Financial markets show cautious optimism early Thursday as major central bankers, including the Federal Reserve (Fed), keep monetary policy unchanged and signal a need for greater economic clarity before confirming the widely anticipated rate cuts. Sentiment is supported by mixed earnings from Wall Street giants, U.S. President Donald Trump’s readiness to avert a U.S. government shutdown, and supportive measures from China, even as markets absorb the previous day’s hawkish policy pauses by the Fed and the Bank of Canada (BoC).
Political focus remains on Washington amid reports that President Trump and Senate Majority Leader Chuck Schumer are moving closer to a deal to avert a government shutdown. The proposal is expected to split Department of Homeland Security (DHS) funding from the broader package, after Democrats objected to DHS funding over concerns linked to Immigration and Customs Enforcement (ICE), including the deaths of U.S. citizens.
The biggest market catalyst comes from comments by Treasury Secretary Scott Bessent, who reiterates the strong dollar policy, countering earlier remarks from Trump that appeared to favor a weaker dollar. Bessent says the U.S. is not intervening in currency markets to support the Japanese yen, hopes the Fed maintains an open mind, and notes that Miron’s term could continue. Following the remarks, the U.S. dollar jumps, especially against the yen.
Markets also appear to be paying less attention to Fed Chair Jerome Powell as his term approaches its May end. The Fed’s decision to leave rates unchanged meets expectations, and although Powell strikes an upbeat tone on the economy, it has little impact on markets or Fed funds futures pricing, which continues to reflect around 19 basis points of easing for June. Powell said the economy is entering 2026 on a firm footing.
Gold and silver posted one of their most dramatic sessions in years, surging sharply in early Asian trade to fresh record highs. Precious metals also draw support from reports that Tether has been steadily accumulating gold reserves. The stablecoin issuer is estimated to hold around 140 tons of physical gold worth roughly $24 billion, stored in a former Swiss nuclear fallout bunker. This equals about 4.5 million troy ounces, more than many central banks hold, and would place Tether among the top 40 official gold holders globally if it were a sovereign nation.
China-related assets gain traction after reports that regulators have eased oversight of the “three red lines” framework, leverage thresholds introduced in 2021 to curb excessive borrowing in the property sector. Local media reports that developers are no longer required to submit monthly data under the framework, signaling a meaningful softening of one of the sector’s most restrictive regulatory pillars.
In Europe, European Central Bank (ECB) policymaker Isabel Schnabel says interest rates are likely to remain at current levels for an extended period. In contrast, ECB’s Martin Kocher warns that further euro strength could become a factor, potentially forcing another interest rate cut if inflation forecasts are affected. Germany’s economy ministry lowers its growth forecast for this year to 1.0% from 1.3%, while German Chancellor Friedrich Merz warns that a weak dollar is hurting exporters and supports the push for a digital euro.
On the geopolitical front, Chinese President Xi Jinping meets UK Prime Minister Keir Starmer in Beijing, signaling a possible reset in relations after years of strain. Starmer calls for a more sophisticated and pragmatic relationship with China, while Xi says China is ready to develop a long-term strategic partnership and stresses the need for stronger dialogue.
In foreign exchange markets, the Australian dollar climbs to a fresh three-year high as speculation intensifies around a potential Reserve Bank of Australia (RBA) rate hike, while the New Zealand dollar advances to a seven-month peak. Both currencies receive additional support from easing measures in China’s property sector that improve broader China-linked risk sentiment.
On the data front, Australia’s fourth-quarter trade prices lift terms of trade as export prices rebound. New Zealand reports a December 2025 trade surplus of 52 million NZD compared with expectations of 30 million NZD, while business confidence eases from record highs even as activity remains firm and inflation picks up.
The Bank of Canada also leaves policy unchanged, with forecasts largely steady. Governor Tiff Macklem says there is a clear consensus that the direction of the next rate move is difficult to predict, keeping USDCAD broadly flat. Meanwhile, U.S. oil inventories post a surprise drawdown, allowing West Texas Intermediate (WTI) crude oil to rise to a four-month high.
As a result, the U.S. Dollar Index (DXY) struggles to defend the previous day’s corrective bounce from a four-year low, allowing gold and silver prices to print fresh record highs. EURUSD and GBPUSD resume their uptrends after pulling back from multi-month highs, USDJPY fades after bouncing from a three-month low, AUDUSD rises to its highest level since February 2023, NZDUSD hits a six-month high, and USDCAD falls to its lowest level since October 2024. Meanwhile, Bitcoin (BTC) and Ethereum (ETH) remain under pressure, while Asia-Pacific equities struggle following a mixed Wall Street close.
Following a brief pullback from over four-year highs, mainly due to the U.S. Dollar’s corrective bounce after Bessent’s comments and the hawkish Fed pause, EURUSD and GBPUSD both pick up bids to resume their previous run-up. In doing so, EURUSD largely ignores mostly neutral remarks from European Central Bank (ECB) officials, while GBPUSD may be buoyed by hopes of stronger UK-China trade ties. However, a cautious mood ahead of today’s top-tier data from the U.S. and the EU is testing buyers amid mixed sentiment.
Elsewhere, USDJPY reverses the previous day’s bounce from a three-month low as the hawkish Bank of Japan (BoJ) bias returns to the market’s attention. Yet hopes for more stimulus from Japan’s Prime Minister test sellers, even as the Japanese yen’s traditional haven status weighs on USDJPY prices.
While major currencies retreated late Wednesday after the U.S. dollar rebounded on Treasury Secretary Scott Bessent’s comments and Fed updates, the currencies of Australia, New Zealand, and Canada remained firmer. Stronger crude oil prices outweighed the Bank of Canada’s (BoC) status quo, pushing USDCAD to its lowest level since October 2024. Meanwhile, rising hawkish odds for the Reserve Bank of Australia (RBA) drove AUDUSD to its highest level since February 2023, while NZDUSD also benefited from New Zealand data and China-linked news to reach its highest level since early July 2025.
Silver hit a fresh all-time high (ATH) at $119.45, while gold also reached a new record top at $5,603 as the U.S. dollar fails to hold its post-Fed rebound and global economic uncertainty drives traders toward precious metals. Meanwhile, reports of Tether’s heavy gold buying, rising silver demand, and growing institutional interest keep XAGUSD and XAUUSD on the bulls’ radar.
Be it rising geopolitical tensions or a surprise draw in the official U.S. weekly oil inventories, and not least the U.S. dollar’s inability to stay firm, West Texas Intermediate (WTI) crude oil had enough momentum to hit a four-month high early Thursday. However, cryptocurrencies failed to benefit from the softer dollar and remained under pressure, facing weekly losses, while equities drifted lower.
Corporate headlines are led by Tesla, which announced plans to phase out production of its Model S and Model X vehicles next quarter and retool its Fremont plant for humanoid robot manufacturing, signaling a strategic shift toward robotaxis and artificial intelligence (AI).
That said, the U.S. equity markets diverged sharply as Goldman Sachs downgraded Indonesian equities to underweight.
On earnings, Tesla reports Q4 2025 results with adjusted earnings per share beating expectations and margins improving, but revenue and free cash flow missing estimates. Microsoft beats forecasts in Q2 FY2026 as Intelligent Cloud outperforms, supported by 38% Azure growth excluding foreign exchange effects, while Meta posts a Q4 2025 earnings beat driven by advertising strength, even as Reality Labs losses widen and capital expenditure guidance rises.
Trade data from Switzerland and Canada will join mid-tier European Union (EU) releases to engage traders ahead of U.S. Jobless Claims, Factory Orders, and Nonfarm Productivity. Key developments to watch include Iran, Greenland, Cuba, U.S. trade tariffs, and political reactions affecting the U.S. dollar and Federal Reserve (Fed) independence.
Despite the U.S. dollar’s post-Federal Open Market Committee (FOMC) rebound, broader fears of a government shutdown, de-dollarization, and geopolitical tensions could put downside pressure on the greenback, potentially restoring the earlier gains of major currencies and Antipodeans versus the dollar. That said, cryptocurrencies could face further weakness, while gold and silver may continue extending their recent rises, and crude oil could remain firmer.
May the trading luck be with you!
