Markets rallied on Wednesday as Trump’s $500B AI initiative pushed the S&P 500 fresh record highs, while other traders positioned for the upcoming central bank events.

How did the major assets react to yesterday’s headlines?

We’re breaking down the info you need to know:

Headlines:

• New Zealand Quarterly CPI growth rate for Q4 2024: 0.5% q/q as expected vs. 0.6% q/q previous
• Australia Westpac–Melbourne Institute Leading Index for December: 0.0% m/m (0.1% previous)
• Trump said his administration would “probably” stop buying oil from Venezuela
• Trump announced Stargate, a $500 billion private-sector AI infrastructure investment plan involving Oracle, Open AI and Softbank
• U.K. public sector net borrowing for December: £17.8B (£14.2B forecast, £11.8B previous)
• ECB officials show support for interest rate cuts
  • ECB President Lagarde is “not overly concerned” about the risk of inflation from abroad and will continue to cut interest rates at a gradual pace
  • Klaas Knot is “pretty comfortable” with market expectations of rate cuts in the next two meetings
  • Bank of Greece Governor Yannis Stournaras sees interest rates closer to 2% by year-end
  • Francois Villeroy de Galhau expects the “disinflation process to go on” despite threats of additional tariffs from the U.S.
  • Finnish central bank chief Olli Rehn is confident inflation will stabilise at target as predicted, allowing easier monetary policies
• Canada Industrial Product Price Index for December: 0.2% m/m (0.5% forecast, 0.6% previous); Raw Materials Price Index accelerated from -0.1% m/m to 1.3% m/m (0.4% forecast)
• U.S. CB leading index for December: -0.1% m/m (-0.1% forecast, 0.4% previous)

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

The major assets leaned into a solid risk-on mood today, driven by tech hype, though tariff worries didn’t completely fade.

The S&P 500 hit a fresh intraday record of 6,100 before settling at 6,086.37. Tech stocks led the charge after Trump unveiled a massive $500B private-sector AI infrastructure plan and Netflix crushed expectations with its earnings.

The US 10-year Treasury yields rose to 4.61%, likely over reduced safe-haven demand amid the tech rally, dovish signals from ECB officials, and positioning ahead of the Bank of Japan’s (BOJ) expected rate hike.

Gold climbed to $2,767.60, marking a three-month high. It got a boost from safe-haven buying after Trump’s tariff threats on EU and Chinese imports, though there was also physical demand ahead of the Chinese New Year. However, USD strength kept gains in check.

WTI crude extended its losing streak to five sessions, ending at $75.40. Markets are still digesting Trump’s remarks about halting Venezuelan oil imports while grappling with concerns over trade war effects on demand. Meanwhile, bitcoin dropped to $103,493, reversing Monday’s Trump meme coin buzz as selling picked up steam after breaking below the $105,000 support level.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

The dollar saw some wild swings as central bank speculations and Trump’s trade comments kept the FX markets on edge. USD’s early gains on the back of Trump’s AI announcement didn’t last long, with the focus quickly shifting to monetary policy talks.

The dollar dropped some time in the European session open, tracking the disappointing UK public sector borrowing data that reinforced the broader narrative of coordinated global central bank easing. The selling picked up speed as multiple ECB officials, led by Knot, backed near-term rate cuts. Markets are now pricing in 46bps of easing over two meetings, with growing expectations for BOE rate cuts by mid-year.

The yen took a hit as traders geared up for Friday’s BOJ meeting, with 92% expecting a rate hike to 0.50%. Meanwhile, NZD struggled after Q4 CPI came in at 2.2% y/y, adding fuel to the case for more RBNZ easing.

By the end of the session, the dollar found some footing as traders weighed Trump’s trade rhetoric against shifting expectations for central bank moves.

Upcoming Potential Catalysts on the Economic Calendar:

• U.K. CBI industrial order expectations at 11:00 am GMT
• Canada retail sales data at 1:30 pm GMT
• U.S. weekly initial jobless claims at 1:30 pm GMT
• Euro Area consumer confidence at 3:00 pm GMT
• U.S. President Trump to give a speech at the World Economic Forum via satellite at 4:00 pm GMT
• U.S. crude oil inventories at 4:00 pm GMT
• Australia flash manufacturing and services PMIs at 10:00 pm GMT
• Japan national core CPI at 11:30 pm GMT
• U.K. GfK consumer confidence at 12:01 am GMT (Jan 24)
• Japan flash manufacturing PMI at 12:30 am GMT (Jan 24)

Key market drivers today include Canadian retail sales and U.S. jobless claims, a critical gauge of labor market health amidst shifting Fed policy speculations.

Oil traders will need to position ahead of both crude inventories and President Trump’s speech in the afternoon, as these twin events at 4:00 pm GMT could spark risk-related volatility.

In late U.S./early Asian trading, attention will turn to Japan’s national core CPI, followed by manufacturing PMI releases from Australia and Japan as could set the tone for Friday’s trading.

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