Market sentiment remains slightly negative early Wednesday, as traders struggle with mixed U.S. data, a lack of major events this week, and the upcoming holiday season. The Federal Reserve’s dovish stance continues to dominate, while equity markets are edging higher, driven by gains in technology stocks, keeping traders hopeful amid a quieter trading session.
The preliminary reading of U.S. third-quarter (Q3) Gross Domestic Product (GDP) growth surprised markets by coming in at 4.3%, beating the forecast of 3.3% and the previous 3.8%. Meanwhile, Durable Goods Orders for October dropped by 2.2%, the largest decline in three months, compared to expectations of a 1.5% drop.
The U.S. ADP Employment Change 4-Week Average eased to 11.5K from 16.25K. The preliminary Core Personal Consumption Expenditure (PCE) for Q3 came in at 2.9% quarter-over-quarter (QoQ), matching market forecasts but higher than the previous 2.6%. Industrial Production for October declined by 0.1% month-over-month (MoM), missing the consensus of 0.1%.
The U.S. Conference Board’s Consumer Confidence for December came in at 89.1, below the expected 91.7 and the revised previous reading of 92.9. The Richmond Manufacturing Index for December improved to -7.0, better than the forecast of -8.0 and the previous reading of -15.0.
U.S. economic advisor Kevin Hassett said the GDP report is a "great Christmas present" for the American people, emphasizing the effectiveness of the Trump administration’s trade agenda and trade deficit reduction. He also pointed out that Artificial Intelligence (AI) is showing up in the data.
On trade, the U.S. has delayed imposing new tariffs on Chinese semiconductor imports until mid-2027, signaling a more tactical approach to managing trade tensions with Beijing while keeping the option for tougher action in the future. The delay in semiconductor tariffs suggests a more measured U.S. trade stance, reducing short-term supply-chain risks while maintaining leverage over China’s semiconductor industry ambitions.
In the Middle East, tensions between Israel and Iran remain high, though there were no new escalations. The ongoing uncertainty in the region has kept traders cautious, particularly due to the strategic importance of Middle Eastern supply routes and infrastructure.
In Asia, Japan was the main focus early on. Japan’s November Corporate Service Price Index (CSPIs), which is the services-sector Producer Price Index (PPI), showed an increase of 2.7% year-on-year, which was in line with expectations and indicates that underlying service-sector price pressures are still strong.
The Bank of Japan (BOJ) also released the minutes of its October policy meeting, but they attracted little attention as the market focuses on the BOJ's December decision, which is set to raise the short-term policy rate to its highest level in around 30 years. The October BOJ meeting highlighted a balance between resilient growth and rising inflation against global trade and asset-price risks.
Japan’s transition away from ultra-low rates continues to put upward pressure on long-term Japanese Government Bond (JGB) yields. Japan’s government is planning to assume a 3% interest rate on long-term government bond expenses in its FY2026 budget, the highest rate in almost 20 years, a development that got attention in Asian markets.
In commodities, precious metals continued their recent surge. Gold briefly crossed the $4,500 mark before falling back below that level, while silver pushed higher again, reaching over $72, outperforming other assets during the session.
The Bank of Canada’s Governing Council minutes from the December 10, 2025, decision showed that the Bank held rates at 2.25%, stating the economy is resilient but uncertainty persists. The labor market is mixed, and inflation is on target. No clear bias for future moves was indicated, with policy decisions dependent on incoming data.
A private survey showed a crude oil inventory build, contrary to expectations for a drawdown.
Against this backdrop, the U.S. Dollar Index drops for the third consecutive day, allowing Gold to refresh its all-time high before retreating, while USDJPY remains pressured for the third consecutive day. That said, EURUSD and GBPUSD both stall two-day winning streaks at the highest level in three months, while AUDUSD and NZDUSD both rise for three consecutive days to hit 14 and three-month highs, respectively. Meanwhile, USDCAD drops to the lowest level since late July, whereas WTI crude oil pauses after a three-day winning streak. Furthermore, cryptocurrencies drift lower, and the Asia-Pacific shares post mild gains, tracing the modestly firmer Wall Street.
The broad weakness in the U.S. dollar pushed both EURUSD and GBPUSD to their highest levels since late September during their two-day uptrend. However, the U.S. Dollar Index (DXY) saw a mild bounce from an 11-week low early Wednesday, which slowed down the buying momentum for EURUSD and GBPUSD. This is especially true as traders begin to wind down for year-end consolidation with a light economic calendar.
The USDJPY pair is on track for its first yearly loss in five years, falling for the third consecutive day. This decline is driven by factors like the Bank of Japan's (BoJ) rate hike, rising Japanese Government Bond (JGB) yields, and the Yen’s traditional safe-haven appeal. The softer U.S. dollar also played a role in the Yen’s recent gains, despite today’s BoJ minutes and mixed signals from the services PMI.
AUDUSD rises for the third consecutive day to the highest level since October 2024, while NZDUSD also posts a three-day winning streak as bulls approach the late September peak. That said, the USDCAD drops to a five-month low during its three-day downtrend. Notably, softer USD, hopes of more China stimulus, and the year-end moves allowed these commodity-linked currencies to remain firmer versus the USD. It should be observed that the latest recovery in the crude oil prices, Canada’s key export item, and hawkish statements from the BoC exerted additional downside pressure on the USDCAD.
Gold rose for the fourth consecutive day, reaching a record high near $4,526, driven by a softer USD and the market's rush for safe-haven assets, though it retreated slightly afterward. Meanwhile, WTI crude oil gained from rising geopolitical tensions in the Middle East and ongoing inventory draws in the U.S. However, light market activity due to the holiday season limited crude’s movement, halting its three-day uptrend early Wednesday.
A lack of major catalysts in the crypto sector, combined with a softer USD, failed to spark much buying interest in Bitcoin (BTC) and Ethereum (ETH). As a result, both are on track for a yearly loss, despite several positives.
In the U.S. stock market, equities closed with modest gains, largely driven by news of a delay in U.S.-China chip tariffs, as traders overlooked Tesla’s troubles and embraced the softer USD and dovish Federal Reserve stance.
Tesla's sales in the UK and Europe have sharply declined, reflecting increased competition and weaker demand in the electric vehicle (EV) market. In the UK, Tesla registrations dropped by 19%, signaling a slowdown in one of Europe's key EV markets.
The U.S. has postponed the imposition of new tariffs on Chinese semiconductor imports until mid-2027, indicating a more measured approach to managing trade tensions with China, while keeping the option for tougher measures open in the future.
Wednesday’s economic calendar will be shaped by U.S. Jobless Claims, weekly Crude Oil and Natural Gas inventories, and Fed discussions. Additionally, U.S. equity market performance, tensions between Israel and Iran, updates on Ukraine-Russia, and any news related to Trump will be important for intraday movements.
As we head into the Christmas holiday season with a lighter economic calendar, traders are likely to see less volatility. This could allow major investors to maintain their previous positions, while momentum and counter-trend traders might take advantage of the low liquidity, causing price swings. As a result, the U.S. dollar may stay under pressure, helping risk assets like equities and antipodean currencies to edge higher, while cryptocurrencies could remain under pressure.
May the trading luck be with you!
