Fed Minutes in Focus as USD Stabilizes, Gold Slips from Record Highs

Markets turn cautious as investors await the Feds December meeting minutes. The US Dollar stabilizes near 98.10, gold drops sharply from record highs, while GBP/USD, EUR/USD, and USD/JPY react to central bank signals.

Markets Brace for Fed Minutes as Dollar Holds Firm

Global financial markets are trading cautiously at the start of the week as investors shift their focus to the release of the Federal Reserve‘s December FOMC meeting minutes, due on Tuesday. The minutes are expected to provide critical insight into policymakers’ thinking following the 25-basis-point interest rate cut and guidance on the outlook for monetary policy in 2026.

The US Dollar (USD) remains broadly stable, while gold prices retreat sharply from record highs amid profit-taking and thin year-end liquidity.

US Dollar Index Steady Ahead of FOMC Minutes

The US Dollar Index (DXY) is hovering near the 98.10 level, showing little change on Monday as traders await fresh policy signals from the Federal Reserve. At its December meeting, the Fed lowered its benchmark interest rate by 25 basis points, bringing the target range to 3.50%–3.75%.

While the Fed signaled the possibility of another rate cut in 2026, markets are increasingly convinced that policymakers will remain on hold in the near term. According to the CME FedWatch Tool, the probability of rates being left unchanged at the January meeting remains high, while expectations for an immediate follow-up cut continue to fade.

The upcoming FOMC Minutes will be closely watched for clues on inflation risks, labor market conditions, and the degree of consensus among policymakers.

Gold Prices Slide on Profit-Taking and Thin Liquidity

Gold (XAU/USD) dropped sharply on Monday, falling around 4.50% to trade near $4,330, after hitting an all-time high late last week. The decline reflects strong profit-taking activity following a powerful multi-month rally.

Thin liquidity conditions ahead of the year-end holiday period have amplified the corrective move, increasing volatility in precious metals. While long-term fundamentals such as easing monetary policy and geopolitical uncertainty remain supportive, gold appears vulnerable to further consolidation in the near term.

GBP/USD Steady as UK Inflation Limits BoE Flexibility

The GBP/USD pair is trading near the 1.3490 region, with investors remaining cautious despite ongoing speculation about the Bank of Englands (BoE) policy direction.

Inflation in the United Kingdom remains well above the BoE‘s 2% target, constraining the central bank’s ability to cut rates aggressively. Although price pressures have eased, annual inflation slowed to 3.2% in November, down from a peak of 3.8% recorded between July and September. This gradual slowdown offers limited relief but keeps monetary policy restrictive.

EUR/USD Rebounds as Geopolitical Risks Support the Dollar

EUR/USD is trading near 1.1750, recovering modestly and snapping a three-day losing streak. The pairs movement comes as the US Dollar strengthens on renewed geopolitical concerns and shifting investor sentiment.

Markets are assessing the broader implications of the Trump–Zelenskyy meeting. At the same time, rising tensions between China and Taiwan continue to support safe-haven demand for the US Dollar, limiting the euros upside potential.

USD/JPY Near 156.20 After BoJ Minutes

The USD/JPY pair is trading near 156.20 following the release of the Bank of Japan (BoJ) Monetary Policy Meeting minutes during Mondays Asian session.

BoJ policymakers reiterated that interest rates in Japan remain far from neutral, highlighting the central banks cautious approach to normalization. However, several members warned that tightening too quickly could create unwanted stress for the economy and financial markets, reinforcing expectations that policy changes will remain gradual and data-dependent.

Market Outlook: Fed Guidance Remains the Key Driver

With liquidity thinning and major central banks signaling caution, the release of the Feds December minutes is likely to remain the primary catalyst for near-term market direction. Any hints of internal disagreement or shifts in inflation concerns could trigger renewed volatility across currencies and commodities.