived haven demand, after consolidating earlier in the week following their violent year‑end reversal. Gold's sustained outperformance relative to oil continued to signal caution about the broader economic outlook.
- Oil: Crude held firm but remained subdued, with US strategic reserve releases, ongoing geopolitical risks in Europe, the Middle East, and South America failing to push prices materially higher.
Market Reactions – Indices Market Major Changes
- US Equities: The S&P 500 extended its powerful 2026 start, climbing 1.6% on the week to close near 6,966—just shy of 7,000 and marking fresh record highs, driven by continued AI optimism and broadening participation into banks, energy, and industrials.
- Europe: Miners and chip stocks led European gains as Rio Tinto and Glencore revived early merger talks, while ASML and Infineon rallied on upbeat semiconductor signals.
- Asia‑Pacific: Hong Kong steadied as China data cooled sentiment, but Kuaishou, CK Hutchison, and gold miners Zhaojin and Zijin rose as metals found favour; Japan saw strength in defence, banks, and semiconductor equipment names.
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