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• We expect the ECB to leave the deposit rate unchanged at 2.0% on Thursday 18 December in line with consensus and market pricing.
• • Data has come in stronger than expected by ECB staff, so we expect an upward revision to the growth forecasts amid inflation little changed.
• • We see the ECB holding rates steady at 2.0% in both 2026 and 2027 due to inflation undershooting in contrast to market expectations of 37 bp worth of hikes.
• We expect a muted market reaction as Lagarde will likely signal ECB being on hold for a while, reiterating the ‘good place’ assessment.

We expect the ECB to leave the deposit rate unchanged at 2.0% at the meeting on December 18, in line with consensus and market pricing. Since the last meeting both inflation, growth, and wages have come in stronger than expected by the ECB. The euro area economy grew 0.3% q/q in Q3 compared to 0.0% q/q projected (see chart 1), core inflation is set to average 2.4% y/y in Q4 compared to the 2.2% projection, and wage growth rose to 4.0% y/y in Q3 in contrast to an expected decline to 3.2% by the ECB staff. These positive data surprises combined with the decent PMIs in both October and November support the “good place” assessment of the ECB, thereby reducing the chances of further rate cuts.

The meeting will also unveil new staff projections, including 2028 for the first time. We expect growth forecasts to rise to 1.4% y/y for 2025 (from 1.2%) and 1.1% y/y for 2026 (from 1.0%), with 1.2% for both 2027 and 2028. Inflation is likely to remain largely unchanged, except for a revision to 1.7% y/y for 2027 (from 1.8%) due to the delayed ETS2, with 2028 projected at 2.0% y/y (see chart 2). While growth is likely revised up headline and core inflation is at the same projected below target in both 2026 and 2027, which we believe limits the case for rate hikes by the ECB. We therefore see the ECB holding rates steady at 2.0% in both 2026 and 2027.

There is a growing disagreement within the ECB on the rate outlook where Schnabel sees inflation risks tilted to the upside and thereby is “comfortable” with market pricing that the next move will be a hike. This comment combined with stronger than expected wage growth has fueled a significant reprising of the outlook for the ECB, with expectations for cuts next year completely erased and markets now pricing 37bp worth of hikes before 2027 year-end (see chart 3). A push-back against Schnabel’s comments by Villeroy saying he sees “no reason to raise ECB rates soon” and Simkus expecting 2% “at further meetings” has done little to alleviate the pressure in the market.

While we have long had a paying bias in the short end of the euro swap curve, we cautiously believe that the magnitude of recent moves is overdone. Yet, we highlight the rise in real rates is due to the expectation of stronger growth and not lower inflation, which means that a pushback from the ECB is less pressing. On the back of this, we believe that Lagarde will signal that they will be on hold for a while, reiterating that the ECB is in a good place, data-dependent, and not pre-committing to a particular rate path. We therefore expect a limited market reaction.

The Dollar Index extends steep-post-Fed fall into second straight day, hitting the lowest in six weeks on Thursday.

Fed’s 25 basis points rate cut and relatively dovish Chair Powell’s comments deflated the dollar across the board, with 0.85% drop in past 24 hours, contributing to broader weakness and keeping the index on track for the third consecutive weekly loss.

Fresh acceleration lower penetrated into ascending and thickening daily Ichimoku cloud and broke below Fibo 38.2% of 95.82/100.32 rally, bringing in focus key supports at 98.07/01 (50% retracement/cloud base.

Violation of 98.00 zone would generate fresh bearish signal for extension towards 97.54 (Fibo 61.8%) and 97.10 (Oct 1 higher low).

Meanwhile, increased headwinds at cloud base should be anticipated, with consolidation / limited correction to be ideally capped by broken Fibo 38.2% (98.60) and limited upticks to stall under cloud top (98.87) to keep bears in play and offer better levels to re-enter bearish market.

Firmly bearish daily studies support scenario.

Res: 98.60; 98.87; 99.00; 99.30.
Sup: 98.01; 97.76; 97.54; 97.10.

Gold prices have fallen from a post FOMC high of $4250/oz to lows around $4206/oz in early US trade. Market participants are assessing the Federal Reserve’s (Fed) monetary policy outlook after the latest interest rate cut.

Mixed FOMC Keeps Markets Guessing

On Wednesday, the Federal Reserve (Fed) carried out another interest rate cut of 25 bps, which put the new target range for the policy rate at 3.50%-3.75%, exactly as expected.

The decision, however, was not unanimous, passing with a 9-3 vote; one member wanted a larger cut of 50 bps, while two others wanted to keep the rates unchanged. Despite the cut, the price of gold did not rise much because the Fed did not offer a strong or clear outlook for future rate decisions.

As discussed in the FOMC Preview article this week, the dot plot and forward guidance were always likely to hold more importance at the meeting. This certainly proved true looking at the reaction of the precious metal since.

Fed Chair Jerome Powell repeated that the central bank is "well-positioned to wait and see how the economy evolves." These comments confirmed that the Fed is taking a "wait-and-see" approach after cutting rates three times this year (a total of 75 basis points).

Nevertheless, since policymakers still disagree on whether more rate cuts will be needed in 2026, market participants are unsure about the future direction of policy, which is keeping the price of gold stuck in the same trading range it has been in for over a week.

Market expectations however, have not changed much. Looking at the latest data from LSEG and markets are still pricing in around 57 bps of rate cuts through December 2026.

Implied Rates for Federal Reserve

Source: LSEG

Ahead of the meeting markets were pricing in around 76 bps of cuts (including yesterday). This shows that there hasn't been much change and this could explain Gold's malaise today.

FOMC Impact on the US Dollar and Outlook

The FOMC meeting yesterday was likely the most significant event that could positively impact the markets before the end of the year.

Since that event has now passed, the US dollar might start to experience its typical seasonal weakness as the year concludes. This could cause the US Dollar Index (DXY) to gradually fall toward the 98.00 level and potentially lower.

Looking ahead at events that could spark some volatility in the US Dollar in the days and weeks before the January Fed meeting.

There is a large amount of new economic data scheduled for release. However, Fed Chair Powell cautioned that this data might be misleading or inaccurate because of technical problems caused by the government shutdown.

Market participants are now turning their attention to the upcoming November jobs report, which is due next Tuesday. Additionally, there are several other rate meetings scheduled by major central banks over the next ten days.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Geopolitical Risk

Another factor to keep in mind heading into the year-end is the ongoing US-Venezuela dynamic. Any escalations or fall of government could add to safe haven demand and thus aid Gold in its bullish rally.

This may prove to be a saving grace for those eyeing $4300/oz handle for the precious metal. Without such a catalyst, i am not sure Gold can sustain its current bullish momentum in the last three weeks of December. This could leave the precious metal in for a correction ahead of 2026.

Technical Outlook - Gold (XAU/USD)

Looking at the four-hour chart below, the technical picture is decent for bullish continuation.

The key is the most recent high near the key 4250 handle which has served as resistance before as well on December 5.

A four-hour candle close above this level will be needed if bulls are to seize the initiative.

The period-14 RSI remains above 50 which is a sign of bullish momentum.

A move above 4250 brings 4259 and 4275 into focus.

A pullback from here brings the 50-day MA into focus at 4209 before the 4190 and 100-day MA at 4166 into focus.

Gold (XAU/USD) Four-Hour Chart, December 11, 2025

Source: TradingView (click to enlarge)

The US Dollar took a hit following yesterday's Fed decision, driven by mechanical flows typical after a rate cut.

Given the rally to new cycle highs over the past two months, current outflows aren't surprising—benefiting not just the majors, but especially exotic currencies.

Prior to the meeting, the Dollar had held relatively strong despite a dovish Fed repricing, ranging near its recent highs supported by elevated yields following Williams' comments.

However, despite the Dot Plot projecting only ~2 cuts for 2026 and Chair Powell suggesting the US is entering the "high end of the neutral rate range," the Dollar is sliding back to mid-October levels.

US Dollar Performance against Majors since the beginning of the Week – Source: TradingView

The cut itself was neither explicitly dovish nor hawkish; communications were solid.

If you missed Powell's speech (great recap right here), he placed extra emphasis on inflation. Consequently, as noted yesterday, future inflation data may carry even more weight than the NFP (which is projected to ease gradually over the next year).

The Fed has been driving blind with limited inflation reports since September due to the government shutdown, making upcoming prints critical for markets.

November NFP is scheduled for December 16, followed by CPI on Dec 18.

Let's dive into the Dollar Index (DXY) charts to spot how much deeper the Dollar can correct given this shift in fundamentals.

Dollar Index (DXY) Multi-timeframe Outlook

Daily Chart

Dollar Index (DXY) Daily Chart, December 11, 2025 – Source: TradingView

The Dollar is falling harshly after trying to hold its elevated range, nothing too surprising here – Yesterday's move was based from its 200-Day Moving Average acting as resistance and now breaking below its key Pivot Area rendering the DXY bearish short-term.

Looking back even further, the US Dollar is holding a long-term rangebound trajectory since mid-2025 between 97.00 to 100.00 – Makes sense when looking at its first-half harsh fall (-12% since January).

On the bigger picture, cuts have been expected for a long-time in the US so yesterday did not surprise Macro traders too much.

Still, with the Daily RSI going towards the bearish territory and momentum getting strong, the fall should continue at least towards the 98.00 Support area, allowing other majors to appreciate.

4H Chart and Technical Levels

Dollar Index (DXY) 4H Chart, December 11, 2025 – Source: TradingView

Keep a close eye on the Dollar Bear Channel in Intraday timeframes which should guide short-term flows.

Levels to place on your DXY charts:

Resistance Levels

• 100.00 to 100.50 Main resistance zone
• 100.376 November highs
• 99.80 mini-resistance
• 98.50 to 98.80 Pivot Zone

Support Levels

• 98.25 Lower bound of 4H Channel
• 98.00 Key support (+/- 100 pips) Next support
• 97.40 to 97.80 August Range Support
• 2025 Lows 96.40 to 96.80 Support

1H Chart

Dollar Index (DXY) 1H Chart, December 11, 2025 – Source: TradingView

Watch to the reactions as the Dollar reaches the lower bound of the Channel between 98.20 to 98.30 and spot how other assets correlate.

There has been profit-taking flows overnight in Equities so keep an eye on this and flows in other FX currencies throughout the session.

Safe Trades!

Markets

Yesterday’s Fed decision left markets with some kind of ‘glass half full, glass halve empty’ dichotomy. As such, the Fed message should be supportive for overall market/risk sentiment. Some optimists even might have discerned some Goldilocks features from a scenario that includes higher growth, easing inflationary pressures and the Fed Chair elaborating on solid productivity growth. The Fed engaging in ‘technical measures’ to guarantee ample liquidity also should give comfort. Still, this good news occurs in an environment where most Fed governors feel their room of maneuver restrained by upside inflation risks and at the same time developing labour market weakness. With policy rate entering ‘within the range of plausible neutral estimates’ any further easing can’t occur on some kind of ‘autopilot’. The end of the cycle is coming close and further steps will have to finely checked against incoming data and the perceived risk balance. Short-term US money/interest rate markets perfectly capture this balanced set-up. Money markets continue to see the 3% neutral area as the bottom of current cycle. Highly negative growth/labour market news is needed for a break below that level. The 2-y yield in the run-up to yesterday’s Fed meeting moved to the top of the 3.40/3.65% trading range. Despite the Fed Chair (and the dots) signaling a high bar for further easing, a topside break was still was rejected. At 3.51% the 2-y yield now again trades perfectly in the middle of that range, awaiting upcoming data evidence to help markets make up there mind on the pace at which the Fed might return to that 3% neutral level. In this respect, jobless claims jumped to 236k from an extremely low 192k the previous week. The biggest move since the start of the pandemic is probably affected by statistical noise due to Thanksgiving. Whatever, US yields for now easily maintain/extend yesterday’s decline with changes between -5 bps (5-y) and -3.5 bps (30-y & 2-y). EMU yields are taking a breather after the recent sharp rise. German yields are changing less than 2 bp across the curve. European equity markets initially failed to join yesterday’s positive reaction in the US post-Fed. Disappointing Oracle sales and high capital spending rekindled investor concerns on AI-related valuations. However, some dip-buying soon kicked in. The Eurostoxx 50 gains about 0.6% and trades less than 1.5% from its al time record. The S&P 500 opens 0.35% in red, but futures are well of the intraday lows.

Most significant follow-through price action post-Fed occurs in the dollar. After a setback yesterday, DXY (at 98.33) dropped below first minor support at 98.76/98.57 (recent low/Oct 28 low). EUR/USD in a similar move finally captures the 1.17 big figure. USD/JPY drops to 155.15 area (from 156), in a pure dollar move. EUR/JPY (182.15) holds near the all-time top. The Aussie dollar this time lags the rally in non-USD currencies, after a strong RBA driven rally of late and weaker than expected labour market data published this morning.'

News & Views

The Hungarian forint trades volatile today with Hungarian bonds dropping (bear steepening up to +7 bps at 10-yr) on reports that PM Orban is playing with the idea of becoming President. Hungarian parliament yesterday approved a law making it harder for lawmakers to remove a president from the post in the future. In the run-up to pivotal April parliamentary elections, which Fidesz risks losing for the first time since returning to power in 2010, parliament could exploit its supermajority to turn the current ceremonial presidential role into something way more powerful. The current presidential term only expires in 2029 but president Sulyok is a known Fidesz ally.

The Swiss National Bank left its policy rate unchanged at 0%. The expansionary policy helps ensure a slow rise in inflation in coming quarters. The central bank’s conditional (stable rates over policy horizon) inflation forecast puts average annual inflation at 0.2% for this year, 0.3% for next and 0.6% for 2027; slightly lower compared with September (0.5% for 2026 & 0.7% for 2027) and within the 0%-2% target zone. Swiss GDP contracted in the third quarter, mainly because of the pharmaceuticals industry, which continued to see countermoves following an extremely strong Q1 in anticipation of possible US tariffs. The economic outlook for has improved slightly due to the lower US tariffs and somewhat better developments globally. For 2025 as a whole, SNB expects GDP growth of just under 1.5%. For 2026, they expect growth of around 1%. Unemployment is likely to continue to rise somewhat. As usual, the SNB mentions a willingness to be active in the FX market as necessary. The Swiss franc slightly outperforms today with EUR/CHF trading at 0.9330 from a start at 0.9360.

Daily Pivots: (S1) 1.1646; (P) 1.1673; (R1) 1.1724; More….

Intraday bias in EUR/USD remains on the upside at this point. The break of 1.1747 resistance should confirm that fall form 1.1917 has completed as a correction to 1.1467. Further rally should be seen to retest 1.1917 high. For now, risk will stay on the upside as long as 1.1614 support holds, in case of retreat.

In the bigger picture, as long as 55 W EMA (now at 1.1346) holds, up trend from 0.9534 (2022 low) is still in favor to continue. Decisive break of 1.2 key psychological level will carry larger bullish implication. However, sustained trading below 55 W EMA will argue that rise from 0.9534 has completed as a three wave corrective bounce, and keep long term outlook bearish.

Daily Pivots: (S1) 1.3323; (P) 1.3356; (R1) 1.3416; More...

GBP/USD's rise from 1.3008 resumed by breaking through 1.3384 and intraday bias is back on the upside. As noted before, fall from 1.3787 should have completed as a three-wave correction to 1.3008. Firm break of 1.3470 resistance will pave the way to retest 1.3787 high. Further rally is expected as long as 1.3286 support holds, in case of retreat.

In the bigger picture, current development suggests that fall from 1.3787 is merely a corrective move, and larger rise from 1.0351 (2022 low) is still in progress. Firm break of 1.3787 will target 1.4248 (2021 high) key structural resistance. This will remain the favored case as long as target 38.2% retracement of 1.0351 to 1.3787 at 1.2474 holds, in case of another fall.

Daily Pivots: (S1) 155.58; (P) 156.26; (R1) 156.72; More...

Intraday bias in USD/JPY stays neutral first. Corrective pattern from 157.88 could extend lower. Break of 154.33 will target 55 D EMA (now at 153.51). On the upside, above 156.94 will bring retest of 157.88. Firm break there will resume whole rally from 139.87 to 158.85 key structural resistance

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.

Daily Pivots: (S1) 0.7970; (P) 0.8022; (R1) 0.8053; More…

USD/CHF's fall from 0.8101 resumes through 0.7990 and intraday bias is back on the downside. Further fall should be seen to 0.7877 support. Overall, price actions from 0.7828 are seen as a corrective pattern and might extend. Nevertheless, firm break of 0.7877 will argue that larger down trend might be ready to resume through 0.7828 low.

In the bigger picture, outlook will stay bearish as long as 0.8332 support turned resistance holds (2023 low). Long term down trend from 1.0342 (2017 high) is still in progress. Next target is 100% projection of 1.0146 (2022 high) to 0.8332 from 0.9200 at 0.7382.