DBG Markets: Market Report for Dec 08, 2025

Central Bank Super Week: Fed Cut Confirmed, Divergence in Focus

The Fed‘s December rate cut is effectively “locked in” following Friday’s PCE Price Index release. Inflation came in stable and slightly below consensus, signaling moderating price pressures that support a Fed easing move.

Fed Cuts Dominates, Dollar Pressures

The “soft landing” narrative is now the dominant driver for the market. The cooling inflation data has cemented expectations for a Federal Reserve rate cut at the upcoming December meeting, with implied probabilities maintaining near ~90%.

Consequently, the US Dollar Index faces continued headwinds. With the “Fed pivot” effectively priced in, the yield advantage that supported the US Dollar is eroding.

USD Index, H4 Chart

The double-top pattern on the Dollar Index is confirmed, with the 99-level now acting as resistance. Downside momentum appears likely unless the Fed signals a more cautious approach.

Central Bank Super Week, Divergence in Plays

While the Fed is preparing to cut, other major central banks this week are likely to signal a pause in easing or a pivot toward the end of easing, creating a potentially powerful divergence opportunity for their respective currencies against the U.S. Dollar.

· Reserve Bank of Australia (RBA - Dec 9): Expected to HOLD. Unlike the Fed, the RBA is grappling with sticky domestic inflation and a tight labor market. Markets are pricing in a pause (keeping the cash rate at 3.60%), with a hawkish tone likely to persist. This divergence (Fed cut vs. RBA hold) is structurally bullish for AUD/USD.

· Bank of Canada (BoC - Dec 10): Expected to PAUSE/HOLD. After recent aggressive easing, strong Canadian employment data last week has shifted the consensus toward a pause to assess the impact of prior cuts. This removal of immediate dovish pressure is supporting the CAD.

· Swiss National Bank (SNB - Dec 11): Expected to HOLD. With inflation stabilizing near 0% and the Franc already strong, the SNB is likely to maintain its policy rate at 0%, reserving ammunition for future shocks.

The expected hold or hawkish stance from these major central banks creates a clear divergence with the Fed, reinforcing the narrative of a Fed easing while peers maintain firmness. This sets a strong directional backdrop for currency markets this week.

Currency Outlook: Trading the Dollar Weakness

1. AUD/USD: Hawkish Hold Booster

AUDUSD likely to remain the strongest setup this week, supported by the RBAs “hawkish hold” expectation and rising commodities and risk-sentiment.

AUD/USD, Daily Chart

Technically, the pair appears to be breaking out from a long period of consolidation and a converging triangle. With a decisive break above 0.6600, the pair is now eyeing tests of 0.6680 and 0.6700.

Outlook: A confirmed dovish Fed alongside the RBAs hawkish hold could propel AUD/USD beyond the key 0.6700 resistance level.

2. USDCAD: Bearish Pressure Building

As noted earlier, strong Canadian jobs data and a likely BoC pause, in contrast with the Feds cut, continue to exert downward pressure on USDCAD.

USDCAD, Daily Chart

The pairs double-top bearish reversal was confirmed after breaking the 1.4000 neckline support, and last Friday it also broke below the 1.3900 support. The pair is now trading within the 1.3900–1.3730 zone.

USDCAD, H4 Chart

Outlook: Any pullback or rebound in this range continues to provide short-the-rally opportunities. Unless there is a clear reversal in the Fed–BoC policy divergence, the bearish bias remains intact.

Gold: Coil Before the Break

Meanwhile, gold prices have entered a tight consolidation phase, hovering around the $4,200/oz psychological level.

The price action signals indecision, with buyers defending the floor but lacking the momentum for an immediate impulse. The market is waiting for a catalyst—likely the Fed decision—to trigger the next move.

XAU/USD, H2 Chart

The outlook remains neutral-bullish provided support holds. Traders are watching for a convincing daily close above $4,240. A break of this resistance would confirm the consolidation is over and open the door for a run toward fresh highs.

Bottom Line: Feds Pivot Dominates the Week

The overarching theme remains “Sell the dollar, buy the divergence.” The Feds move toward a rate-cut pivot, contrasted with peers such as the RBA and BoC holding firm, continues to create a fundamental backdrop favoring non-Dollar currencies and precious metals.

FOMCs SEP in Focus

However, as noted earlier, the December Fed cut alone does not guarantee a sharp decline in the Dollar. The key focus remains on the Feds Summary of Economic Projections (SEP).

Beyond the rate decision itself, markets will scrutinize how the Fed plans to pivot monetary policy into 2026, including its projections for the broader economic outlook. This is particularly important given the upcoming leadership changes, with Powells term concluding in May 2026, potentially ushering in significant policy shifts.