The Christmas holiday market is quiet, the RMB against the US dollar breaks through a key psychological level, and precious metals hit new all-time highs.

Global Markets Enter Correction Mode, Liquidity Significantly Shrinks

As Christmas approaches, major global exchanges are pressing the pause button. On December 25th (Christmas Day), U.S. stocks were closed all day, resuming normal trading on the 26th; Hong Kong markets also closed for two days; European exchanges such as London, Frankfurt, and Paris suspended operations; Asia-Pacific markets like Australia and Singapore followed local customs to close. This means global trading activity has sharply declined, market participants have significantly reduced, and weak market liquidity has become an important driver of recent market volatility.

Renminbi Appreciation Accelerates, First Time Back in the “6” Era Against the US Dollar

The most notable development is the strong performance of the RMB against the USD. On December 25th (Thursday), offshore RMB USD/CNH broke through the 7.0 barrier, with USD/CNH falling to 6.9965, the first time since September 2024 to break this psychological level. Onshore RMB also fell to 7.0051 USD/CNY, hitting a new low since May 2023.

Market analysts attribute the RMB’s strength mainly to sustained end-of-year foreign exchange settlement demand. A trader from a Chinese bank revealed, “Market settlement is high, external USD is weak, and bullish expectations are quite consistent,” suggesting the RMB may continue approaching the 7.0 mark in the short term, with the pace depending on the market guidance of major state-owned banks.

Notably, Goldman Sachs in its latest report pointed out that the People’s Bank of China (PBOC) has alternated between emphasizing “resilience” and “flexibility” over the past few months—this subtle change in wording hints that the central bank may prefer to allow the RMB to strengthen but also aims to avoid rapid appreciation that could trigger market volatility. Goldman Sachs economist Xinquan Chen added that from September’s emphasis on “enhancing exchange rate resilience” to November’s mention of “maintaining exchange rate flexibility,” and then re-emphasizing “exchange rate resilience” in Q4, these policy signals indicate the PBOC is carefully balancing the pace of appreciation.

Goldman Sachs maintains its USD/CNY forecast, expecting 3-month, 6-month, and 12-month rates to reach 6.95, 6.90, and 6.85 respectively. The bank also expects the RMB to face a 50 basis point reserve requirement ratio adjustment and a 10 basis point interest rate cut in Q1, with another 10 basis point rate cut in Q3.

Precious Metals Rise, Gold and Silver Hit Historic Highs

In the context of a strengthening RMB and weakening USD, commodities priced in USD have also risen. On December 26th (Friday), gold briefly surpassed the $4,500 mark to $4,504, while silver rose to $73.67, both hitting record highs. This upward trend reflects market expectations adjustments regarding global liquidity.

Fed Rate Cut Expectations Rise, but 2026 May Not See Ultra-Loose Era

Bank of America predicts the Fed will cut rates once in June and once in July 2026. The bank also expects the 10-year U.S. Treasury yield to fall back to the 4%–4.25% range by year-end, with further downside potential. It’s important to note that although rate cuts are beginning, this does not mean a return to an ultra-low interest rate era—overall borrowing conditions will be only slightly looser than in 2024–2025, insufficient to recreate the aggressive housing and stock market rallies of the past.

Bank of Japan Maintains Hawkish Tone, Prime Minister Reaffirms Fiscal Discipline

Contrasting with the Fed’s gradual rate cuts, Bank of Japan Governor Ueda Kazuo recently reiterated his commitment to raising interest rates. In a speech at the Japan Business Federation, he stated that Japan’s core inflation is gradually accelerating and steadily approaching the BOJ’s 2% target, and that they are prepared to continue raising rates. Ueda pointed out that unless the economy faces significant negative shocks, the tight labor market will persist, exerting upward pressure on wages. He emphasized that companies are passing on rising labor and raw material costs in food and other goods and services, indicating Japan is forming a wage-inflation cycle.

Prime Minister Sanae Noda also announced that the total budget for the fiscal year starting April 2026 will be approximately 122.3 trillion yen, up about 6.3% from this fiscal year’s 115.2 trillion yen, setting a record high. He stressed that new government bond issuance will be limited to 29.6 trillion yen, below 30 trillion yen for the second consecutive year, and the debt dependency ratio will decrease from 24.9% to 24.2%, the first time below 30% in 27 years. The draft budget will be submitted to the Diet early next year. Following this news, the yield on Japan’s 40-year government bonds fell 7 basis points to 3.62%, the lowest since November 17th.

Tech Sector Outlook Diverges, Semiconductors Poised to Break $1 Trillion

Bank of America semiconductor analyst Vivek Arya predicts that global semiconductor sales will grow 30% in 2026, with annual sales surpassing the $1 trillion milestone for the first time in history. He emphasizes that leading companies with high-margin structures and solid market positions will be core to capital deployment, naming NVIDIA, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems as the most confident investment targets.

However, CFRA Chief Investment Strategist Sam Stovall is more cautious about the 2026 US stock outlook. He states that for the S&P 500 to achieve double-digit gains again, all growth engines must operate at full throttle. He projects a year-end 2026 target of 7,400 points, about 7% above current levels, but warns that while markets may continue higher next year, downside risks are increasing, making it unlikely to replicate the strong performance of 2024.

Chip Industry Accelerates Consolidation, NVIDIA Partners with Groq

NVIDIA’s partnership with AI chip startup Groq has attracted market attention. Although early rumors suggested NVIDIA would acquire Groq for $20 billion in cash, NVIDIA later clarified that the deal is a technology licensing agreement rather than an acquisition—NVIDIA is licensed to use Groq’s chip technology and has hired its CEO Simon Edwards. Groq will continue operating as an independent company, with founders Jonathan Ross, President Sunny Madra, and other engineering team members joining NVIDIA.

The strategic significance of this cooperation lies in NVIDIA’s dominance in training AI models but facing increasing competition in the “inference” domain (responding to user requests with trained AI models). Groq completed a $750 million funding round in September, valuing it at $6.9 billion, more than doubling from $2.8 billion in August last year. Its focus on inference technology accumulation is evidently attractive to NVIDIA.