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🧠Soft US inflation, BoJ hike jolt FX landscape

Published: 12/19/2025

Overall Market Sentiment:


Risk tone is cautiously positive, but positioning is still jumpy after a dense central-bank week. The dollar is attempting a small bounce from the lows, while rates markets continue to lean toward easier policy into 2026. Gold remains well supported and oil stays heavy near the lower end of the recent range, keeping the disinflation narrative alive.


Geopolitics:

Oil continues to trade more on the surplus outlook than on disruption risk. The market is still balancing progress and setbacks in Russia–Ukraine diplomacy with periodic sanctions and enforcement headlines, but the price response remains muted at current levels. For FX, sub-60s crude is generally a headwind for petro-currencies and a tailwind for the global disinflation story, which tends to support lower long-end yields.





Currency outlooks



🔻 USD: Softer inflation narrative keeps trend fragile

The dollar is firmer on the day but still sits near the bottom of its recent range. Reportedly, the latest CPI print was materially softer than expected, reinforcing the idea that disinflation is reasserting itself even after the recent data disruptions. With the Fed already having eased this cycle and markets still pricing additional cuts through 2026, the dollar’s carry advantage continues to look less dominant than earlier in the year.

Near-term bias: still slightly softer unless US data re-accelerate or risk sentiment deteriorates sharply.


🔺 EUR: Supported by a patient ECB and relative rate maths

EURUSD remains underpinned by the perception that euro-area policy is steadier than the US path. The ECB held rates, keeping the deposit rate at 2.00% and the main refinancing rate at 2.15%, reinforcing the “patient pause” framing.

Near-term bias: modest EUR support while the US disinflation/easing narrative holds.


🔻 GBP: BoE cut reopens easing-cycle focus

Sterling remains sensitive to the idea that the BoE is now moving into an easing phase. The BoE cut Bank Rate to 3.75%, which puts more weight on the path guidance and the pace of follow-on cuts rather than the first move itself.

Near-term bias: mildly negative on crosses if UK data stay soft and the BoE signals more to come.


⚖️ CAD: BoC pause helps, oil doesn’t

CAD has a stabilising anchor from a BoC that is signalling pause-mode, but oil’s weakness limits upside torque. With crude still priced like a surplus market, CAD tends to trade more like a “rates and growth” currency than a pure oil proxy.

Near-term bias: neutral; direction mostly hinges on the USD leg and risk tone.


🔻 CHF: Strong starting point limits further gains

With inflation very low and policy already at the floor, CHF strength has less “fundamental room” to extend unless risk aversion spikes. In calmer tape, CHF often mean-reverts lower versus EUR more easily than it trends stronger.

Near-term bias: mild CHF softness unless markets tip into a sharper risk-off.


⚖️ JPY: BoJ shift is structurally supportive, even if the day-to-day is messy

If the BoJ has indeed delivered the hike you reference, the bigger takeaway is the direction of travel: Japan moving away from emergency settings narrows the policy gap over time, but the near-term yen reaction can still be two-sided if guidance is cautious and global risk remains constructive.

Near-term bias: mixed day-to-day; structurally more yen-supportive than earlier in the year.


⚖️ AUD: Hawkish tilt vs cyclical headwinds

AUD remains caught between relatively firm rate expectations at home and an external backdrop that’s sensitive to China and global risk swings.

Near-term bias: range-bound; tends to follow broad risk appetite and the USD leg.


⚖️ NZD: Policy floor helps, but it still trades like high beta

NZD’s “hawkish cut / end-of-easing” framing can offer a yield floor, but the currency still behaves like a risk-sensitive high beta in choppy macro tape.

Near-term bias: neutral; global risk and USD direction dominate.





Cross-asset wrap



  • 🪙 Gold: Still acting like a macro hedge on softer inflation and policy uncertainty.
  • 🛢 Oil: Heavy tone reinforces the disinflation narrative; limited support for petro-FX.
  • 📈 Stocks: The cash index level can diverge from futures; if you cite levels, label whether it’s futures or spot. (S&P 500 E-mini Dec ’25 was ~6,772 on Dec 18.)
  • ₿ Crypto: Continues to trade as high beta to liquidity, real yields, and risk sentiment.



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