On Tuesday, news and data across Asia were light, but risk sentiment was positive. Asian equities rose, and the U.S. dollar continued to lose value as markets processed softer U.S. data and key macroeconomic and corporate updates.
An absence of global escalation over the U.S. takeover of Venezuela, along with softer U.S. data, Nvidia news, and mixed Federal Reserve (Fed) statements, helped create cautious optimism on Monday.
The Trump administration says U.S. oil companies are ready to invest in Venezuela, though this may affect long-term oil supply, but it has a limited short-term impact.
The Trump administration has set three strict conditions for Venezuela's new leader. These conditions raise risks around Venezuela’s oil flows and complicate expectations for sanctions relief and foreign investments. U.S. officials have communicated clear expectations to Venezuela’s interim leader, Delcy Rodríguez. The U.S. demands include tackling drug trafficking, removing foreign operatives from hostile countries, and halting oil exports to adversaries like China. The U.S. expects Rodríguez to eventually allow free elections, but there is no fixed timetable.
In December, the U.S. ISM manufacturing index fell to 47.9, below the expected 48.4, marking the lowest reading since November 2024.
Minneapolis Fed President Neel Kashkari expressed that the U.S. economy may be near a neutral position. Current expectations are for a potential rate cut by the Fed at the March 18 meeting, with a pause likely in January.
In Japan, the Bank of Japan's monetary base shrank for the first time in 18 years, signaling continued policy tightening and bond tapering.
UK retailers warned of persistent inflation as they raised prices faster in December. Despite some stabilization in business confidence, inflation pressures remain a concern.
In Australia, the December services PMI showed slowing growth but continuing inflationary pressures. The Reserve Bank of Australia is likely to stay focused on these issues, especially with the November CPI data coming soon.
The U.S. Dollar Index (DXY) declined, while gold stayed firm and crude oil rose before retreating slightly on Tuesday. USDJPY reversed its gains, while AUDUSD and NZDUSD rose. USDCAD continued its five-day uptrend but eased on Tuesday. Bitcoin reached its highest point since mid-November, and Ethereum also hit a three-week high before pulling back. Wall Street closed with gains, helping Asian-Pacific shares edge higher.
The U.S. Dollar’s pullback helped EURUSD and GBPUSD post gains, with GBPUSD rising sharply as traders view the Pound as a short-term alternative to the Dollar amid stabilizing business conditions and growing UK inflation concerns. EURUSD stayed firm, supported by talks of Ukraine-Russia peace and improving EU economics. GBPUSD hit its highest level since mid-September, while EURUSD defended its recovery from a three-week low.
USDJPY pulls back from two-week high after two-day loss, as Japan’s first monetary base drop in 18 years fuels hawkish BoJ rate hike concerns for 2026. The Yen’s safe-haven status and a broad U.S. Dollar retreat also weigh on the pair.
The market’s cautious optimism, along with a pullback in the U.S. Dollar and concerns over China’s stimulus, boosts AUDUSD and NZDUSD. Meanwhile, USDCAD retreats from a three-week high, as crude oil prices, key to Canada’s exports, lose steam after the Venezuelan concerns fade. A strong Australian PMI for December also helped the Aussie rise to its highest level since October 2024.
WTI crude oil trims its biggest daily gain in two weeks, as markets remain doubtful about a supply drain from the U.S. attack on Venezuela and OPEC+ inaction. Energy demand concerns, linked to ongoing economic tensions in China and Asia, weigh on prices, despite a softer USD. Meanwhile, the weaker USD and mixed geopolitical news help lift gold and silver prices, with both metals staying firm near weekly highs.
Bitcoin and Ethereum remain on the sidelines after recent recoveries, as buyers wait for more signals to move past the 2025 losses. Talks about the U.S. administration’s likely positive stance on crypto, along with a softer USD, keep buyers hopeful.
Meanwhile, broad cautious optimism and a weaker USD helped Wall Street finish Monday on a positive note, lifting Asia-Pacific shares early on Tuesday. News surrounding Nvidia also boosted technology stocks.
At CES 2026 in Las Vegas, Nvidia revealed its new Rubin platform, featuring the Vera Rubin superchip for AI and advanced reasoning. CEO Jensen Huang highlighted its tenfold cost reduction compared to the previous generation, solidifying Nvidia’s position as a leader in networking hardware and computing semiconductors.
German inflation and the final readings of the U.S. S&P Global PMI will be key highlights on Tuesday's economic calendar, but the main focus will be on news regarding the Fed talks, Venezuela, and Russia.
With the USD’s pullback, weak data could extend recent gains for major currencies, the Antipodeans, and cryptocurrencies. Equities may edge higher, and gold is likely to stay firm unless a major surprise arises. Additionally, USDJPY could remain under pressure due to the Yen’s safe-haven status and the hawkish Bank of Japan bias, though recent downside moves have lacked momentum.
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