Market participants look for a possible turnaround on Thursday as mixed trade and geopolitical signals clash with the Federal Reserve’s (Fed) dovish bias. U.S. data and events, developments around Iran and Venezuela, Trump tariff headlines, and a pause in U.S. crypto legislation kept traders cautious ahead of mid-tier U.S. economic releases.
U.S. data remained firm. The Producer Price Index (PPI) for November rose 0.2% Month-over-Month (MoM), matching forecasts and improving from October’s 0.1%. Retail Sales climbed to a three-month high of 0.6% MoM, beating the 0.4% consensus and a downwardly revised -0.1% prior. Business Inventories for October held at 0.3%, above expectations of 0.2%. Existing Home Sales for December rose to 4.35 million, the highest since March 2024, beating forecasts of 4.21 million and a revised 4.14 million prior.
Additionally, the Federal Reserve’s January 2026 Beige Book showed modest improvement in the economy, with eight of twelve Districts reporting slight growth after three periods of stagnation.
Meanwhile, the Federal Reserve officials delivered mixed but clearer signals on the 2026 rate path. Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, said it is “way too soon” to cut rates, supporting holding rates steady amid a resilient but confusing economy, while warning against premature easing.
Raphael Bostic, President of the Federal Reserve Bank of Atlanta, echoed that view ahead of his February 28 retirement, saying inflation is “not won yet,” and policy must remain restrictive as the economy strengthens into 2026.
In contrast, Mary Daly Paulson, a Federal Reserve policymaker, described the outlook as “pretty benign” and said rate cuts later this year remain possible if forecasts hold, calling policy only “a little restrictive.” Christopher Miran, also a Federal Reserve policymaker, took a dovish tone, arguing deregulation boosts productivity and lowers prices, supporting rate cuts. His term ends this month, though he will remain until a successor is confirmed.
Markets watched the Supreme Court for a tariff ruling, but no decision was issued. Stocks initially rallied on relief before fading, with the S&P 500 falling over 1% at its lows, dragged by megacap technology stocks and financials.
President Donald Trump highlighted Venezuela oil talks after crude slid on earlier Iran remarks. He said killings linked to Iran’s protest crackdown were subsiding and that there were no plans for mass executions. Trump also said he spoke with Venezuela’s interim president Delcy Rodríguez, claiming progress on oil, critical minerals, trade, and national security, and calling the U.S.–Venezuela partnership “spectacular.”
The U.S. began withdrawing some personnel from Middle East bases after Iranian warnings of retaliation if Washington strikes. The move was described as precautionary amid rising tensions, with the United Nations Security Council set to meet on Iran at the request of the U.S.
U.S. Treasury Secretary Scott Bessent warned Japan about excessive foreign exchange volatility, stressing that sharp currency swings threaten economic and financial stability.
Japan’s December 2025 Producer Price Index (PPI) rose 0.1% MoM, matching expectations. Prices remain consistent with further Bank of Japan (BOJ) rate hikes, though urgency is low ahead of the January 22–23 policy meeting. The yen steadied on intervention warnings but stayed pressured by the “Takaichi trade,” with officials stepping up verbal warnings as the currency neared ¥160 per dollar. BOJ Governor Kazuo Ueda reiterated that Japan is moving toward a sustained wage–price cycle and said rates will rise further if forecasts hold, favoring gradual normalization. A Reuters poll shows the BOJ likely holding rates through March, with hikes mid-year toward 1% or higher by September or July.
Japanese firms warned that worsening China ties threaten the economy, with a Reuters survey showing over two-thirds expecting economic damage.
In the UK, the housing outlook improved slightly in December, with the Royal Institution of Chartered Surveyors (RICS) reporting better sentiment, while Britain climbed global foreign direct investment rankings.
China and Canada struck a conciliatory tone during Prime Minister Mark Carney’s visit, with China’s foreign minister Wang Yi calling it symbolic and Canada’s foreign minister Mélanie Joly echoing a forward-looking stance.
Oil prices edged lower as markets focused on diplomacy over immediate military action. The United States called an emergency United Nations Security Council meeting on Iran, which markets viewed as stabilizing. Venezuelan oil exports to China are expected to fall sharply from February after a U.S. blockade reduced tanker availability, according to Reuters.
Against this backdrop, the U.S. Dollar Index (DXY) posts mild gains within a five-day trading range, while crude oil, gold, and silver face a pullback in prices. Meanwhile, EURUSD and GBPUSD remain under pressure, reversing the previous day’s corrective bounce, whereas USDJPY picks up bids to reverse the previous day’s U-turn from the highest level since July 2024. Further, AUDUSD and NZDUSD both hold lower grounds near the week’s bottom, while USDCAD edges higher within a five-day trading range. Additionally, Bitcoin (BTC) retreats from a two-month high, and Ethereum (ETH) also eases from a five-week top amid challenges to the crypto legislation, while the Asia-Pacific shares trace Wall Street’s downbeat performance despite lacking momentum.
Even as the latest U.S. data strengthens concerns that Federal Reserve (Fed) rate cuts may be delayed into 2026, the U.S. Dollar’s ability to avoid further losses continues to pressure major currencies. This pressure is amplified by geopolitical worries linked to Greenland, Iran, Ukraine, and Venezuela. At the same time, mostly weak second-tier economic data from the Eurozone and the United Kingdom (UK), discussed earlier, adds downside pressure on EURUSD and GBPUSD, keeping both pairs confined within a week-long trading range.
Elsewhere, USDJPY remains indecisive after reversing from a multi-month high and ending a six-day winning streak. Ongoing talk of possible Japanese intervention to support the yen conflicts with expectations of further Bank of Japan (BoJ) rate hikes, rising China–Japan tensions, and the Japanese yen’s (JPY) traditional safe-haven role. These opposing forces have limited recent moves in the pair, even as buyers appear more optimistic.
Amid a sour market mood, ongoing China-related challenges, and the U.S. Dollar’s resilience despite the Federal Reserve’s (Fed) dovish bias, the Australian Dollar, New Zealand Dollar, and Canadian Dollar stayed under pressure within a weekly range. USDCAD faced additional pressure from weaker crude oil prices, a key Canadian export, which outweighed recent positive developments in China–Canada relations. As a result, AUDUSD and NZDUSD remain on the back foot, while USDCAD edges higher.
WTI crude oil posts a 2.0% intraday loss early Thursday, extending the previous day’s retreat from a 12-week high, as easing fears surrounding the U.S.-Iran war join Trump’s push for more oil output from Venezuela. Additionally, a surprise build in the U.S. weekly inventories, per the official source EIA, also exerts downside pressure on the WTI crude oil, even if the black gold faces a fourth consecutive weekly gain.
Gold and silver fell early Thursday, reversing part of their recent rally, as market participants reassessed sentiment amid a strong U.S. Dollar despite the Federal Reserve’s (Fed) dovish bias. Weak physical demand from China and India also pressured buyers ahead of second-tier U.S. economic data.
Meanwhile, the U.S. Senate Banking Committee delayed a major crypto market structure bill due to political and industry divisions, with Chairman Tim Scott confirming no new vote date after Coinbase withdrew support. This setback weighed on Bitcoin (BTC) and Ethereum (ETH) prices, although backdoor industry news and institutional inflows kept some buyers optimistic.
On Wall Street, all three major benchmarks closed modestly lower for the second straight day, pressured by President Donald Trump’s 25% tariffs on chips, mixed geopolitical concerns, and lackluster earnings from major financial firms. Trump’s tariffs target select advanced artificial intelligence (AI) chips, including Nvidia’s H200 and Advanced Micro Devices (AMD) MI325X, citing national security. The White House said broader semiconductor tariffs could follow to secure supply chains and strengthen domestic manufacturing. Trump also directed the Commerce Department and the Office of the U.S. Trade Representative to reduce U.S. reliance on imported critical minerals through foreign supplier agreements.
With the market showing a slight urge to test the previous trading range, supported by U.S. data and geopolitical developments, traders are positioned for a potential turnaround on Thursday, particularly ahead of mid-tier U.S. economic releases and the looming U.S. Supreme Court decision on Trump tariffs.
Thursday’s calendar is busy, featuring Eurozone Industrial Production and Trade Balance, Canada Wholesale Sales, and remarks from several Federal Reserve (Fed) officials, followed by U.S. Export-Import Price data, weekly jobless claims, and sentiment and activity reports from the New York and Philadelphia Feds.
If the U.S. data surprises to the upside, the U.S. Dollar may strengthen, extending its weekly gains. This could add to easing supply pressures on oil, weighing on WTI crude prices. Gold and silver could react differently depending on market sentiment: they may extend their recent pullback if risk appetite weakens, or stabilize if the mood improves. Cryptocurrencies are likely to remain under pressure, and equities may also struggle unless President Donald Trump announces a major initiative, which currently appears unlikely.
May the trading luck be with you!
