Sterling edged slightly lower against the dollar on Wednesday, but it remains on track to post its biggest annual gain in eight years.

However, the pound has underperformed the euro in 2025 and is expected to finish the year as the weakest major European currency.

Sterling was last down 0.2% against the dollar at $1.3436. Over the course of the year, the pound has gained 7.5%, marking its largest annual rise since a 9.5% increase in 2017.

By contrast, the euro, Swiss franc, and Norwegian and Swedish krona have all risen between 13% and 19% against the dollar this year.

Against the euro, sterling slipped 0.1% on Wednesday and is down more than 5% over 2025 to 87.24 pence, its largest annual decline versus the single currency since 2020.

Fiscal concerns cap gains

Despite sterling’s strength against a broadly weaker dollar, domestic political uncertainty, concerns over UK public finances, and stagnant growth weighed on the currency during the second half of the year.

The key event for currency traders was the autumn budget, but November’s fiscal announcement passed without major controversy, easing some of the pressure that had built up on the pound in the latter part of the year.

Sterling’s performance in 2026 is expected to hinge on monetary policy moves by the Bank of England. The central bank cut borrowing costs four times in 2025, including in December, although the Monetary Policy Committee remains divided, with policymakers signalling that the pace of rate cuts could slow further.

Money market traders have yet to fully price in another potential rate cut before June. Markets are currently pricing around 40 basis points of easing by year-end, implying roughly a 60% chance of a second rate cut.

Kevin Thozet, a member of the investment committee at Carmignac, said: “With the budget behind us, slowing economic growth, a weakening labour market, and rising bond yields will allow the Bank of England to cut interest rates further.”

He added: “The dilemma facing policymakers has eased, at least in the short term.”

US stock indexes fell at the open on Wednesday — the final trading session of 2025 — although Wall Street remains on track to post strong annual gains.

Technology stocks came under increasing pressure amid profit-taking as the year draws to a close.

Minutes from the Federal Reserve’s latest meeting, released on Tuesday, revealed a sharp divide among policymakers over the decision to cut interest rates earlier this month.

The minutes also showed that policymakers supported further rate cuts if inflation slows over time, in line with expectations.

Forecasts from 19 officials who attended the December meeting — including 12 voting members — pointed to the possibility of one additional rate cut in 2026 followed by another in 2027, which could bring the policy rate down to around 3%, a level officials consider “neutral,” meaning it neither restrains nor significantly stimulates economic growth.

In trading, the Dow Jones Industrial Average fell 0.3%, or 158 points, to 48,206 as of 16:14 GMT. The broader S&P 500 declined 0.3%, or 23 points, to 6,873, while the Nasdaq Composite dropped 0.3%, or 80 points, to 23,339.

Nickel prices on the London Metal Exchange (LME) jumped by around 5% to their highest levels in several months after Indonesia, the world’s largest nickel producer, signaled plans to curb output starting in 2026, in an effort to reverse a prolonged market downturn caused by oversupply.

The nickel market was jolted by comments from Indonesia’s Minister of Energy and Mineral Resources, Bahlil Lahadalia. In an interview with CNBC Indonesia, he said the country plans to reduce nickel production beginning in 2026 to help rebalance supply and demand and support prices. The remarks triggered an immediate rally, with three-month nickel contracts on the LME rising to $16,560 per metric ton, their highest level since March.

The proposed cuts underscore Indonesia’s immense influence over the market, as the country accounts for around 70% of global nickel supply. The government exercises control through a mining quota system known locally as RKAB. By tightening the issuance of these quotas, authorities can effectively regulate the flow of raw materials and global supply. The minister’s comments were widely seen as a clear signal of intent to “turn down the tap.”

A paradox of its own making

The move highlights a paradox that Indonesia itself largely helped create. A decade of explosive production growth, driven by abundant resources and supportive policy incentives, turned the country into a dominant supplier of nickel used in stainless steel and electric vehicle batteries. But the surge in supply ultimately overwhelmed demand, putting sustained pressure on prices through most of 2025 and leading to a buildup of inventories on the LME.

Despite its market dominance, Indonesia has not been immune to the effects of lower prices. The situation has been exacerbated by weaker-than-expected demand from the battery sector, a key pillar of long-term growth. Automakers are increasingly shifting toward cheaper battery chemistries that rely less on nickel, such as lithium iron phosphate (LFP), undermining longer-term demand prospects for the metal.

Can production cuts really rebalance the market?

While the policy signal has boosted short-term sentiment, achieving a durable recovery remains challenging. World Bank forecasts broadly align with the recent move higher, projecting an average nickel price of $16,000 per metric ton in 2027.

However, the underlying surplus remains substantial. Russia’s Norilsk Nickel, one of the world’s largest producers, still expects a global surplus of refined nickel of around 275,000 metric tons in 2026. Analysts note that Indonesia’s cuts would need to be both deep and strictly enforced to make a meaningful dent in excess inventories.

Market watchers caution that without a structural shift in demand dynamics — such as a renewed preference for nickel-intensive EV batteries or the emergence of new demand sources — any price rally may struggle to extend much further. Ultimately, the scale and credibility of Indonesia’s supply discipline will be the decisive factor shaping the nickel market over the next two years.

Bitcoin edged slightly higher on Wednesday, but was still on track to end the year in negative territory, weighed down by sharp fourth-quarter losses amid weak liquidity and fading risk appetite, which continued to cast a shadow over the broader cryptocurrency market.

The world’s largest cryptocurrency was trading up 1.3% at $89,010 as of 06:56 a.m. US Eastern Time (11:56 GMT).

Bitcoin was heading for an annual decline of around 5%, with losses in the fourth quarter alone exceeding 22%. The cryptocurrency had reached a record high above $126,000 in October.

The sharp late-year pullback erased earlier gains and left Bitcoin struggling to hold key support levels, as investors retreated from higher-risk assets.

Bitcoin heads for annual loss after 22% drop in Q4

Bitcoin’s weakness toward the end of 2025 followed a strong rally in the fourth quarter of 2024, when prices surged after Donald Trump was elected US president.

At the time, markets had priced in expectations that his administration would adopt a more supportive regulatory stance toward digital assets, boosting sentiment across the crypto sector and driving strong investment inflows.

However, the optimism that carried into early 2025 proved difficult to sustain. After posting solid gains in the first half of the year, Bitcoin began to lose momentum from mid-2025 onward, as global financial conditions tightened and investor caution increased.

Recovery attempts in December failed to gain traction, despite seasonal expectations for a so-called “Santa Claus rally.” Bitcoin repeatedly struggled to reclaim higher price levels during the month, with each upward move met by renewed selling, as traders opted to take profits or scale back positions ahead of year-end.

Despite continued institutional interest in digital assets, including ongoing activity in spot Bitcoin exchange-traded funds, inflows were not sufficient to offset the broader risk-off mood dominating global markets.

Cryptocurrency prices today: altcoins under pressure, annual losses in focus

Most alternative cryptocurrencies continued to trade in narrow ranges on Wednesday and were on course to post annual losses.

Ethereum, the world’s second-largest cryptocurrency, rose 0.8% to $2,996.10, but was still heading for an annual decline of around 10%.

XRP, the third-largest cryptocurrency globally, also edged slightly higher to $1.87, but was similarly on track to record an annual loss of about 10%.