A pivotal week: Monetary policy in crisis, markets await the next move

The Fed Opens the Door, and Markets Set New Conditions

This week, the financial world froze at the news from Washington. The Fed cut interest rates by 25 basis points to a range of 3.50%-3.75%, but what was supposed to be a clear signal of easing became a source of confusion. The decision, supported by 9 out of 12 Fed board members, opened a new chapter – alongside the rate cut, Powell announced a program to purchase short-term government bonds on a scale of 40 billion dollars per month.

Key moment? Powell clearly stated that current rates are within the broad estimated neutral range, meaning the Fed has room to maneuver. Many Wall Street banks quickly recalculated their forecasts – realizing that the Fed will become the main buyer of government securities through 2026. Barclays raised its Fed purchase forecast from 345 billion to 525 billion dollars.

However, Powell revealed something else important: employment data may be systematically overstated by as much as 60,000 jobs per month. The actual labor market might already be experiencing a negative net increase of 20,000 jobs. This explains the Fed’s shift toward a “job protection” stance – and why the market is waiting for further rate cuts.

Trump, however, is not satisfied, considering the 25 basis points “insufficient,” which added tension to the entire situation.

Where Is the Money Going? White Metals Outperform Gold

When the Fed opens the money taps, investors are doing something surprising – instead of rushing to gold, they are discovering white metals. Silver showed phenomenal strength this week, setting new all-time highs for four consecutive days. Since January, silver’s price has doubled, and this is just the beginning.

The World Silver Association’s report shows that 2025 will be the fifth consecutive year of a silver market operating under supply deficit conditions – about 117 million ounces are missing. The demand and supply chart is clear – demand is rising, but production cannot keep up.

What about gold? It briefly hit the level of 4,330 USD per ounce (the highest in over a month), but silver is taking the scepter. RBC forecasts that the average gold price next year will be 4,600 USD, while some analysts predict silver could surpass 100 USD.

However, gold has a “reputation problem” – a report from the Bank for International Settlements revealed that recent growth is driven by retail investors, reinforcing the speculative nature of this market.

The Dollar Loses Ground, and Global Currencies Wake Up

The US dollar index this week serves as a litmus test for the entire Fed policy. It initially rose on expectations of a “hawkish” rate cut but plummeted sharply after the announcement – the market judged Powell was not tough enough.

Meanwhile, USD/JPY moved like from a horror film – first rising, then giving back most of the gains. Why? Bank of Japan Governor Kazuo Ueda stole the scene, signaling that Japan is approaching its sustainable 2% inflation target and suggesting that future rate hikes will not be limited to just one.

The market now prices in a 90% probability of a rate hike by the BoJ next week. If it materializes, Japanese rates will return to 0.75% – the highest since 1995.

Meanwhile, the euro, pound, and AUD/USD strengthened – the market believes that rate easing cycles in Europe, Australia, and Canada are nearing their end, and some central banks may move to hikes. The ECB almost entirely rules out further cuts, and the probability of hikes through the end of 2026 is about 30%.

Oil Falls, Geopolitics Remain Unsettled

Oil prices this week behaved like a drunken sailor – changing direction at every turn. Main factors? Concerns over Russian oil purchases by India, resuming production in Iraq, and speculation about peace between Russia and Ukraine.

A dramatic moment came Wednesday when the US stopped a supertanker carrying Venezuelan oil – the first such case since 2019. The tanker was transporting oil worth about 80 million dollars (5% of Venezuela’s monthly import expenses), but the administration claimed the oil was destined for the Iranian Islamic Revolutionary Guard Corps. Venezuela accused the US of “international piracy.”

Goldman Sachs and Deutsche Bank already announce that the sell-off in oil is far from over – oversupply will push prices downward throughout the coming year.

Stocks Are Moving, but Nothing Is Certain

US stocks generally showed strength, but the mirror reflection reveals clear divisions. The Dow Jones and S&P 500 hit new all-time highs, driven by gains in banking and cyclical sectors. However, this internal market structure should be approached with caution – not everything that glitters is gold.

Oracle took a heavy hit on Thursday – its stock fell over 10% after disappointing results. Despite the AI hype, revenues reached 16.06 billion USD versus expected 16.21 billion. Meanwhile, Broadcom demonstrated how it should be done – revenue for Q4 of fiscal year 2025 reached 18.015 billion USD (up 28% year-over-year), and profit margins increased by 97% year-over-year. Broadcom’s AI order backlog is an astonishing 73 billion dollars.

The market is beginning to doubt high valuations and dependence on a few clients – the first test of the AI bubble has just begun.

Technology Changes the Rules of the Game

This week, the media world was shaken by news of a spectacular takeover battle. Netflix kicked off the game, announcing a framework agreement to acquire Warner Bros. Discovery for about 72 billion dollars. It didn’t take long – over the weekend, Paramount, supported by Skydance, made a hostile bid of 30 dollars per share (approximately 108.4 billion dollars), which values the company higher both in terms of valuation and certainty of completion.

Trump entered the game as an uninvited guest, stating that regardless of who wins, CNN should change ownership. Kushner, Trump’s son-in-law, appeared in the Paramount plan.

Meanwhile, in the AI world, Meta is quietly revolutionizing – shifting from open models to closed ones, similar to Google and OpenAI. The new “Avocado” model is expected next spring. Zuckerberg committed to investing 600 billion dollars in AI infrastructure over three years – which means drastic cuts in metaverse and virtual reality projects.

OpenAI announced ChatGPT-5.2 and stated that the weekly number of ChatGPT users exceeded 800 million. Disney immediately invested a billion dollars in OpenAI and signed an agreement to use over 200 animated characters.

Moore Threads – “the first Chinese GPU company” – after a surge of over 700%, quickly issued a risk warning and took a hit on Friday. The company explained that new products are still in R&D and do not generate revenue – warning of overheated speculative sentiment.

What’s Next? The Game Awaits

As the Fed prints money and the Bank of Japan prepares to raise rates, the financial world enters a new phase. White metals outperform gold, technology consolidates, and US stocks await the next move. Investors who thought the recent months were stable should prepare – this week showed that volatility is still alive and ready to play.