Dollar firms, stocks wobble as Fed cut hopes fade; Nvidia jumps on China chip talk, ASML faces scrutiny
Risk appetite cooled and the dollar firmed as traders pared back Federal Reserve rate-cut bets, pressuring U.S. equities and keeping FX volatility elevated. Chip headlines around China buoyed Nvidia, while scrutiny of ASML’s China sales stoked geopolitical risk premium across tech supply chains. Gold’s blistering run has cooled, and Bitcoin’s correlation with AI leaders is keeping crypto tethered to rate expectations.
Market snapshot
- Wall Street slipped as traders reassessed the timing and depth of Fed cuts; cyclicals lagged while select megacap tech outperformed.
- The dollar strengthened alongside higher Treasury yields, tightening financial conditions into year-end.
- Nvidia rose after reports of approval to sell certain AI chips into China, while ASML reiterated compliance with export controls amid renewed scrutiny.
- Media stocks were in focus after talk of a Paramount approach lifted Warner Bros. Discovery.
- Gold’s momentum eased after a powerful 2025 rally; scenario analysis points to a wide tail-risk band into 2026.
- Bitcoin hovered near the $90k area, with ETF cost bases and Fed expectations anchoring near-term flows.
FX and rates: stronger dollar, tighter conditions
The repricing of Fed easing—fewer cuts pushed further out—nudged front-end U.S. yields higher, supporting the dollar against most majors. Traders flagged a firmer USD/JPY on rate differentials and a softer EUR/USD as U.S. data resilience contrasts with Europe’s sluggish growth pulse. Risk-sensitive G10 and EM FX underperformed as real yields ticked up and equity risk appetite faded. Liquidity remains decent but year-end hedging is adding to intraday FX swings, according to dealers.
Chips, China and equity rotation
Nvidia shares gained roughly 2% after reports suggested U.S. authorities cleared sales of certain H200-class AI processors to China that comply with export rules. Any easing at the margin is seen as supportive for revenue visibility and could cushion valuation multiples if domestic demand normalizes. Conversely, ASML came under fresh scrutiny amid media reports questioning end-use of certain tools in China; the company said it remains fully compliant with export laws. The split reaction underscored how geopolitics continues to drive dispersion across semiconductor stocks.
Elsewhere, media consolidation chatter resurfaced: Warner Bros. Discovery rallied on talk of an approach to Paramount, reviving a sector-specific bid even as broader risk sentiment cooled.
Commodities: gold’s surge cools
After a torrid year-to-date run, bullion momentum eased as higher real yields weighed on non-yielding assets. Industry commentary, including scenarios cited by the World Gold Council, suggests a relatively flat base case into 2026, but with wide tail risks if growth or policy shocks emerge—potentially a sharp rally on safe-haven demand or a notable pullback if real rates climb and the dollar extends its advance. Positioning remains elevated, keeping gold sensitive to macro surprises and U.S. data beats.
Crypto: Bitcoin tracks AI and the Fed
Bitcoin’s “risk-asset” beta remains high, with traders pointing to a robust correlation with AI equities. Spot demand tied to ETF inflows has anchored perceived cost bases in the mid-$80,000s, while resistance layers near $90,000–$100,000 loom large as rate expectations shift. The path of policy remains pivotal: a slower Fed easing cycle raises the hurdle for a decisive breakout, though advocates argue the risk/reward still skews higher if recession odds rise and liquidity expectations improve. Volatility is likely to stay elevated into year-end rebalancing.
What to watch
– U.S. inflation prints and labor data for fresh guidance on the Fed’s 2026 policy path and timing of the first cut.
– Any updates on U.S.–China tech export rules and corporate guidance from chipmakers.
– ETF flow data in both gold and Bitcoin as a barometer of structural demand.
– Dollar strength versus high-beta FX; watch USD/JPY and EUR/USD at key technical levels.
As markets toggle between resilient growth and tighter financial conditions, cross-asset dispersion is widening—an environment where FX and rates set the tone for equities and commodities, BPayNews notes.
FAQs
How do fading Fed rate-cut expectations affect the dollar and stocks?
A slower or shallower Fed easing path pushes U.S. yields higher and supports the dollar, tightening financial conditions. That typically weighs on equities—especially cyclicals and small caps—while defensives and select megacaps can outperform on quality and cash-flow durability.
Why did Nvidia rally despite broader market softness?
Reports indicating approval to sell compliant AI chips to China improved sentiment around Nvidia’s exportable product mix and revenue visibility. Even modest clarity on China sales can support valuation multiples given AI demand depth.
What’s behind the scrutiny of ASML’s China sales?
Media reports raised questions about end-use risks tied to China, putting a spotlight on export controls. ASML says it complies with all laws and licenses. The episode reinforces geopolitical risk premia across the semiconductor supply chain.
Is gold’s rally over?
Not necessarily. Momentum cooled as real yields rose, but scenario analysis for 2026 shows wide outcomes: gold could tread water if growth holds and the dollar stays firm, or rally sharply on safe-haven flows if macro risks escalate.
Why is Bitcoin moving with AI stocks and the Fed?
Crypto’s correlation with high-beta tech has been elevated as both are sensitive to liquidity and growth expectations. A stronger dollar and higher real yields are headwinds, while easier policy and ETF inflows tend to support upside.
