The majority of large banks now think the Fed will keep trimming its balance sheet through June, longer than first thought. The Fed has already cut its holdings from $9 trillion to $7 trillion as it tries to normalise market conditions without causing a crash, but things got trickier in late 2024 when some banks had to use the Fed's emergency cash window, showing signs of market stress. The Fed's December meeting minutes revealed growing inflation worries, leading officials to plan fewer rate cuts in 2025. They now see just two cuts coming, down from their earlier forecast of four. Trump's return to the White House adds another layer of uncertainty, with his trade and immigration policies likely to shake up the Fed's plans.

EQUITY

Wall Street had a calm trading session after a bad Tuesday after new jobs data shows an improving labour market. The Federal Reserve's latest meeting notes showed officials are getting more worried about inflation heating up, especially with Trump's proposed trade policies on the horizon. Markets will take a pause on Thursday to honour former President Jimmy Carter, giving investors time to digest economic news before trading resumes.

GOLD

Gold prices failed to continue higher than $2,670 on Thursday after hitting a four-week high ahead of Friday's vital jobs report. Bullion initially received a boost from weaker private job openings, with only 122,000 jobs added in December versus forecasts of 140,000, but reversed unexpectedly, tracking other commodities. Additionally, gold ETFs saw their first yearly inflow since 2020, driven by strong Asian investor interest. The Fed appears to be seeking clear economic signals before adjusting rates.

OIL

Oil prices took a hit on Wednesday as reports show U.S. fuel stockpiles jumped more than experts expected, with Brent crude dropping 1.3% to $76.13 and WTI falling 1.5% to $73.25. The massive rise in fuel supplies combined with a stronger dollar put real pressure on prices. OPEC's output, which dropped in December, and Russia's production dip helped limit losses. Looking ahead, analysts at BMI think oil prices will be lower on average this year compared to 2024.

CURRENCY

The dollar tracks higher with markets bracing for Donald Trump's return to the White House and possibly back into the Trump trade era where every social media post moves the market. Profit-taking on the dollar was short-lived after investors scaled back their rate cut projection. Bond markets are feeling the pain after 10-year U.S. Treasury yields hit their highest level since April at 4.73%, while British government bonds are having their worst selloff since the 2022 Liz Truss crisis with no clear reason.