9 min readWeekly recap:
US stocks posted a weekly gain last week despite heightened volatility as investors digested the latest Federal Reserve interest rate decision, the appointment of the new Fed Chair, the start of mega-cap earnings, and intense volatility in the precious metals market. The USD recovered from a four-year low but still booked losses for the week.
As expected, the Federal Reserve left interest rates on hold at 3.5% to 3.75%, noting a solid growth outlook and signs of stabilisation in the labour market, suggesting rates will likely remain on hold for longer.
Precious metals remained in focus with Gold and Silver rising to multiple record highs before falling sharply at the end of the week. Silver plunged 30% to settle at $78.53, marking its worst day since March 1980. Gold shed 9% on Friday to trade at $4865. Precious metals are falling further at the start of the new week, with Gold now down $1000 from its record high and Silver down 35% in two days.
These big moves lower were triggered by reports, and then the confirmation of Kevin Warsh as the next Federal Reserve chair. The announcement eased concerns about the Fed’s independence, helping the USD recover from a 4-year low, but also raised concerns about a tighter Fed balance sheet, which would mean less liquidity. A partial US government shutdown adds to market nervousness. However, this is expected to be resolved this week.
Big tech kicked off earnings this week, with Microsoft dropping 10% after its results, as investors fretted over significant capital expenditures in the AI build-out without seeing meaningful returns on that spend. Cloud growth slowed.
OPEC+ meeting (Sunday)
OPEC+ agreed to keep its oil output unchanged for March at the meeting on Sunday, even after crude oil prices hit a six-month high last week on concerns that the US could launch a military attack on Iran, the 4th largest OPEC producing country. The meeting of eight OPEC members came as oil prices reached multi-month highs on Friday despite speculation about a 2026 supply glut, which could further pressurise prices.
The 8 producers raised production by 2.9 million barrels per day from April through December 2025, roughly 3% of global demand, to increase market share. However, in November, they paused plans for further increases due to weaker demand. The group made no mention of what would come beyond March. Oil prices are falling today as the US and Iran de-escalate geopolitical tensions. US-Iran talks this week will be a key driver of oil prices.
US ISM manufacturing (Monday)
Expectations are for ISM manufacturing PMI to contract at a slower pace of 48.3 in January, up from 47.9 in December. Using the S&P Global US manufacturing PMI as a benchmark, it rose to a two-month high of 51.9 in January, with manufacturing output growth accelerating to a 5-month high. New orders recovered from December’s decline, but only slightly, pointing to still-soft underlying demand.
Meanwhile, attention will also be on input and factory gate costs, which rose sharply in the S&P Global Flash PMI data, and could point to rising inflationary pressures. Investors will be looking to see whether this trend continues and shows up in the ISM data. Stronger data could support the U.S. dollar and cyclical stocks within the Dow Jones.
US ISM services (Wednesday) PMIs
The services PMI is expected to show that activity expanded at a slightly slower pace in January at 53.8, down from 54.4 in December, which marked the fastest pace of expansion in over a year, fueled by solid demand growth and a pickup in hiring. The December figure exceeded expectations, and new orders expanded by the most since 2024.
This pickup in demand helped spark the healthiest growth in services employment since February. Again, the market will be watching closely to see whether this trend continues into 2026. Strong data could help revive demand for the US dollar, lifting USD/JPY.
RBA rate decision (Wednesday)
In the December meeting, the RBA left rates unchanged at 3.6% in line with expectations and a third consecutive hold. This was despite October’s CPI report showing a rise in both headline and underlying inflation. During the press conference, Governor Bullock confirmed that the RBA did not consider a rate cut but did consider scenarios for a rate hike.
Since the December meeting, key data points have come in stronger than expected, with the unemployment rate falling to 4.1% and inflation rising 3.4%, ahead of the RBA 3.2% forecast. The market is pricing in a 75% probability of a rate hike at the upcoming RBA meeting, taking rates to 3.85%. A hawkish RBA could lift AUD/USD.
BoE rate decision (Thursday)
At the December meeting, the BoE cut rates by 25 basis points to 3.75% in a narrow 5-4 vote. Guidance remained cautiously dovish, noting that inflation had peaked and was expected to cool to the 2% target around spring this year. Subsequent data has reinforced a softer outlook for the labour market with the employment rate remaining at 5.1%, its highest level since May 2021. Core inflation at 3.2% is at the lowest level since December 2024.
Still, the BoE is expected to remain on hold this week and for the rest of the first quarter to allow for the impact of the rate-cutting cycles to gain further traction. A dovish-sounding BoE could pull GBP/USD lower.
ECB rate decision (Thursday)
The ECB is expected to leave rates unchanged at 2%. At the December meeting, the ECB confirmed a meeting-by-meeting, data-dependent approach. ECB President Christine Lagarde said that policy was in a good place. Inflation is not a concern for the ECB at the moment, with headline CPI in December at 1.9%, down from 2.2% in October and November. The January inflation data will be released on Wednesday and could tick higher, potentially to 2.1%.
However, this would still be close to the 2% target. Policymakers have been monitoring the euro’s strength, which rose above 1.20 last week. A strong euro could add disinflationary pressures and could raise doubts about whether the ECB could keep rates unchanged for much of the year. Lagarde’s press conference will be watched for clues over the potential timing and direction of rates. A dovish-sounding ECB could pull EUR/USD lower.
Non-farm payroll report (Friday)
In December, the US economy added just 50,000 jobs, well short of expectations of a gain of 60,000 and below November’s downwardly revised figure of 56,000. However, the unemployment rate also edged lower to 4.4% from 4.5% in in in November. The market looked past the softer job creation figures and focused on the lower unemployment rate as evidence of labour market stabilisation.
This was also highlighted by Federal Reserve chair Jerome Powell, who said the labour market is showing signs of stabilisation. With expectations for 70,000 jobs to be added in January, the unemployment rate is expected to tick up to 4.5%. Stronger-than-expected jobs data could add to signs of a stabilisation, meaning rates could remain on pause for longer. This could pull Gold and stocks lower.
US earnings season
After Microsoft and Meta spiked volatility last week, attention turns to earnings from Alphabet and Amazon. Concerns over capital expenditure are running high. While Microsoft spooked the market, Meta was cheered as its huge capex spend translated into impressive revenue growth forecasts.
Other big names such as Disney, Palantir, AMD, Uber, Qualcomm, Snap, and Under Armour are also set to report this week. Revived concerns over the AI trade could fuel a rotation away from tech stocks, pulling the Nasdaq lower.
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