The USD/JPY pair fell 0.75% to around the 155.80 level during European trading on Tuesday. The pair is under heavy selling pressure amid broad weakness in the US dollar, as expectations grow that the Federal Reserve will implement deeper interest rate cuts in 2026 than those signaled in its monetary policy statement issued on December 17.

At the time of writing, the US dollar index (DXY), which tracks the greenback against six major currencies, was hovering near an 11-week low at around 97.85.

The CME FedWatch tool showed a 73.8% probability that the Federal Reserve will cut interest rates by at least 50 basis points next year. This contrasts with the Fed’s dot plot released last week, where policymakers collectively projected the federal funds rate to fall to 3.4% from its current range of 3.50%–3.75%, implying just one rate cut in 2026.

Dovish expectations for the Fed have been reinforced by signs of weakness in the labor market, as well as indications from a series of recent consumer price index (CPI) reports showing that the impact of tariffs on inflation has been limited.

Looking ahead, the preliminary third-quarter gross domestic product (GDP) report will be the next key catalyst for US dollar movements, scheduled for release at 13:30 GMT. Investors will closely watch the data for fresh signals on the resilience of the current economic backdrop.

Meanwhile, the yen’s outperformance added significant pressure on the pair following warnings of potential Japanese intervention in the foreign exchange market. Japanese Finance Minister Satsuki Katayama issued the remarks to support the currency against what she described as excessive and one-sided moves.

Earlier in the day, Katayama said that “Japan has full freedom to deal with excessive movements in the yen,” adding that the government would take “appropriate action against exaggerated moves.”

Silver prices rose in European trading on Tuesday, extending gains for a third consecutive day and continuing to break record levels, reaching the $70-per-ounce threshold for the first time in history, amid strong demand for the white metal, particularly from retail traders.

The rally was also supported by a weaker US dollar in foreign exchange markets, weighed down by strong expectations that the Federal Reserve will cut interest rates twice next year.

Price overview

Silver prices today: silver rose 1.4% to $70.00 per ounce, marking a new all-time high, from an opening level of $69.05, after touching an intraday low of $68.92.

At Monday’s settlement, silver prices jumped 2.8%, marking a second consecutive daily gain and setting fresh record levels amid strong demand for precious metals.

US dollar

The dollar index fell 0.2% on Tuesday, extending losses for a second straight session and hitting a one-week low, reflecting continued weakness in the US currency against a basket of major and minor currencies.

As is well known, a weaker US dollar makes dollar-priced metals and commodities more attractive to buyers holding other currencies.

The decline comes amid increased dollar selling ahead of the Christmas and New Year holidays, and under pressure from cautious comments by some Federal Reserve officials highlighting growing concern over weakness in US labor market indicators.

US interest rates

According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the January 2026 meeting currently stands at 78%, while the probability of a 25-basis-point rate cut is priced at 22%.

Investors are currently pricing in two US interest rate cuts over the course of next year, while Federal Reserve projections point to only one 25-basis-point cut.

US economic growth

To reprice the above expectations, investors are awaiting later today the release of US third-quarter GDP data, which was delayed due to the US government shutdown.

The preliminary GDP reading is due at 13:30 GMT and is expected to show growth of 3.2% in the third quarter, compared with 3.8% growth in the second quarter.

Silver outlook

Tim Waterer, chief market analyst at KCM Trade, said that buyers continue to view precious metals as an effective tool for portfolio diversification and value preservation, adding that he does not believe gold or silver have reached their peaks yet.

Michael Brown, chief strategist at Pepperstone, said that some sideways movement could occur during the holiday period due to reduced market liquidity.

Brown added that the rally is expected to resume with strong momentum once trading volumes return to normal levels, noting that $5,000 is a natural target for gold next year, while $75 represents a long-term target for silver.

Gold prices rose in European trading on Tuesday, extending gains for a third consecutive day and continuing to smash record levels, as they moved sharply closer to trading above $4,500 per ounce for the first time in history. The rally was driven by strong investment demand for the precious metal and supported by a decline in the US dollar in foreign exchange markets.

These developments come as expectations grow that the Federal Reserve will cut US interest rates twice next year. To reprice those expectations, investors are awaiting later today the release of US economic growth data for the third quarter.

Price overview

Gold prices today: gold rose about 1.25% to $4,497.86 per ounce, marking a new all-time high, from an opening level of $4,443.38, while the session low stood at $4,443.38.

At Monday’s settlement, gold prices jumped 2.4%, marking a second consecutive daily gain, after breaking above the $4,400-per-ounce level for the first time ever.

US dollar

The dollar index fell 0.2% on Tuesday, extending losses for a second straight session and hitting a one-week low, reflecting continued weakness in the US currency against a basket of major and minor currencies.

As is well known, a weaker US dollar makes dollar-priced gold bullion more attractive to buyers holding other currencies.

The decline comes amid increased dollar selling ahead of the Christmas and New Year holidays, and under pressure from cautious comments by some Federal Reserve officials highlighting growing concern over weakness in US labor market indicators.

US interest rates

According to the CME FedWatch tool, pricing for keeping US interest rates unchanged at the January 2026 meeting currently stands at 78%, while the probability of a 25-basis-point rate cut is priced at 22%.

Investors are currently pricing in two US rate cuts over the course of next year, while Federal Reserve projections point to only one 25-basis-point cut.

US economic growth

To reprice the above expectations, investors are awaiting later today the release of US third-quarter GDP data, which was delayed due to the US government shutdown.

The preliminary GDP reading is due at 13:30 GMT and is expected to show growth of 3.2% in the third quarter, compared with 3.8% growth in the second quarter.

Gold outlook

Tim Waterer, chief market analyst at KCM Trade, said that tensions between the United States and Venezuela are keeping gold in focus as a hedge against uncertainty.

Waterer added that gold has posted strong gains this week as part of a broader shift in investor positioning, alongside expectations of further easing in US interest rates.

He noted that buyers continue to view precious metals as an effective tool for portfolio diversification and value preservation, adding that he does not believe gold or silver have reached their peaks yet.

Frank Walbaum, market analyst at NAGA, said that with year-end approaching and liquidity thinning, price volatility could intensify, noting that gold may remain particularly sensitive to geopolitical developments and changes in interest rate expectations.

Michael Brown, chief strategist at Pepperstone, said that some sideways movement could occur during the holiday period due to reduced market liquidity.

Brown added that the rally is expected to resume with strong momentum once trading volumes return to normal levels, noting that $5,000 is a natural target for gold next year, while $75 represents a long-term target for silver.

SPDR fund

Gold holdings at SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose by about 12.02 metric tons on Monday, marking the biggest daily increase since October 17, lifting total holdings to 1,054.56 metric tons — the highest level since June 23, 2022.

The euro rose in European trading on Tuesday against a basket of global currencies, extending its gains for a second consecutive day against the US dollar and hitting a one-week high, supported by continued selling of the US currency in the foreign exchange market ahead of the Christmas holidays.

The single currency was also supported by declining expectations that the European Central Bank will cut interest rates in February 2026, particularly amid recent improvements in economic activity across the euro area, alongside expectations that this improvement will continue as downside risks ease.

Price overview

Euro exchange rate today: the euro rose 0.2% against the dollar to $1.1780, its highest level in a week, from an opening level of $1.1759, after touching an intraday low of $1.1753.

The euro ended Monday’s session up 0.45% against the dollar, marking its first gain in five days, amid active selling of the US currency.

US dollar

The dollar index fell 0.2% on Tuesday, deepening losses for a second straight session and hitting a one-week low, reflecting continued weakness in the US currency against a basket of major and minor currencies.

The decline comes amid increased dollar selling ahead of the Christmas and New Year holidays, and under pressure from cautious comments by some Federal Reserve officials, which highlighted growing concern over weakness in US labor market indicators.

European interest rates

In line with expectations, the European Central Bank kept its key interest rates unchanged last week at 2.15%, the lowest level since October 2022, marking the fourth consecutive meeting with no change.

The ECB reaffirmed its data-dependent, meeting-by-meeting approach, without committing to a specific interest rate path, noting that current rates are appropriate given stable inflation and economic growth.

ECB President Christine Lagarde said the bank remains in a “good position” and stressed that there is consensus within the Governing Council to keep all options open, including the possibility of raising rates if necessary.

Money market pricing for a 25-basis-point interest rate cut by the ECB in February 2026 currently remains below 10%.

To reprice these expectations, investors are awaiting further euro area economic data on inflation, unemployment, and wage growth.