This week, the core variables in global markets remain focused on the policy paths of major central banks, with the most crucial event being the Federal Reserve's interest rate meeting.

Over the past week, market expectations have increasingly leaned towards the Fed deciding to cut interest rates by 25 basis points at its meeting next Wednesday. This expectation is driven by declining inflation expectations and weaker forward-looking economic data. Currently, the most likely scenario is that they will follow market expectations and implement a rate cut next week, despite inflation being significantly above target.

President Trump has hinted that he has made a decision on the next Fed chair, expecting his staunch supporter Kevin Hassett to take the position, who is likely to push for further rate cuts. However, the regular rotation of regional Fed presidents on the FOMC voting committee is likely to push policy towards a more hawkish direction next year.

Last week's talks in Moscow on the Ukraine crisis failed to achieve a breakthrough, while the G7 is discussing a stricter "comprehensive maritime services ban" on Russian oil exports to replace the existing price cap mechanism.

The US and Ukrainian officials have reached an agreement on a "security arrangement framework." According to a statement from the U.S. State Department, this progress was made after two days of talks, and consultations are scheduled to continue on Saturday. The talks, conducted by the U.S. special envoy and senior Ukrainian national security and military officials, focused on building a “deterrent capability” needed to maintain lasting peace.

Last Week's Market Performance Recap:

Last week, U.S. stocks continued their slight upward trend, with the S&P 500 rising for the fourth consecutive day. Investors assessed moderate inflation data while significantly increasing their bets on a Federal Reserve rate cut next week. Meanwhile, two major corporate news items—Netflix's $83 billion acquisition of Warner Bros. Discovery (WBD) and SpaceX's potential valuation doubling to $800 billion—generated strong market attention, driving the technology and media sectors into the spotlight. At Friday's close, the S&P 500 rose 0.19% to 6,870.40 points, just about 0.7% away from its intraday record high. The Nasdaq Composite rose 0.31% to close at 23,578.13; the Dow Jones Industrial Average rose 104 points, or 0.22%, to close at 47,954.99.

After several weeks of one-way movement, international gold prices fluctuated wildly within a high range last week, experiencing several sharp rises and falls in a "V-shaped reversal," reaching a high of $4,264 before repeatedly falling back below $4,200, approaching a key technical support level. With the Federal Reserve's interest rate decision approaching, market sentiment was significantly divided, with investors generally remaining cautious in the face of uncertainty, and the gap between institutional and retail investor expectations widening further.

Last week, the silver market's upward trend continued, but before testing the key level of $60/ounce, prices began to show signs of correction. Earlier, a new historical high of $59.340 was reached, directly reflecting that the current market is in an extremely overbought state. Silver closed the week at $58.380/ounce, a weekly gain of 3.5%. Market concerns about its future trajectory have not diminished, particularly the risks of a sharp reversal and parabolic fluctuations, which remain the focus of attention.

Last week, the US dollar index came under pressure, closing at 98.98, a cumulative decline of 0.5% for the week, nearing a five-week low. Market expectations for a Federal Reserve rate cut next week continued to rise, becoming the dominant factor in the foreign exchange market last week. Traders estimated the probability of a rate cut on December 10th to be close to 90%. The weakening trend of the dollar is reasonable, as it remains overvalued relative to major currencies. Furthermore, the prospect of White House economic advisor Hassett potentially succeeding as Fed chairman has been interpreted by the market as a possible indication of a more dovish monetary policy.

The euro held steady against the dollar at $1.1645, not far from a three-week high. Latest data showed that a rebound in investment spending drove the eurozone economy to achieve better-than-expected growth in the third quarter, providing the European Central Bank with valuable policy buffer space amid inflation targets and external uncertainties. The yen rose to 155.30 against the dollar as market expectations of a possible interest rate hike by the Bank of Japan this month prompted some carry trades to be unwound. The Bank of Japan is expected to raise its target interest rate from 0.5% to 0.75% at its December 18-19 meeting, and will subsequently raise rates every six months.

The pound/dollar pair corrected its gains, falling back to around 1.3320. Last week, while struggling to maintain its weekly gains, the pair faced renewed pressure and retreated to the 1.3320 area after a slight bullish attempt by the dollar. Despite a surprisingly strong rise in US consumer confidence, the dollar didn't receive much favor, as traders were more interested in the Federal Reserve's statements next week. The Australian dollar continued its rise on Friday, climbing to its highest level since September 18 at 0.6649 against the dollar, heading towards a second consecutive week of gains, as traders were almost certain the Reserve Bank of Australia would keep interest rates unchanged on December 9.

WTI crude oil hovered around $60.00 per barrel at the end of last week, holding above a two-week high and maintaining last week's gains, driven by geopolitical risk premiums. Traders continued to focus on potential U.S. action against Venezuela, while oil prices were supported by the lack of progress in U.S.-Moscow negotiations over the Ukraine war, which reduced the near-term prospects for a restoration of Russian supplies, as Ukraine continued to target Russian energy infrastructure. Expectations of a U.S. interest rate cut that could stimulate economic activity and boost oil demand also added upward pressure.

Bitcoin continued to hold above $92,000 last week, having been trapped in a $94,000 to $82,000 range for the past two weeks. Earlier in the week, Bitcoin had rallied strongly as expectations of an impending Federal Reserve rate cut boosted risk appetite. Traders continued to bet that loose monetary policy could revive the momentum of major digital assets. Bitcoin oscillated around $92,000, retreating after failing to break through $94,000 overnight. This reinforced the view that it is gradually moving into the low-liquidity $85,000–$95,000 range.

The U.S. 10-year Treasury yield rose to a two-week high of 4.1% last week as the market assessed the outlook for the Federal Reserve's interest rate path next year. The Michigan Consumer Sentiment Index reflected a rebound in consumer sentiment in December, slightly easing concerns that high living costs and slow job growth could hinder spending. The consensus is further solidified by a 25 basis point rate cut next week, as the delayed release of the September PCE price index failed to deliver an upside surprise.

Market Outlook This Week: This week (December 8-12), the Federal Reserve will announce its interest rate decision, creating a double window of data and policy activity for global markets. Key indicators from core economies will be released, multiple central banks will release policy signals, and important industry conferences and financial reports will be launched. Every development could potentially shake market sentiment.

From Chinese trade, inflation, and liquidity data to the Fed's rate cut decision, from three major oil market reports to central bank decisions in various countries, investors need to closely monitor key variables, plan their strategies in advance, and grasp potential opportunities and risks.

With the Fed announcing its final interest rate decision of the year this week, the market's dramatic fluctuations in the outlook for monetary policy are finally coming to a conclusion. Gold prices have fluctuated repeatedly over the past six weeks and are currently attempting to establish a new support range around $4200/ounce. If the Federal Reserve releases a more dovish signal, gold prices may retest historical highs; however, if the guidance leans hawkish, gold may face short-term pullback pressure.

Regarding this week's risks:

Risk Warning: In addition to core economic data and policies, investors should be wary of three potential risks:

First, the implementation of the Fed's interest rate cut and Powell's statements are the core variables this week, directly affecting the dollar, US stocks, and global risk asset sentiment. Investment options may experience a "sell the news" scenario.

Second, if speeches by officials from the Fed, ECB, and other major central banks signal a policy shift, it could quickly correct market expectations, triggering sharp short-term fluctuations in corresponding currencies and assets.

Third, if international trade frictions escalate again, it will suppress global risk asset sentiment, dragging down the performance of stocks, commodities, and other assets.

This Week's Conclusion:

This week's highlight: Four major global central banks will announce their interest rate decisions this week, including the Federal Reserve's policy meeting, as well as the Reserve Bank of Australia, the Bank of Canada, and the Swiss National Bank. The market generally expects all three central banks to maintain their interest rates. Among them, the Federal Reserve will undoubtedly be the biggest variable guiding the direction of the financial markets.

With the Federal Reserve's interest rate decision approaching, market sentiment is significantly diverging. Investors are generally cautious ahead of the market direction, and the gap in expectations between institutional and retail investors is widening further.

Amid the wave of interest rate cuts; are global central banks joining forces to "besiege" the Fed?

The claim that global central banks are "besieging" the Fed is inaccurate and an exaggerated misinterpretation.

In fact, the world is experiencing a coordinated shift in monetary policy driven by the economic cycle, rather than a "besiege" of the Fed. According to the latest data, as of November 2025, eight developed economies and twelve emerging market central banks have followed suit with interest rate cuts, while only four of the 61 central banks tracked globally are still raising interest rates.

Global Central Banks and the Fed: Divergence, Not a "Besiege" Defending Independence: Global Central Banks' Actions Are Not a Joint Attack on the Federal Reserve, but Rather Demonstrated by Three Major Trends:

1) Policy Divergence: Central Banks Make Independent Decisions, Out of Sync with the Fed

Fed: Expects a 25 basis point rate cut in December to the 3.75%-4% range, with a potential further reduction to 3.25% in 2026; ECB: Maintains high interest rates, stating "there is unlikely to be a rate cut until at least next year"; Bank of Japan: Plans to begin raising interest rates in December, ending its ultra-loose policy; Bank of England: Introduces a drastic tax increase, causing the pound to rebound; Emerging Markets: Some are still in a tightening cycle, dealing with inflationary pressures.

This divergence reflects a growing trend of global central banks becoming more "data-dependent" and "localized" in their policies, with significantly increased autonomy, rather than a coordinated action against the Fed.

2) Defensive Measures: Reducing Over-Reliance on the Dollar System

European Solution: Discussions are underway to integrate non-US central bank dollar reserves and establish a "dollar pool" independent of the Federal Reserve as an alternative liquidity support mechanism during crises, addressing the risk of "dollar weaponization."

BRICS Countries: Accelerating the promotion of local currency settlement and establishing the "BRICS Clear" system; Brazil and South Africa have launched pilot programs for RMB payment platforms involving soybean and gold transactions.

China: Establishing currency swap mechanisms with more than 40 countries and promoting the CIPS system to reduce reliance on SWIFT.

These measures aim to enhance financial resilience, rather than challenge the Federal Reserve itself, and are a rational response to the fragility of the dollar-dominated system.

3) Collective Concerns and Support for the Federal Reserve's Independence

Global central bank leaders issued a unanimous warning:

ECB President Christine Lagarde: "Trump's interference in the Fed's affairs will pose a very serious threat to the US and global economies. A loss of central bank independence will lead to dysfunction and instability."

Bank of Japan Governor Kazuo Ueda: While declining to comment on the specifics of the Fed, he emphasized that "central bank independence is crucial for maintaining economic and financial stability."

Jackson Holt Global Central Bank Conference: More than a dozen central bank governors collectively supported Powell, warning that a loss of Fed independence would set a "dangerous precedent," leading to global financial market turmoil and investors demanding higher risk premiums for US Treasury bonds.

Conclusion: Global central banks' attitude towards the Fed is one of "concern that a loss of its independence will jeopardize global stability," not "joint confrontation." The so-called "encirclement" is an exaggeration by the media; the reality is an adaptive adjustment of the global financial system to a unipolar-dominated model.

The Federal Reserve's massive release of dollar supply: Unfavorable for the dollar's performance?

The US government shut down throughout October, which should have significantly reduced government spending. Meanwhile, tariff revenues reached a record high that month, increasing 3.3 times compared to last year. However, according to data from the US Treasury Department, the fiscal deficit in October alone still reached a staggering $284 billion, a 10% year-on-year increase. These figures clearly reflect the dire state of the Trump administration's finances. To fill the deficit, the US government has had to issue a large amount of debt, which will drain funds from the market, leading to a tight money supply and being extremely detrimental to the US economy. This may explain why the Federal Reserve decided to stop reducing its balance sheet in December.

However, such measures alone seem insufficient to alleviate the tight dollar liquidity in the market. Therefore, the Federal Deposit Insurance Corporation (FDIC) announced last week that it would relax leverage ratio regulations for US commercial banks to release more funds from them to address current challenges. Leverage ratio regulations for US commercial banks were established after the 2008 financial crisis to prohibit excessive leveraged investments by commercial banks. The reduction in these requirements, while beneficial in releasing a large amount of bank funds into the market, also increases the risk of bubbles in the entire financial market.

Many investors are focusing on whether the Federal Reserve will cut interest rates at its December 11th meeting to assess the impact on the dollar, neglecting the impact of the large dollar supply released after easing leverage requirements for US banks. Since the FDIC only passed this plan on November 25th, it also explains why the US dollar index fell below 100 on that day, and why US stocks, gold, silver, and Bitcoin rose successively last week.

Looking ahead to the Federal Reserve's policy meeting next Thursday (December 11th), with several high-profile Fed officials expressing support for a December rate cut, including close supporters of Fed Chairman Powell and New York Fed President Williams, and Hassett, considered a leading candidate for the next Fed Chairman, all unanimously supporting a December rate cut, interest rate futures indicate that the market now estimates the probability of a rate cut next Thursday to be nearly 80%. Faced with rising expectations of a December rate cut by the Fed, coupled with the easing of bank leverage ratio requirements, the US dollar is expected to remain under pressure this week. Technically, attention should be paid to the double-top neckline at 99 US dollar index points; a break below this level could lead to a deeper correction in the US dollar.

Could the prospect of a Fed rate cut ignite a super bull market for gold at $5,000?

At the beginning of this month, spot gold prices fluctuated between $4,060 and $4,260, with market sentiment wavering between expectations of a rate cut and economic data. This is not merely a short-term fluctuation, but rather a prelude to a higher peak. Looking back at last week's price action, gold prices retreated after hitting a six-week high, but subsequently rebounded strongly, demonstrating strong buying support on dips. Meanwhile, surging global central bank gold purchases, declining US Treasury yields, and escalating geopolitical tensions all provided a solid foundation for gold's support.

Gold prices experienced a typical profit-taking process last Tuesday, with spot gold hitting a low near $4,160, a drop of approximately 1.5%. This was mainly due to some investors locking in profits after reaching a six-week high on Monday, leading to increased short-term selling pressure. However, this pullback is not a sign of market weakness, but rather a healthy adjustment. This is attributed to the continued decline in the US dollar index and the pullback in US Treasury yields, factors that attracted medium- to long-term investors to buy on dips.

This profit-taking is only temporary; the market is in a continuation pattern and will eventually break upwards. He even optimistically predicts that gold may reach the $5,000 milestone at the beginning of the new year. Recent US economic data has gradually shown signs of cooling, such as weaker-than-expected manufacturing data, further strengthening gold's appeal as a safe-haven asset. Against this backdrop, gold's short-term fluctuations are more like a build-up, paving the way for subsequent gains.

The Federal Reserve's policy direction is undoubtedly the core variable affecting gold prices. Currently, the market prices an 89% probability of a 25 basis point rate cut by the Federal Reserve at its December meeting, a significant increase from 63% a month ago. This is attributed to dovish signals from Fed policymakers and signs of a cooling US economy.

While the US economy is showing signs of pressure among low-income consumers, overall labor income remains robust, suggesting that rate cuts will be implemented gradually. It's worth noting that President Trump plans to announce his successor to Powell as Fed Chair early next year. White House economic advisor Hassett, a leading dovish candidate, could further amplify expectations of easing policies, providing a long-term positive for gold.

Global central bank gold purchases are another strong support for the gold market. Data from the World Gold Council shows that central banks net purchased 53 tons of gold in October, a 36% increase month-on-month, marking the largest monthly demand since early 2025.

Meanwhile, the US dollar index has fallen for several consecutive trading days, mainly due to the potential dovish nomination of Trump as Fed Chair. If Hassett takes office, his dovish stance could further depress the dollar, enhancing the attractiveness of gold. These dynamics combined to lower the opportunity cost of holding gold due to the decline in US Treasury yields, driving a rebound in gold prices from their lows.

Geopolitical factors remain a catalyst for gold. Recently, Russian President Vladimir Putin and US Special Envoy Sergei Vitkov held a nearly five-hour closed-door meeting on the Ukraine issue. Furthermore, US President Trump's tough stance last week, stating that any country trafficking illegal drugs to the US could be attacked, stimulated safe-haven demand, prompting investors to turn to gold as a safe haven.

In conclusion, while the gold market faces short-term profit-taking pressure, multiple factors, including expectations of a Fed rate cut, strong central bank gold purchases, declining US Treasury yields, a weakening dollar, and geopolitical uncertainty, are collectively propelling it upwards. Looking ahead, with the new year approaching, the $5,000 target is not out of reach. Investors should closely monitor the Fed meeting results and key data releases.

Japan has no choice but to "protect its bonds and abandon its currency"; is the Bank of Japan sacrificing the yen?

The yield on Japanese 10-year government bonds once reached its highest level since 2006, but this was not a signal of a strengthening economy, but rather a manifestation of its deep-seated "debt trap." The central bank was forced to hold more than half of its government bonds to maintain market stability; every 1% increase in yield meant a 2.5% transfer of GDP wealth. With a debt ratio of 250% and structural economic difficulties, Japan had no choice but to "protect its bonds and abandon its currency," allowing the yen to become a permanent financing currency and continue to depreciate, thus struggling to maintain a temporary balance in the debt system.

The current rise in government bond yields under Japan's macroeconomic policy framework is not a signal of a strong economy, nor is it an endorsement of Japanese economic growth or the central bank's policy decisions. It is merely a repricing of the inflation premium in a system unable to bear positive real interest rates. In Japan, rising yields are precisely a sign of economic weakness, because the structural support that once anchored the bond market no longer exists.

The Structural Transformation of the Japanese Economy and the Fate of the Yen

From 1975 to 2010, the Japanese economy relied on a powerful external stabilizer: the trade balance. When the trade surplus narrows, the yen weakens; when the trade surplus widens, the yen strengthens. This correlation stems from Japan's export surplus generating foreign exchange earnings, which flow back into the yen, increasing domestic savings and ultimately flowing into the Japanese government bond market. The trade surplus indirectly supports the bond market.

However, this pattern was disrupted after the global financial crisis, particularly after the Fukushima nuclear accident. Japan transformed into a structural energy importer, and its trade surplus disappeared. Logically, the yen should have collapsed. But in reality, between 2010 and 2012, the yen strengthened because the scale of capital repatriation far exceeded the impact of trade channels—this period completely broke the original correlation.

Although the correlation was broken, the trend remained unchanged. After 2012, the trade balance remained weak, and the yen entered its longest depreciation cycle. Japan no longer used export surpluses to drive yen strength, but rather import dependence to weaken it. Since the trade surplus no longer increased domestic savings, the balance sheets of banks, insurance companies, and pension funds also stopped expanding. This gap had to be filled by the Bank of Japan.

Once the Bank of Japan (BOJ) controls yields, the pressure to adjust will fall solely on the exchange rate—this is the essence of the current policy framework. When the BOJ suppresses yields, all macroeconomic pressures are borne by the yen: every time the central bank attempts to tighten, the yen rebounds sharply; every time the central bank sinks deeper into negative real interest rates, the yen weakens again. The long-term depreciation trend of the yen is an external manifestation of Japan's "inflation default" mechanism.

The Japanese economy has only three possible paths forward: one is a significant depreciation of the yen to the 170-200 range. Only under the dual scenario of yen depreciation and a strong US economy can Japan rebuild its trade surplus. A weaker yen will stimulate a surge in exports, while US economic expansion will boost external demand—this will restart the traditional engine of corporate profit growth driving domestic savings expansion.

The yen will continue to maintain its characteristics as a structural financing currency: every few quarters, when imported inflation surges and forces the BOJ to tighten policy, the yen rebounds sharply; but debt arithmetic will eventually force the central bank to return to easing, and the yen will resume its decline.

Therefore, my conclusion is that Japan could only choose to save its bond market or defend its currency value; the two were mutually exclusive. Thus, as always, it chose to protect its bond market. The cost, however, was borne by the yen.

Overview of Important Overseas Economic Events and Matters This Week:

Monday (December 8): Japan's revised Q3 seasonally adjusted annualized real GDP growth rate (%); Eurozone December Sentix Investor Confidence Index; Canada's November Leading Indicators month-on-month growth rate (%)

Tuesday (December 9): Australia's ANZ Consumer Confidence Index for the week ending December 7; Reserve Bank of Australia's interest rate decision; Monetary policy meeting and statement release

Wednesday (December 10): China's November PPI/CPI year-on-year rate (%); US EIA crude oil inventory change for the week ending December 5 (in thousands of barrels); Bank of England Governor Bailey's speech; Bank of Canada's interest rate decision

Thursday (December 11): Japan's Q4 BSI Large Manufacturers Confidence Index; Australia's November seasonally adjusted unemployment rate (%); Australia's November employment change (in thousands); US initial jobless claims for the week ending December 6 (in thousands); US October PPI YoY (%); Fed Interest Rate Decision; Fed Chairman Powell Holds Monetary Policy Press Conference

Friday (December 12): UK October GDP MoM (%); UK October Industrial Production MoM (%); UK October Goods Trade Balance - Seasonally Adjusted (Billion GBP); Fed Releases US Household Financial Health Data from its Q3 2025 Flow of Funds Report

* Disclaimer: This content does not constitute investment advice. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.