Markets Set for Fed Cut amid Softening Dollar and Extended Oil Gains – Weekly Recap (1–5 Dec 2025)

Weekly Recap: 1–5 December 2025

The new month opened on a cautious note as Wall Street slid on 1 December, with big-tech and crypto-linked names under fresh pressure, and as appetite for risk faded.

Sentiment stabilized throughout the week amid falling bond yields and growing confidence that the Federal Reserve will announce a quarter-point rate cut at next week's meeting. US stocks finished the week little changed overall, with global equity markets posting only modest gains, as the tone shifted from "risk-off" to "wait-and-see" rather than outright fear.

The US data was mixed but mostly in line with a gentle cooling in activity. The jobless-claims figures and other labour indicators didn't show any sharp slowdown, yet were soft enough to keep the hopes of policy easing alive. By Thursday, the major US indexes hovered near flat for the day, supported by expectations for a December cut even as investors digested the latest labour-market reports.

Attention heading into Friday turned squarely to the core PCE inflation release, the Fed's preferred gauge of inflation, as markets priced close to a 90% chance of a cut and look for further confirmation price pressures continue to ease.

In foreign-exchange markets, that shift in rate expectations translated into further dollar softness. Global “risk” assets, such as emerging-market stocks and currencies, headed for weekly gains as investors rotated into higher-yielding and higher-beta plays while the greenback wilted.

Euro–dollar mostly traded sideways, and strategists said that there was a neutral bias with markets waiting for clearer Fed signals and fresh European data.

In particular, the yen was in focus. A surprisingly sharp fall in Japan's October household spending revived questions about the strength of domestic demand just as the Bank of Japan considers its first rate hike since January, complicating the policy outlook and fuelling two-way volatility in USD/JPY.

Commodities told a more directional story: Oil prices were set for a gain of about 2% on the week, which would be its second positive week in a row. Traders pointed to a mix of Fed-cut hopes that would support future demand, geopolitical tension involving Venezuela, and supply disruptions linked to a Ukrainian drone strike on Kazakh exports via the Caspian Pipeline Consortium.

The decision by OPEC+ to hold output curbs steady, while Saudi Arabia was trimming the official selling price to Asia, added nuance but didn't shake the overall bullish bias either.

Meanwhile, gold consolidated after its powerful November surge. Prices hovered in a broad range around the 4,050–4,150 USD/oz zone, with some weekly softness but continued strong support as lingering geopolitical risks and uncertainty about the speed of any Fed easing kept safe-haven demand alive. Trading Economics By the end of the week, the overriding theme across US markets, FX, and commodities was unequivocal: investors are largely "strapped in" for an impending Fed cut, with the US dollar on the back foot and risk assets grinding higher, but the final verdict is still out and contingent on the incoming US inflation and jobs data over the coming days.