Currency markets remain largely frozen, with holiday conditions draining liquidity and suppressing volatility. Also, the macro calendar offers no immediate catalyst, leaving markets with little to trade beyond positioning adjustments. As a result, price action across majors and crosses shows little urgency, with most traders waiting for January to re-engage.
Focus now shifts to minutes from the December meeting of the Fed, expected to highlight a deeply divided committee. The three-way vote split captured sharp disagreements over whether easing should continue at all. Kansas City Fed President Jeffrey Schmid and Chicago Fed President Austan Goolsbee both voted to hold rates steady, reflecting concern that inflation risks still warrant caution. In contrast, Governor Stephen Miran again argued for a more aggressive 50bp cut.
The dot plot revealed similar fractures. Setting aside Miran’s ultra-dovish stance, policymakers were split almost evenly between those expecting one cut in 2025 and those projecting none at all, including a return to higher rates. Meanwhile, another cluster saw scope for two or more cuts in 2026. This dispersion underscores how difficult it will be to push policy expectations decisively in either direction. For now, the median one-cut outlook remains more a reflection of compromise than consensus.
Markets continue to price around a 50% chance of a March cut, but that view rests on incomplete information. Three additional rounds of jobs and inflation data will arrive before that meeting, leaving ample room for repricing.
Beyond data, Fed leadership uncertainty is emerging as a longer-term factor. US President Donald Trump said he plans to name his preferred successor to Chair Jerome Powell in January. A choice between the more dovish Kevin Hassett and the more experienced, market-friendly Kevin Warsh would carry meaningful implications for rates expectations in 2026.
For now, FX performance reflects caution rather than conviction, with Kiwi lagging the week, Yen leading, and nearly all major pairs locked firmly within last week’s ranges.
Swiss KOF barometer rises to 101.7, manufacturing outlook strengthens
Swiss KOF Economic Barometer rose from 101.7 to 103.4 in December, beating expectations of 101.4 and signaling improving momentum heading into early 2026. According to KOF Swiss Economic Institute, the outlook for the Swiss economy at the turn of the year is now above its long-term average.
The improvement is being driven primarily by the production side of the economy. Indicator bundles linked to output showed broad-based gains, with manufacturing standing out as a particular bright spot.
However, the picture was uneven. On the demand side, indicators tied to private consumption and foreign demand remain under pressure, highlighting lingering caution among households and external headwinds.
USD/JPY Daily Outlook
Daily Pivots: (S1) 155.78; (P) 156.18; (R1) 156.44; More…
USD/JPY is extending sideway consolidations below 157.88 and intraday bias stays neutral. With 154.33 support intact, outlook remains bullish. On the upside, firm break of 158.85 key structural resistance will be an important medium term bullish sign. Next target will be 161.94 high. However, decisive break of 154.38 will turn bias to the downside for deeper correction.
In the bigger picture, corrective pattern from 161.94 (2024 high) could have completed with three waves at 139.87. Larger up trend from 102.58 (2021 low) could be ready to resume through 161.94 high. Decisive break of 158.85 structural resistance will solidify this bullish case and target 161.94 for confirmation. On the downside, break of 150.90 resistance turned support will dampen this bullish view and extend the corrective range pattern with another falling leg.
