US stocks charge toward all time highs after the latest 25 basis point cut, and the market chatter is now dominated by one thing… the Santa rally is warming up and traders are piling in
The USD slides for a third straight week while the yen stiffens ahead of a potential BOJ hike, setting the stage for explosive FX moves into the holiday season
A monster week ahead with NFP, US inflation, the BOE and the BOJ all hitting the wires, and every release feeding the question on every trader’s lips… is this Santa rally about to go full throttle?
US Stocks Push Toward Record Highs
It has been another lively week in the markets with US stocks set to finish close to record highs. The Dow is up over 2%, the S and P 500 is up almost 1%, all fuelled by the much anticipated 25 basis point rate cut on Wednesday. On the surface it looked like a hawkish cut, with Fed Chair Powell hinting at a pause until they see how the economy develops. But his comments about the softening labour market had traders hedging their bets and already eyeing the next cut.
The Fed was split down the middle on the 25 basis point move. The leading contender for the top job, Kevin Hassett, is believed to have been the only voting member pushing for a 50 basis point cut. If he gets the chair in May 2026 many analysts expect a more dovish Fed which would mean faster cuts and cheaper money. Companies love cheaper money and so do stock markets, which could make 2026 another big year for gains. The Nasdaq was the only index to buck the trend thanks to a drag from Oracle after its quarterly forecast missed expectations and revived some of the lingering concerns around an AI shakeout. International markets followed the US higher with both the German Dax and the UK FTSE flirting with all time highs.
USD Weakness, Yen Strength Ahead of Major Central Bank Decisions
The US dollar continued to slide as expected after the rate cut. This will be the 3rd straight week of declines for the greenback which has now fallen 2% across that period. The Japanese yen remains well supported. Earlier in the week Governor Ueda pointed out that their inflation target is finally in sight which has boosted speculation that the Bank of Japan will hike rates at next weeks meeting. As mentioned last week, the interest rate differential between the US and Japan could be one of the biggest themes for the USDJPY in the coming year. Falling rates in the US and rising rates in Japan should naturally push the pair lower. When US rates started rising after the pandemic and Japan held steady, the USDJPY was trading near 110. We are now around 155 which means there is a huge amount of potential unwind in these long positions through 2026.
A Huge Macro Week Ahead: NFP, Inflation, BOE & BOJ
Normally after the final Fed meeting of the year the market starts to wind down for Christmas. Not this year. Next week is stacked with big market movers. Tuesday brings the Non Farm Payroll report which will be watched closely given Powell’s renewed focus on the labour market as his central driver for the rate path. We get US retail sales, average earnings and unemployment. Thursday brings US inflation data. The Bank of England is also up next week and is expected to cut interest rates by 25 basis points. As always the attention will be on the forward guidance rather than the move itself. Then on Friday we get the Bank of Japans decision which could be the biggest of the lot.
Throw all of this into a cauldron and the outcome is clear. Volatility. Especially in the USDJPY and across global stocks.
So what is on my radar this week. First up I’ll be keeping a close eye on stocks. A Santa rally may already be underway. I’ll be looking for entries using my Boomerang trend strategy which you can learn in my trading masterclass. You can also download the Forex 101 guide for more insights.
A fundamental teaching inside my PropIQ trader education is that trading is ultimately about probability, having an edge and exploiting that edge over time. It is not about the trade you are in right now or the trade you took last week. If we can consistently achieve better than a 50 50 edge and manage risk sensibly then over time we should come out ahead. It stands to reason that buying a strong currency and selling a weak one offers a natural edge. Right now my currency momentum meter shows that the strongest currencies continue to be the Australian, New Zealand and Canadian dollar. These are the classic commodity and risk on currencies and they remain top of the pack. The weakest currency is the USD.
It is a fantastic environment when the fundamentals line up with the technicals. Rates are falling in the US and on hold or potentially rising in Australia and New Zealand. I’ll be watching closely in the coming days for opportunities to trade my edge.
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Disclaimer
This market commentary is provided for educational and informational purposes only. It reflects the opinions of the author at the time of writing and should not be taken as financial or investment advice.
Funded Trading Plus operates evaluation and simulated funded challenges, not live trading accounts. All references to trading, strategies, or market opportunities relate to simulated trading environments. Past market performance or individual trader results are not indicative of future outcomes.
About Andrew Lockwood
Andrew Lockwood is a seasoned professional trader with over 40 years of experience in financial markets. Starting his career on the floor of the London International Financial Futures Exchange (LIFFE) in the 1980s, Andrew has traded through multiple market cycles and volatility regimes. Today, he specialises in prop trading strategies, focusing on technical setups, risk management, and trader psychology. As the founder of PropIQ and a leading mentor, Andrew is dedicated to training the next generation of prop traders with proven, real-world trading methods.