Market Sector Scanner: Markets Adjust to Fed Rate Cut as Attention Turns to BOJ and Key U.S. Data
The Federal Reserve cut interest rates again and signaled openness to further easing in 2026, lifting U.S. stocks and gold while pressuring the dollar. With BOJ rate hike expectations rising and a packed week of U.S. employment, inflation, and central bank meetings ahead, markets are preparing for increased volatility.
Attention last week centered on the Fed, which lowered interest rates again, taking them to 3.50%–3.75%. Powell’s message left the door open to more easing, lifting U.S. equities and gold while weighing on the dollar. In Japan, weak GDP figures contrasted with more optimistic BOJ comments, leading markets to price in a possible rate hike this week as the 10-year yield climbed toward 1.95%.
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Key Events Calendar for December 15 – 19
Forex Market
USD/JPY
Last Week Recap
USD/JPY tested higher at the start of the week but turned lower following the Federal Reserve meeting. The pair weakened after markets were surprised by Fed Chair Powell’s more dovish stance, as he appeared more open to further interest rate cuts in 2026 than previously expected.
Technical Picture
The 10-day moving average continues to slope slightly lower, suggesting upside progress may be limited in the short term. Price is also trading near the middle of the Bollinger Bands, pointing to range-bound conditions rather than a strong directional move.
Outlook This Week
With a busy week of U.S. economic data ahead and Japanese interest rates expected to rise at this week’s BOJ meeting, volatility is likely to increase. As the market attempts to anticipate the next major move, range trading conditions may offer multiple short-term trading opportunities.
GBP/JPY
Last Week Recap
GBP/JPY continued to move higher last week, driven by strength in the pound, despite weaker U.K. economic data. Markets have already priced in an interest rate cut at this week’s Bank of England meeting, limiting the negative impact of the data and allowing the pair to extend its advance.
Technical Picture
The upper Bollinger Band acted as resistance, capping gains in the short term. However, the 10-day moving average continues to trend higher, indicating that the broader uptrend remains intact.
Outlook This Week
A volatile week is expected, with several key data releases and the Bank of England meeting capable of driving sharp moves. For now, the bias remains to the upside, and buying pullbacks toward the 10-day moving average continues to look like the preferred approach.
EUR/USD
Last Week Recap
EUR/USD extended its recent advance after Fed Chair Powell signaled the possibility of interest rate cuts in 2026, depending on economic conditions. This encouraged speculative buying and pushed the pair to its highest level in around two months, as the U.S. dollar weakened.
Technical Picture
Price moved back toward the upper Bollinger Band, while the 10-day moving average continues to trend higher, indicating that the short-term uptrend remains intact. However, gains may slow as the market digests recent strength.
Outlook This Week
The ECB is expected to keep interest rates unchanged, placing the focus firmly on U.S. employment and retail sales data. These releases are likely to determine near-term direction and could trigger increased volatility in EUR/USD.
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Equities
U.S. Stock Market
Last Week Recap
The Nasdaq underperformed last week and failed to benefit meaningfully from the U.S. interest rate cut, especially compared with the Dow. Growing concerns over high valuations in AI-related stocks weighed on sentiment and led to a sharp sell-off toward the end of the week.
Technical Picture
The index closed below the 10-day moving average at the end of the week, signaling a potential end to the short-term uptrend that had been in place since late last month.
Outlook
Friday’s sell-off may serve as an early warning sign. With key U.S. economic data and the FOMC statement ahead, sentiment could shift further. For now, a more cautious approach is warranted, with traders likely to focus on selling rallies rather than buying dips.
Commodities
Gold
Last Week Recap
Gold volatility picked up last week as the metal reacted positively to the dovish tone following the U.S. interest rate cut. Renewed expectations for lower rates supported buying interest and pushed prices close to record highs.
Technical Picture
Gold remains in a strong and orderly uptrend, with the 10-day moving average continuing to lead prices higher. However, after the recent rapid advance, the upper Bollinger Band is acting as short-term resistance, suggesting some consolidation may occur.
Outlook This Week
The broader uptrend looks set to continue, with a test of record highs likely. That said, elevated volatility is expected, particularly around the release of U.S. non-farm payrolls and retail sales, which could drive sharp short-term swings.
Markets face a busy week with central banks in focus. The Bank of Japan is expected to raise rates, while the Bank of England is seen cutting and the ECB is likely to hold steady. Key U.S. releases, including employment, retail sales, and inflation, arrive midweek, while UK and euro area inflation data will shape expectations for policy moves into 2026.
