The euro strengthened in European trading on Wednesday against a basket of global currencies, extending its gains for a third straight session versus the US dollar and touching a one-week high. The move was supported by the ongoing decline in the greenback and optimism around progress toward a potential peace agreement between Russia and Ukraine.

With uncertainty still surrounding the likelihood of a European Central Bank rate cut in December, investors are awaiting further economic data on inflation, unemployment, and growth across the eurozone to better assess the path of ECB policy easing ahead.

Price Overview

• EUR/USD rose 0.2% to 1.1592 — the highest in a week — from an opening level of 1.1570, after touching an intraday low of 1.1563.

• The euro ended Tuesday up roughly 0.45%, marking a second straight daily gain, supported by positive developments in the peace talks as well as weak US economic data.

US Dollar

The dollar index fell about 0.25% on Wednesday, marking a third consecutive decline and hitting a one-week low, reflecting continued downward momentum in the US currency against both major and minor counterparts.

The decline comes as markets price in a higher probability of a Federal Reserve rate cut in December, driven by a stream of softer US data and more dovish-leaning commentary from several Fed officials.

Ukraine Peace Framework

Diplomacy has intensified in recent weeks as efforts accelerate to end the more than three-year war in Ukraine. The initial US proposal — a 28-point framework — served as a baseline for talks among the US, Ukraine, and several European partners. Kyiv rejected the early draft as being overly favorable to Moscow, particularly on issues of sovereignty, borders, and regional security guarantees.

This pushback prompted a new round of negotiations in Geneva, focused on reshaping the plan into something more balanced. The talks resulted in a joint US-Ukraine statement announcing an “updated and refined framework” with adjustments to sensitive sections and a stronger emphasis on territorial integrity and security assurances.

President Volodymyr Zelensky described the new version as “more balanced” and containing “the right elements,” signaling a softer stance from Kyiv. The European Commission also welcomed the progress, calling the revised plan a realistic basis for advancing negotiations.

However, the framework still awaits an official response from Moscow, which says it has not yet received clear details. Major points of contention — such as the status of disputed territories, Ukraine’s NATO ambitions, and future security guarantees — remain unresolved.

Even so, analysts view the resumption of structured, multilateral dialogue as a meaningful shift away from the military stalemate toward a more mature diplomatic track.

Bullish Sentiment

• Chris Turner, head of FX strategy at ING, said that while markets have seen similar optimism before, signs of a peace framework are beginning to appear in currency trading. He added that falling energy prices could also support the euro.

• SEB Bank noted in September that the euro could rise as much as 7.5% against the dollar if a credible peace agreement is reached.

• SEB analysts said such a breakthrough would be a “game-changer for European growth and inflation dynamics,” boosting household purchasing power and revitalizing the industrial sector.

European Rates

• Market pricing for a 25-basis-point ECB rate cut in December remains steady around 25%.

• Investors are awaiting further eurozone data on inflation, unemployment, and wage trends to refine expectations for the December meeting.

The New Zealand dollar strengthened broadly on Wednesday against a basket of major and minor currencies, extending gains for a second consecutive session versus the US dollar and hitting a three-week high. The move comes as investors increased their exposure to the kiwi after the Reserve Bank of New Zealand adopted a more hawkish tone at its final meeting of the year.

In line with market expectations — and marking a third consecutive rate cut — the RBNZ lowered interest rates by 25 basis points to their lowest level in three years, while signaling that the current easing cycle is effectively coming to an end as signs of economic recovery begin to emerge.

Price Overview

• NZD/USD rose 1.4% to 0.5697, the highest since November 4, up from an opening level of 0.5618. The pair recorded an intraday low of 0.5616.

• The kiwi ended Tuesday up 0.2% versus the US dollar, its second gain in three sessions, supported by a softer greenback.

Reserve Bank of New Zealand

The RBNZ cut its official cash rate by 25 basis points to 2.25% on Wednesday — its lowest since May 2022 — marking the ninth cut since the easing cycle began a year ago and the third in a row. The bank has now lowered rates by a cumulative 325 basis points since August 2024, as inflation slowed back into the medium-term target range of 2%–3% amid weak economic activity and a softening labor market.

In its final policy statement of the year — and the last under Governor Christian Hawkesby before Swedish economist Anna Breman takes over in December — the bank said future moves would depend on how inflation and economic conditions evolve over the medium term.

It noted that inflation risks are now “balanced,” with economic activity expected to remain soft through mid-2025 before gradually improving as lower interest rates support household spending.

Minutes from the meeting showed that policymakers debated holding rates at 2.50% or cutting by 25 basis points, with five of the six members voting in favor of the cut.

At a press conference, Governor Hawkesby highlighted the policy shift, noting the outlook “tilts slightly to the downside” but is consistent with keeping the policy rate unchanged through 2026. The bank now expects the OCR to reach 2.20% in Q1 2026 and 2.65% by Q4 2027 — lower than August forecasts but still reflecting a more hawkish bias, with little room left for further easing.

New Zealand Rate Outlook

• Following the RBNZ decision, market pricing for another 25-basis-point cut in February 2026 dropped below 20%.

• Futures markets see the policy rate ending 2026 around 2.25%.

Analyst Commentary

• Nick Tuffley, chief economist at ASB Bank, said the door to further easing “is not as wide as many had expected,” adding that the RBNZ was generally more cautious than anticipated. He noted that another cut is unlikely unless economic data weakens significantly.

• Doug Steel, chief economist at BNZ, said the hurdle for additional action is now high, adding: “The data would need to surprise meaningfully on the downside to push the RBNZ toward more easing.”

US stock indexes rose on Tuesday as traders increased their bets on a Federal Reserve interest-rate cut.

According to CME FedWatch, the probability of a 25-basis-point cut in December climbed to 83%, compared with 50% a week earlier.

The shift followed comments from several Fed policymakers who backed continuing the path of lower borrowing costs in the near term without jeopardizing progress on inflation, citing a weakening labor market.

A report from ADP showed that the US private sector lost an average of about 13,500 jobs per week over the four weeks ending November 11.

Fed Governor Christopher Waller said on Monday that a December rate cut is necessary, though he noted that the January decision may be more complicated because of the backlog of delayed data.

At 18:28 GMT, the Dow Jones Industrial Average rose 1.2% (558 points) to 47,006. The S&P 500 gained 0.7% (47 points) to 6,753, while the Nasdaq Composite added 0.4% (90 points) to 22,965.

The great-power competition of the twenty-first century is no longer fought on battlefields or in oil markets; it now takes place within the microscopic circuits of semiconductors. These components, once treated as the invisible backbone of consumer electronics, have become the front line of today’s global geopolitical divide. What began as a tariff-driven trade dispute has evolved into something far more serious: a full-scale technological war centered on a component tiny in size but immense in strategic value — the semiconductor chip. As the saying goes, “Whoever controls chips controls the world.” Control here means holding the keys to the future of artificial intelligence, quantum computing, global supply chains, and advanced weaponry. From TV remotes to satellites, silicon chips are everywhere.

The problem is that Washington views China’s technological rise as an existential threat to America’s position, while Beijing sees US tariffs as an attempt to halt its ascent before it begins. Every export ban, every subsidy program, and every market restriction now sends shockwaves across the globe, pulling allies and rivals alike into the race for semiconductors. These are not mere trade disputes, but a complex struggle that will determine who leads the next global order: the United States with its technological dominance, or China with its ambition for self-sufficiency. The stakes are higher than ever — nothing less than command of global power itself.

This rivalry began with tariffs in 2018, after Washington accused Beijing of intellectual-property theft and unfair trade practices. Those accusations triggered a trade war that rattled global markets, eventually morphing into a more strategic conflict: the semiconductor war. China’s view is shaped by what it calls the “Century of Humiliation,” seeing foreign pressure as yet another attempt to keep it technologically behind — making chipmaking both a political goal and a strategic endpoint.

Taiwan adds another layer of tension. The island produces the majority of the world’s advanced semiconductors and is home to TSMC, making it both a strategic asset and a potential flashpoint. The United States says it supports Taiwan to preserve its technological edge, while China’s goals go much further: reunification and breaking America’s grip. The “silicon war” is therefore tied to some of the world’s most dangerous geopolitical flashpoints. Chips are no longer just components — they are instruments of power. The US and China are no longer merely competing; they are locked in a war without bombs or missiles, fought through supply chains and microcircuits.

What makes the chip industry unique is that no single country can control the entire process. The United States leads in design and software; Taiwan and South Korea dominate advanced manufacturing; the Netherlands supplies essential lithography equipment; Japan provides specialized materials. China remains behind in the most advanced segments. Any disruption in America or Taiwan can cripple whole industries, making semiconductors one of the most significant geopolitical chokepoints in the world. And the implications go far beyond economics: chips power drones, hypersonic missiles, and modern tools of warfare. America’s strategic objective is clear — cut China off from the most advanced technologies to preserve US dominance.

The reality is stark: the next global war may not be fought with tanks or nuclear weapons, but with semiconductors. Whoever wins the chip war will not only control technology, but also the rules of the new global order. Silicon is now seen as the new oil, the new steel, even the new gunpowder of the twenty-first century.

The United States sees the chip war as the gateway to power in this century, which is why semiconductors have moved from the realm of commerce to the realm of strategy. They are no longer treated as consumer goods but as weapons of influence. Washington wants to preserve its status as the world’s sole superpower, and in the digital age, semiconductors are its sharpest weapon. Its strategy has two tracks: choke China’s technological progress and build a fortress of allies to defend America’s lead. This includes banning firms like Huawei and SMIC, blacklisting Chinese tech companies, and restricting advanced EUV and DUV lithography equipment.

The 2022 CHIPS and Science Act — more than 50 billion dollars in subsidies — underscores that silicon is now a matter of national security, not economics. More importantly, America has succeeded in pulling its allies — Japan, the Netherlands, South Korea, and Taiwan — into this silicon alliance, using them to enforce its policies. TSMC’s decision to build factories in Arizona is not merely an economic move: it is a geopolitical step to anchor US influence in advanced chip manufacturing.

Realists argue that this alliance is not cooperation but alignment for survival. The US is drawing new cold-war lines to decide who leads and who follows. Turning semiconductors into a weapon goes far beyond free-market competition; it is about protecting dominance in a system where technology is the sharpest blade. America wants to prevent China from achieving parity; China, on the other hand, sees every US ban or sanction as another chapter in a long history of humiliation. For Beijing, semiconductors are the core of national survival. “Made in China 2025” and massive state subsidies are part of that mission. China is pouring billions into silicon — research, design, and fabrication — and recruiting engineers worldwide to achieve one goal: break dependence on the West.

Yet China remains trapped in what realists call the “technology-dependence trap.” It can design chips, but it still relies on Dutch lithography, Taiwanese manufacturing, and American software tools. China is climbing a technological mountain while the US keeps removing the steps. For Beijing, breaking America’s grip on technology is the essence of national revival. For Xi Jinping, semiconductors are not just economic drivers — they are instruments of sovereignty. In a world where technology is a battlefield, losing the chip war would mean a new “century of humiliation,” while accepting Chinese parity would mean the US giving up its global leadership. Neither outcome is acceptable. This is an existential struggle, not an economic rivalry.

The conflict is no longer US-China only — it is reshaping the entire world order. Two technological worlds are emerging: one built on US chips and Western supply chains, the other aligned with China’s rapidly growing ecosystem. Allies are caught in between. Taiwan, which produces 90% of the world’s most advanced chips, is now of enormous strategic importance and a potential trigger for conflict. South Korea stands at a crossroads between its security alliance with Washington and its biggest export market in China. The Netherlands has seen its industry become a tool of US strategy after being pressured to block ASML from selling advanced lithography equipment to China. The EU, reluctant to choose sides, is pouring billions into building its own chip sector — unwilling to fall behind in a world where technology is the new nuclear weapon.

But the global economy will pay a heavy price. Splitting supply chains means higher costs, redundant factories, and slower innovation. Developing nations will be forced into one camp or the other — an alignment imposed on them by a war they did not start. The global economy will remain unstable for years.

Realists will say this evolution is natural in great-power rivalry, but the stakes are far more dangerous. If the twentieth century was the era of “oil wars,” the twenty-first will be the era of “silicon wars.” The difference is that oil was found in many places — but chips depend on a handful of chokepoints, making the global economy fragile and extremely vulnerable to conflict. The semiconductor war is not merely economic; it is a geopolitical time bomb.

Conclusion:

The semiconductor rivalry is not a traditional confrontation between armies but a far more complex battle intertwined with the lifelines of the global economy. Every US restriction increases China’s determination; every Chinese push for self-sufficiency heightens Washington’s fear of losing dominance — creating a cycle of endless escalation. This competition cannot be resolved through diplomacy or compromises as in past trade disputes, because technology has become the essence of power. Yet in seeking dominance, both Washington and Beijing may end up weakening the very global system on which their economies rely.

History will remember the twenty-first-century “silicon cold war” not as an era of innovation, but as a force that dismantled the world order.