DBG Markets: Market Report for Dec 31, 2025

FOMC‘s “Cautious Pivot” and 2026 Outlook; “Last Call” for US Dollar, Gold, Nasdaq100

Yesterday’s release of the December FOMC minutes provided the final piece of the 2025 macro puzzle. Despite the Federal Reserves third consecutive rate cut earlier this month, the minutes revealed a committee growing increasingly cautious and divided as it approaches 2026.

FOMC Minutes: From “Aggressive” to “Assessment”

The December 9–10 meeting minutes highlighted a significant shift in tone from Jerome Powell and his colleagues.

The key takeaway was the shift from discussions of “additional adjustments” to focusing on the “extent and timing” of future cuts. Several participants suggested it would be appropriate to hold rates steady for a period to assess the lagged effects on labor markets and inflation.

· Near Neutral Rate: Chair Powell noted that the current fed funds rate (3.50%–3.75%) is near the estimated “neutral range,” indicating the Fed is no longer in a hurry to cut and is moving toward a data-dependent, wait-and-see approach.

· Committee Divisions: Officials remain split between concerns over potential labor market deterioration and fears that inflation remains sticky, signaling that the final phase of disinflation is not yet complete.

· Rare Caution on Equities: Policymakers also flagged rapid equity market gains, warning that looser financial conditions could undermine progress on inflation.

US Dollar: Weak Year, Stabilizing Outlook

Following the minutes, the US Dollar Index (DXY) initially held steady before edging slightly higher to around 98.00. Despite this stabilization, the dollar is ending 2025 with its worst annual performance since 2017, down roughly 9.6% for the year.

The “hawkish hold” tone offered the greenback a modest reprieve. With no immediate January cut priced in (82% market probability of a hold), the dollars yield advantage remains somewhat protected in the short term.

USD Index, H4 Chart

Technically, the dollar has found support in the 97.5–97.8 range, signaling stabilization. For a continuation of the bearish move, a clear break below 98.00 would be needed.

Outlook: With the minutes hinting at a hawkish stance, downside may be capped. Holding above 97.8 could pave the way for a bullish reversal, particularly as the “no cut” narrative begins to take hold in early 2026.

US Stock Market: Santa Rally Loses Momentum

Wall Street reacted with a “sell-on-news” posture, as major indexes recorded their third consecutive minor decline, signaling the Santa Rally may have reached a ceiling. The S&P 500 slipped 0.14% to close below 6,900, while the Nasdaq 100 fell 0.25%.

Investors interpreted the Feds lack of urgency as a signal that the “easy money” phase of the pivot is over. Elevated valuations (S&P 500 up 17% YTD) prompted year-end profit-taking and portfolio rebalancing.

UT100, H4 Chart

The Nasdaq 100 remains capped within a converging range, indicating a temporary loss of momentum. However, thin liquidity could make this assessment less precise.

With the FOMCs hawkish tone, tech-heavy indices like the Nasdaq remain sensitive. As liquidity returns in 2026, the Nasdaq 100 could face further downside pressure.

Outlook: The 25,000 psychological level remains key. A sustained breach could open the door for more downside.

Gold Outlook: Stabilizing After the Shakeout

Following Mondays dramatic 4.5% decline triggered by CME margin hikes, gold stabilized on Tuesday and Wednesday, trading near $4,360–$4,380.

While the structural bullish trend remains intact, short-term technicals suggest a possible corrective phase.

XAUUSD, H4 Chart

Technically, below 4400 downside move as this is the previous record high level that now failed to hold as support, and psychological level breakout. We could see gold have another pullback toward the 4300 – 4260, coincide with the 4-hour chart 200MA.

On the upside, If Gold can reclaim the $4,400 level today, it sets a strong bullish foundation for the January opening.

Bottom Line

FOMC has delivered a clear “reality check” to the markets, tempering the Santa Rally in US equities and precious metals while stabilizing the US Dollar. As we move toward 2026, the focus shifts from “how many cuts” to “how economic data and market developments will shape the next move.”

With today being the last trading day of the year, markets are operating in thin liquidity. Looking ahead to the “first trade” of 2026, heres what to monitor:

· US Dollar: Stabilizing around 97.80–98.00. Holding this range could signal a potential bullish reversal in Q1 as expectations of a January cut fade.

· Nasdaq 100: Showing signs of momentum loss. Watch the 25,000 psychological floor; year-end institutional rebalancing may trigger further profit-taking in overextended tech names.

· Gold: Correcting after record highs. The key “buy zone” is $4,300–$4,260, aligned with the 4-hour 200MA. Reclaiming $4,400 is necessary to restore bullish bias.

Now, caution is warranted given thin liquidity. Stay alert and have a happy New Year.