Early Friday, market sentiment remains slightly positive as traders price in lower interest rates and easing trade and geopolitical tensions in 2026. However, momentum stays weak as most professional participants are still in holiday mode, with a full return expected on Monday, 5 January.
On the data front, mainland China and New Zealand markets were closed for holidays. In Australia, the December Manufacturing Purchasing Managers’ Index (PMI) held steady at 51.6, remaining in expansion and showing modest resilience.
In South Korea, Bank of Korea (BoK) Governor Rhee Chang-yong warned that excessive South Korean won weakness could hurt domestic businesses and add to inflation pressures. Meanwhile, December manufacturing PMI rose to 50.1, returning to expansion after two months below the 50 threshold, supported by stronger export demand.
In trade news, Trump TACO now with pasta as the administration backtracked on Italian pasta tariffs after industry pushback. This reduces near-term trade disruption risks and signals flexibility in trade enforcement, though residual tariffs and review uncertainty still affect EU-U.S. trade relations.
Australia’s manufacturing PMI again held at 51.6 in December, with faster hiring and firmer inflation pressures, pointing to modest resilience but persistent cost pressures into early 2026. Production rose for a second month, supported by new work, though growth slowed and export orders declined slightly for a fourth straight month due to weaker overseas demand.
China imposed a 55% tariff on excess beef imports under a new three-year safeguard regime, posing sentiment risks for the Australian Dollar (AUD) and potentially reshaping global beef trade flows.
Against this backdrop, the U.S. Dollar Index (DXY) struggles to extend its two-day winning streak. Gold rebounds from a two-month support level. EURUSD bounces from a one-week low but lacks momentum, GBPUSD remains under pressure, and USDJPY rises for a third day. AUDUSD recovers from a one-week low, NZDUSD stays sidelined, and USDCAD pauses after a three-day uptrend, while crude oil posts mild gains, cryptocurrencies edge higher, and Asia-Pacific equities grind higher.
EURUSD struggles to gain despite U.S. President Donald Trump’s tariff relief for Italy, as traders await final December Purchasing Managers’ Index (PMI) readings amid a year-end holiday mood, mixed European Central Bank (ECB) bias, and ongoing uncertainty over Ukraine-Russia peace prospects.
Elsewhere, GBPUSD remains under pressure due to fiscal concerns in the UK and recent cautious comments from Bank of England (BoE) officials.
Meanwhile, USDJPY stays firm for a third straight day as traders reassess the Bank of Japan (BoJ) hawkish bias, while a slightly positive market mood reduces safe-haven demand for the Japanese Yen.
AUDUSD rebounds from the week’s low despite mixed Australian Purchasing Managers’ Index (PMI) data, as a risk-on mood supports the risk-barometer currency, especially on clues of China’s stimulus. NZDUSD, however, fails to follow the Australian Dollar despite a lack of major catalysts. Meanwhile, USDCAD ends its three-day winning streak as firmer crude oil prices and a dovish Federal Reserve (Fed) bias weigh on the US Dollar.
Gold price begins 2026 on a firmer footing, up more than 1.0% on the day after a 65% rally in 2025, as the market still favors the precious metal amid the macro uncertainty. Also, ETF demand, technical breakout, and a reversal from the two-month support line also underpin bullish bias surrounding the bullion.
Crude oil posts mild gains after falling nearly 20% in 2025, as markets factor in geopolitical tensions and OPEC+ supply-cut policies. However, expectations of Russia’s return to oil markets amid hopes for a Ukraine-Russia peace deal, along with concerns over China’s demand outlook, limit the recovery.
Meanwhile, equities trade slightly higher, tracking Wall Street, as traders expect a stronger 2026 for technology stocks and see lower interest rates supporting manufacturing and other sectors.
Cryptocurrencies also start 2026 with modest gains after a weak year, supported by expectations of favorable Trump policies and improved exchange-traded fund (ETF) demand for digital assets.
Although most global markets are open, the holiday mood and a light data calendar may result in sluggish Friday trading.
Final readings of the December Purchasing Managers’ Index (PMI) from major economies will feature on the economic calendar and could allow the US Dollar to rebound, which may pressure cryptocurrency prices. Equities are likely to start the year on a slightly positive note but may lack strong momentum.
Looking into 2026, the dollar appears vulnerable. With U.S. mid-term elections approaching, fiscal policy is likely to turn more expansionary as policymakers seek to support economic growth and equity markets. At the same time, pressure from the White House on the Federal Reserve (Fed) to cut rates aggressively is expected to intensify. Expectations of a White House-appointed Fed chair later this year further support the case for a more accommodative monetary policy. In this environment, confidence in the dollar could weaken further, favoring non-USD assets, especially precious metals.
May the trading luck be with you!
