The Federal Reserve will hold a meeting on January 27-28, with CME showing a 95.6% probability of maintaining interest rates. The November PCE inflation rate of 2.8% is well above the 2% target, making a pause in rate cuts a certainty. Bitcoin fluctuated between $88,000 and $90,000, down 7.3% this week, with its year-to-date gains returning to zero, contrasting with gold reaching new highs. Trump threatened to impose 100% tariffs on Canada. AI stocks sold off, with META down 12.4% and NVIDIA down 9.5%.
CME Data Shows 95.6% Chance of Fed Pausing Rate Cuts
The Federal Reserve will hold a policy meeting next week (January 27-28) and announce its rate decision on Thursday (January 29). The market generally expects the Fed to pause rate cuts at this meeting. According to CME “FedWatch,” as of now, the probability of a 25 basis point rate cut in January is only 4.4%, with a 95.6% chance of holding rates steady.
The labor market and inflation are perennial themes in the US financial markets. Based on current data, last month’s employment figures were mixed, and continued cooling of the labor market will suppress financial market performance. Inflation has not yet subsided; the latest PCE data has provided a clearer picture of price changes, further tempering expectations of rate cuts by the Fed.
The unprecedented long shutdown of the US federal government in 2025 delayed the collection, compilation, and release of key economic data, making it difficult for markets to gauge the true inflation situation. This data vacuum has led investors to rely more on existing inflation indicators, with November’s PCE data clearly showing ongoing inflationary pressures.
Regarding inflation, the latest data from the US Bureau of Economic Analysis (BEA) shows that the US November PCE price index increased by 2.8% year-over-year, in line with expectations; the November PCE price index rose 0.2% from the previous quarter, also in line with expectations. Excluding food and energy prices, the US November core PCE price index increased 2.8% year-over-year and 0.2% quarter-over-quarter, both meeting expectations.
The November core PCE remains far from the Fed’s long-term target of 2%, and diverges from the CPI index released earlier by the US Department of Labor. Both the personal consumption expenditures (PCE) and core PCE indices are at 2.8%, with prices of goods continuing to rise, especially non-durable consumer goods (such as food, beverages, clothing, shoes, gasoline, and other basic necessities); service prices have weakened but the overall trend remains uncertain.
The persistent above-2% core PCE is the most direct reason for the Fed’s pause in rate cuts. If inflation is not controlled and rates are cut prematurely, it could trigger runaway inflation expectations, repeating the stagflation nightmare of the 1970s. Fed Chair Powell has repeatedly emphasized that further rate cuts will only be considered once there is clear evidence of inflation continuing to decline toward the 2% target.
Bitcoin’s Year-to-Date Gains Return to Zero, Diverging from Gold Prices
As of 22:30 on January 25, cryptocurrency markets continued to decline. According to CoinGlass data, after Bitcoin surged above $90,000 on January 24, it continued its downward trend on January 25, oscillating between $88,000 and $90,000, with a weekly decline of 7.3%, bringing its year-to-date gains close to zero. Driven by Bitcoin’s weakness, nearly all cryptocurrencies declined. Ethereum fell below $3,000, down nearly 1%, while BNB and Dogecoin dropped 1.41%. In the past 24 hours, nearly 100,000 traders were liquidated, with total liquidations reaching $121 million.
In stark contrast to Bitcoin’s slump, gold and silver experienced explosive rallies in January, continuously hitting record highs and becoming the main safe-haven assets. This divergence raises questions about Bitcoin’s narrative as “digital gold.” Amid uncertainties such as the Fed pausing rate cuts, Trump’s tariff threats, and geopolitical tensions, investors are favoring traditional safe-haven assets over Bitcoin.
The return to zero gains for the year implies that Bitcoin’s entire gains in the first three weeks of 2026 have been erased. This rapid cycle of rise and fall highlights Bitcoin’s fragility and speculative nature. If Bitcoin were truly as reliable as gold, it shouldn’t have completely given back its early-year gains within just a few weeks.
While the liquidation of 100,000 traders and $121 million in total liquidations are not the highest ever, they indicate that leveraged traders are once again suffering heavy losses amid volatility. These liquidations mainly affected long positions, meaning many traders bet on Bitcoin rising, but the sudden drop caught them off guard.
Trump’s Threat of 100% Tariffs on Canada Escalates Trade War
Following US President Trump’s new tariff threats against Canada, Canadian Prime Minister Justin Trudeau called on the public on the 24th to “buy domestic goods” in response to external threats. Previously, Trump posted on social media threatening that if Canada and related countries “reach an agreement,” a 100% tariff would be imposed on Canadian goods entering the US.
A 100% tariff is an extremely rare punitive tax rate, effectively doubling the price of Canadian goods in the US. Such a tariff level is unprecedented in modern trade history and is usually reserved for wartime or extreme confrontations. Trump’s use of this extreme threat demonstrates his maximum pressure strategy in trade negotiations.
Canada is one of the US’s largest trading partners, with annual trade exceeding $600 billion. Canada exports large quantities of energy (oil and natural gas), auto parts, timber, and agricultural products to the US. If Trump actually implements a 100% tariff, it would severely damage the Canadian economy and push up prices for energy and goods in the US, exacerbating inflationary pressures.
Prime Minister Trudeau’s call to “buy domestic goods” is a typical response rooted in economic nationalism. By encouraging domestic consumption, Canada aims to reduce dependence on the US market and send a message that it also has retaliatory measures. Canada might impose reciprocal tariffs on US goods or restrict energy exports to the US, both of which would cause substantial harm to the US economy.
AI Stocks Sell Off and Tech Sector Rotation
On October 29, 2025, META announced earnings, after which AI stocks were sold off. Since then, until January 23, 2026, significant changes have occurred in the US S&P 500 sector indices. First, the Information Technology sector index fell 7.5%, and utilities dropped 5.5%. Meanwhile, industrials, materials, and energy sectors rose 14.7%, 14.5%, and 12.1%, respectively.
Affected by the cooling of AI investment enthusiasm, the major tech giants experienced mixed performance. META dropped 12.4%, Microsoft fell 14%, NVIDIA declined 9.5%, and Broadcom fell 17.1%. Among the eight stocks, only Google A and Google C rose 19.4%. On January 23, Intel forecasted first-quarter sales of $11.7–$12.7 billion, below market expectations, and its stock price plummeted 17.03% at close.
Tech stocks have fallen out of favor, and the future performance of US equities will depend on sector rotation. A key factor in whether the AI investment boom can continue is whether investors prefer to see AI improve labor productivity and practical applications rather than seeking perfect reasoning large models. Currently, US government total debt has reached $38.65 trillion, and the White House plans to increase military spending to $1.5 trillion, a rise of over 50% compared to the previous fiscal year.
