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🧠Fed minutes, soft dollar and oil geopolitics steer FX

Published: 12/30/2025

Overall Market Sentiment



Global risk appetite is cautiously positive into year-end, but price action is being shaped by thin liquidity and a market that is highly sensitive to policy nuance. The US Dollar Index is sitting around 98.0, near a three-month low, while the VIX is in the low-to-mid teens at roughly 14.2, consistent with calm conditions that can still reprice quickly if rates expectations shift.


Equities remain near record territory, with the S&P 500 around 6,905, while rates markets look more “soft landing” than “stress,” with the US 10-year yield near 4.11%.The key macro catalyst is the release of the Federal Reserve’s minutes from the December 9 to 10 FOMC meeting, which investors will parse for how unified the committee is around pausing, and what would need to happen for cuts to resume in 2026.


In this backdrop, the market’s base case is still gradual disinflation and slow growth, but not a sharp downturn. That keeps risk assets supported, while leaving FX mostly driven by relative rates and the credibility of each central bank’s “higher for longer” versus “cut and wait” narrative.



Geopolitics



Oil remains the main geopolitics transmission channel into FX and rates. US crude is around 58.1, and Brent is holding in the low 60s (roughly 60 to 65 as a practical “comfort corridor” many macro desks watch).


The market is effectively balancing two ideas at once:


  • Supply and inventory narratives are still keeping a lid on sustained upside.
  • Headlines around sanctions, shipping disruptions, and broader Middle East or Russia-related risks can still trigger short squeezes and quick risk-premium bursts.



For FX, oil in the low 60s generally means:


  • A mild headwind for petro-currencies like CAD and NOK compared with higher-oil regimes.
  • A modest tailwind for the disinflation narrative, which tends to support bonds and keep the USD from regaining a strong policy-driven bid, unless the Fed turns notably less comfortable with current inflation progress.




Currency outlooks




🔻 USD: Minutes are the catalyst, data are the trend



The USD backdrop remains “soft, unless something forces a repricing.” With DXY near 98, the dollar is still reflecting a year where markets increasingly embraced easing expectations and a gentler growth profile.


What matters most tonight is not just the minutes’ tone, but the distribution of concerns inside the committee:


  • If the minutes emphasize patience and confidence that inflation is trending lower, the market is likely to stay comfortable pricing additional easing in 2026, keeping the dollar capped.
  • If the minutes show persistent anxiety around sticky services inflation, fiscal impulse, or a re-tightening risk, that can fuel a short-covering bounce, especially in thin year-end trading.



Practical levels: 97.5 to 99.0 is a sensible “reference band” while the market is waiting for clearer 2026 guidance. A break beyond it likely needs either a policy communication shock or a meaningful reacceleration in US activity data early in January.



🔺 EUR: Supported by relative policy stability



EURUSD is around 1.18, holding the upper end of its recent range.The euro’s support is coming less from stellar European growth, and more from relative-rate dynamics: if the ECB is perceived as more comfortable sitting still while the Fed debates the next step, EUR can remain resilient on dips.


What could move it:


  • A hawkish-leaning set of Fed minutes can pull EURUSD back through rate differentials.
  • If the minutes look dovish or internally cautious on growth, EUR’s “stable alternative” role tends to reassert itself quickly.



Practical levels: 1.17 to 1.1720 reads as the first support zone, while 1.19 is the next area that would require a clear catalyst, not just drift.



🔺 GBP: Firm versus USD, but still a cross-currency debate



Sterling near 1.35 is consistent with the broader soft-dollar theme.The pound’s near-term performance hinges on whether markets see UK easing as shallow and cautious, or the start of a more extended cycle.


How to think about it this week:


  • Versus USD, GBP can remain supported if the Fed minutes do not push back aggressively on 2026 cuts.
  • Versus EUR, GBP’s story is more nuanced, because relative UK growth and the BoE’s tolerance for cutting matter more than broad USD direction.



Practical levels: 1.34 remains the key “hold zone” for the current range, while 1.36 to 1.37 is the area that tends to invite profit-taking unless global risk appetite is very strong.



⚖️ CAD: Range-bound fundamentals, oil is not a strong tailwind



USDCAD around 1.37 reflects the tug-of-war between a softer USD backdrop and an oil market that is not providing a strong cyclical boost.With oil in the low 60s and growth narratives mixed, CAD tends to behave less like a pure commodity currency and more like a “rates plus risk sentiment” currency.


What could break the range:


  • A sustained oil move away from the low-60s regime.
  • A clear shift in US yield direction after the minutes.



Practical levels: 1.36 is a key pivot, while 1.38 is the familiar ceiling area that tends to appear when USD rebounds or oil sags.



🔺 CHF: Resilient haven, but not a one-way bet



USDCHF around 0.79 highlights how strong CHF remains in real and nominal terms.The franc typically gains on volatility spikes and geopolitical anxiety, but in calm “risk-on” conditions, it can drift weaker at the margin.


The near-term balance is:


  • CHF tends to outperform during sudden risk shocks.
  • CHF tends to stall when equities grind higher and yields stabilize.



Practical levels: 0.78 to 0.80 remains the broad equilibrium zone in USDCHF, with abrupt moves usually tied to risk events rather than domestic Swiss surprises.



🔺 JPY: Post-hike regime shift, but carry still matters



USDJPY near 156 keeps the yen in a familiar tension: Japan is normalizing, but the US still offers higher yields.In practice, that means:


  • JPY strength tends to show up in bursts, especially if risk sentiment wobbles or US yields fall.
  • JPY weakness reappears when carry demand returns and equities stabilize.



What to watch: verbal intervention risk rises as USDJPY pushes higher, and thin liquidity can magnify any policy-related headlines.


Practical levels: 155 is a useful pivot. Below that, markets tend to talk about normalization and narrowing differentials. Above the upper-150s, markets tend to talk more about intervention risk and unstable positioning.



🔺 AUD: Supported by soft USD and metals, capped by growth uncertainty



AUDUSD around 0.67 fits a world where the dollar is soft and industrial and precious metals are strong.The Aussie typically performs best when three conditions align:


  • USD is drifting lower,
  • China sentiment is stable to improving,
  • global equities are firm.



The risk is that any hawkish tilt in Fed minutes or a wobble in global growth proxies can quickly pull AUD back into a range trade.


Practical levels: 0.66 is the first support area; 0.68 to 0.69 is the next resistance zone that often requires a stronger risk-on impulse.



🔺 NZD: Yield support helps, but it is still high beta



NZDUSD around 0.58 reflects the same soft-USD backdrop, with the kiwi typically behaving like a high-beta cousin of AUD.NZD tends to benefit when volatility stays low and global growth is “okay,” but it can slip quickly if risk sentiment turns.


Practical levels: 0.575 is the first support area. 0.59 to 0.60 is the resistance band that usually needs either a clear USD leg lower or a strong improvement in broader risk appetite.



Cross-asset wrap-up



  • 🪙 Gold and metals: Gold is around 4,378, still extremely elevated after recently surging close to the 4,500 mark last week, which speaks to lower real-yield expectations and ongoing demand for hedges.Silver and copper remain high, reinforcing the “metals bid” theme that often coincides with a softer USD regime.
  • 🛢 Oil: WTI near 58 and Brent in the low 60s keep energy more disinflationary than inflationary. The key macro question is whether oil stays range-bound or breaks out of the current comfort zone and reintroduces inflation risk premia.
  • 📈 Stocks: Equities near record levels reflect confidence in a soft landing narrative, but the combination of high valuations and year-end liquidity means policy nuance can still cause sharper-than-usual moves.
  • ₿ Crypto: Bitcoin near 87,800 is behaving like a high-beta extension of the broader “lower real yields, constructive risk” theme, with short-term sensitivity to yields and sentiment rather than crypto-specific catalysts.



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This is general, educational market commentary on FX and macro assets. It is not investment advice and not a trading signal.