Rupee Set To Slip After RBI's Double Strike Fuelled Biggest Rally In Six Months

Forex

Economic

Summary:

The Indian rupee is set to open on the back foot on Monday after a rally fuelled by an aggressive forex intervention by the Reserve Bank of India last week, with traders now reassessing how much follow-through the central bank is willing to deliver.

The one-month non-deliverable forward indicated the rupeewill open in the 89.50-89.60 range versus the U.S. dollar, after rallying nearly 1% on Friday to settle at 89.27.

Late in Friday's session, heavy dollar sales by the RBI powered the rally, with bankers saying the intervention was aimed at speculators and decisively pushing the currency higher.

The rupee climbed from the 90.10–90.20 range to near 89.30 within minutes, triggering stop-losses and forcing a rapid repositioning.

Bankers said the late-session timing amplified the move, leaving little room for counter-flows. A similar playbook was used on Wednesday, though that intervention came soon after the market opened.

The rupee climbed 1.3% last week, its best showing since June, lifting it marginally into positive territory month-to-date.

"If you look at last week, it does seem to me that the RBI is thinking about timing to get maximum impact on near-term price action," a currency trader at a bank said.

"What the market is watching now is whether there is follow-through if there is (rupee) weakness again, and how much of the underlying demand–supply imbalance the intervention can address."

Meanwhile, Asian cues offered little directional cues for the rupee at the beginning of the week. Most regional currencies were largely flat, while the dollar index was marginally weaker.

Asian cues have played a limited role in the rupee's recent intraday moves, bankers say, with domestic flows and RBI intervention the dominant drivers.

"In the absence of significant flows, USD/INR has a propensity to bounce back after every major intervention," India Forex and Asset Management said, adding that 88.80 is now a key support for the pair.

Source: TradingView

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Gerik

Political

Humanitarian Crisis Unfolds Along the Border

On December 21, Cambodia’s Ministry of Interior reported that more than 518,000 citizens, including women and children, have fled their homes and schools due to military operations near the Thai border. Thailand has also confirmed that around 400,000 residents have been displaced from provinces near the conflict zone, particularly in Buriram, where temporary shelters are overwhelmed.

Both governments blame each other for reigniting tensions while claiming their military actions are purely defensive. The dispute primarily revolves around an 800km-long border and ancient temple sites like Preah Vihear, which have historically been flashpoints.

Rising Violence and Casualties

The current round of clashes, ongoing for over two weeks, is considered the most severe since a deadly confrontation in July. Fighting has involved ground troops, artillery, and drones, resulting in at least 22 deaths on the Thai side and 19 on the Cambodian side. The death toll is expected to rise if the conflict continues unchecked.

A ceasefire brokered by the U.S., China, and Malaysia in July quickly collapsed. Thailand later suspended further military talks after accusing Cambodian landmines of injuring its soldiers—a claim Cambodia denies.

Diplomatic Efforts Under Pressure

Although U.S. President Donald Trump recently claimed that the two countries had agreed to a new ceasefire, Bangkok denied the statement, and violent encounters have continued, including a major clash on December 7.

In response, ASEAN foreign ministers are scheduled to meet in Kuala Lumpur to explore diplomatic solutions. China has also sent a special envoy to both countries in an attempt to ease tensions. However, on-the-ground conditions remain highly volatile, particularly near the Preah Vihear temple area.

The Cambodia–Thailand border conflict is escalating rapidly, pushing nearly a million people into displacement and raising serious regional security concerns. Diplomatic efforts so far have failed to produce lasting peace, and without a durable ceasefire, this border standoff could become Southeast Asia’s most dangerous hotspot in 2026.

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Samantha Luan

Commodity

Political

The US has pursued a third oil tanker off the coast of Venezuela, intensifying a blockade that the Trump administration hopes will cut off a vital economic lifeline for the country and isolate the government of President Nicolás Maduro.

The US Coast Guard chased the US-sanctioned Bella 1 on Sunday as it was en route to Venezuela. It boarded Centuries, a ship owned by a Hong Kong-based entity, on Saturday — the first non-sanctioned vessel to be targeted. Another very large crude carrier, the Skipper, was intercepted on Dec. 10.

The moves on three separate vessels represent the most concerted attempt to date to sever the financial links sustaining a government that Washington says is led by a drug-trafficking cartel, and one that it has also recently designated as a foreign terrorist organization. Maduro has so far withstood the onslaught, but the blockade is beginning to limit hard currency and to hurt an already battered economy.

State-owned Petróleos de Venezuela SA, known as PDVSA, ships most of its cargoes to China, usually through intermediaries using so-called dark-fleet tankers, older vessels with obscure ownership that ferry sanctioned oil from Venezuela as well as Iran and Russia. Imports of feedstock from Russia are also vital to dilute Caracas' thick crude.

"Washington calculates that Maduro depends far more on oil exports than the US or China depends on his barrels," said Bob McNally, president of Rapidan Energy Group. "With global balances loosening and prices falling, the US judges it has growing leverage and is likely to intensify pressure on the Maduro regime."

Washington's campaign has caught the attention of oil traders, but Venezuela's exports have dwindled over the years and now account for less than 1% of global demand. The market is also well supplied, and China has multiple alternative options. Oil prices advanced only marginally in early trade in Asia on Monday, with Brent crude climbing toward $61 a barrel.

Maduro has called the Trump administration's recent moves — deadly strikes on boats allegedly carrying drugs, the authorization of the Central Intelligence Agency to conduct covert operations and Trump's order to block tankers — a bid to take Venezuela's oil and install a puppet government.

"This escalation and stronger enforcement point towards a decline in the volume of exports," said Francisco Monaldi, an energy expert at Rice University in Houston. "These days are going to be critical."

The Trump administration's military deployment in the Caribbean is the largest in the region in decades. The weekend's maritime offensives are aimed at signaling that all tankers in the waters around Venezuela are at risk of interdiction and seizure, according to a person familiar with this month's operations, who asked not to be identified discussing deliberations that have not been made public.

US Defense Secretary Pete Hegseth said the blockade of sanctioned oil tankers would remain in "full force," according to a post on X on Dec. 20.

The US Treasury imposed oil sanctions on Venezuela in January 2019, during Donald Trump's first presidential term. Later, the Biden administration adopted a carrot-and-stick approach to try to reverse Venezuela's democratic backsliding, granting a waiver to Chevron Corp. in 2022 that allowed it to resume oil operations.

This year, US officials reissued its license after it expired, but sought to guarantee that the Houston-based firm pays no royalties or taxes in cash to the Venezuelan government. Chevron has said its "operations in Venezuela continue without disruption and in full compliance with laws and regulations applicable to its business, as well as the sanctions frameworks provided for by the U.S. government."

Venezuela's oil industry has seen a dramatic decline in recent years, but Maduro's administration has weathered sanctions and the exodus of up to eight million Venezuelans.

The country's oil production reached the government's 1.2 million barrels per day target, Venezuelan Vice President and Oil Minister Delcy Rodriguez said on Saturday. Production fell to around 400,000 barrels per day after the 2019 sanctions, but rebounded in later years, said Clayton Seigle, a senior fellow at the Center for Strategic and International Studies in Washington.

Both ships intercepted over the weekend had Panamanian flags, though people familiar with the matter said a Chinese company holds title to the oil that was aboard the first ship, the Centuries supertanker. A White House spokesperson said the tanker was flying a false flag and carrying sanctioned oil.

"What they're hoping for is a campaign of maximum pressure that will eventually make the regime collapse, without the need of putting boots on the ground," said Dany Bahar, a senior fellow at the Center for Global Development in Washington. "They're trying to create a credible threat that will make this structure of power collapse, or high-level military turn around and decide to stand up to Maduro, and say, 'You have to leave.'"

A right-wing shift in recent elections in Latin America is deepening Venezuela's diplomatic isolation. Argentina, Bolivia, Ecuador and others signed a statement over the weekend demanding Venezuela respect democratic processes.

Some leaders in the region have still been critical of the campaign. Mexican President Claudia Sheinbaum has said she opposes foreign intervention into sovereign nations, when asked about her stance on opposition leader Maria Corina Machado, the recipient of this year's Nobel Peace Prize. Brazil's President Luiz Inacio Lula da Silva said at Saturday's Mercosur summit in his country that armed conflict in Venezuela would set "a dangerous precedent for the world."

Maduro's embattled government will have to reduce production quickly if it cannot export its oil as storage facilities are unable to hold much more crude.

Source: Bloomberg Europe

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Samantha Luan

Political

Former Malaysian Prime Minister Najib Razak lost a court bid on Monday to serve the rest of his prison term under house arrest, dealing a fresh setback to the once-powerful leader jailed over the 1MDB scandal.

Kuala Lumpur High Court Judge Alice Loke Yee Ching said a royal order allowing Najib to be placed under house arrest was not valid, and that the king cannot decide independently of the Pardons Board. Najib's lawyer, Muhammad Shafee Abdullah, said he would appeal the decision.

Najib had asked the court to compel the government to execute the royal order issued by former King Sultan Abdullah Ahmad Shah. But Prime Minister Anwar Ibrahim had said the house arrest order was not raised at a Pardons Board meeting, adding that any final decision must come from such a meeting.

The court decision complicates Najib's prospects of returning to public life and political relevance. His prison term runs until 2028, and he can only seek public office five years after his release. The former king had already halved Najib's prison sentence last year to six years, and reduced his fines.

Still, Najib retains significant influence in the United Malays National Organisation party, or UMNO, which has actively campaigned for his release. Anwar relies on UMNO's support to remain in power.

Najib faces another crucial decision in Malaysian courts later this week. The High Court will rule on his final 1MDB-linked trial on Friday, and a fresh guilty verdict could set back the 72-year-old's bid for freedom by years.

Najib has been in jail since 2022 for crimes related to 1MDB, a state investment fund that he set up during his time as prime minister. 1MDB became the center of a multi-billion-dollar scandal that spawned probes across continents. Najib has denied siphoning money from the fund.

Source: Bloomberg Europe

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Gerik

Economic

Commodity

Low Oil Prices Force Shale to Slow Down While Gas Surges Ahead

Contrary to expectations from early 2025, the U.S. shale oil sector encountered a sharp slowdown in activity due to persistently weak oil prices. WTI crude hovered below $60 per barrel for much of the year, prompting rig counts to fall from 415 in January to 386 by Thanksgiving. In contrast, natural gas particularly Henry Hub remained elevated, with front-month contracts surpassing $5/MMBtu, driving bullish sentiment around U.S. gas.

This divergence marks a fundamental shift in the energy narrative. While short-term confidence in oil falters, long-term optimism in gas, especially liquefied natural gas (LNG), is reaching levels unseen in recent memory. The removal of licensing restrictions for LNG projects under the Trump administration’s second term has opened up significant new demand up to 7.6 billion cubic feet per day setting the stage for a doubling of U.S. LNG export capacity by 2030.

LNG Boom Faces Cost and Timing Uncertainty

Though the LNG outlook appears promising, the surge of simultaneous project development is straining resources. Nine projects are currently under construction along the Gulf Coast, facing rising costs and labor constraints. Liquefaction plant construction now averages $1,100–$1,200 per ton about 20% higher than projects approved during 2022–2023.

Increased EPC (engineering, procurement, construction) contract protections have shifted financial risk to developers, tightening margins. Global price spreads have narrowed as well: the TTF-Henry Hub differential dropped to just $4/MMBtu in early December 2025 the lowest since early 2021. When new facilities like Golden Pass LNG begin operations in 2026, this compression will intensify, limiting arbitrage profits.

Gas Demand Rises with Data Center Growth and AI Expansion

Beyond LNG, natural gas is gaining a new role in supporting power-hungry AI infrastructure. Data centers, which are now being built alongside dedicated gas-fired power plants, represent a structurally growing demand vertical. While renewable energy remains vital, the firm baseload and high uptime of gas turbines make them indispensable in large-scale AI computing environments.

Rystad Energy and other analysts will continue monitoring the size and timing of data center developments globally, as their growth trajectory could dramatically shift gas demand forecasts in the coming years.

Oil Output Stays Resilient For Now

Despite price headwinds, U.S. oil production defied predictions of stagnation and posted record output in 2025. Most publicly listed E&P firms are maintaining output thanks to tight cost control and disciplined capital management. Analysts estimate that the "corporate breakeven" for these firms sits around $60/bbl WTI a level that covers shareholder returns, interest payments, G&A, and drilling new wells with positive NPV10 economics.

True production declines are unlikely unless prices drop closer to $50/bbl, which would trigger meaningful capex cuts. Even then, operators are hesitant to reduce output due to the cascading impacts: rising per-barrel costs, underutilization of midstream assets, and accelerated decline of PDP reserves the backbone of cash flow and company valuation.

Operators Prioritize Volume Stability Over Dividend Payouts

In response, many shale producers are likely to temporarily reduce shareholder return ratios to preserve output volumes. This mirrors behavior seen in the post-2022 period, when firms demonstrated capital discipline by dialing down payouts to build M&A capacity and strengthen asset portfolios. In 2026, such cost reallocation combined with post-merger G&A savings may enable producers to keep breakevens in check, even if WTI lingers around $55/bbl.

Even with mature techniques, significant upside remains in improving drilling and completion (D&C) efficiency. Super-long laterals are still underutilized across much of the Lower 48, and industry adoption of best practices is uneven. Simul-frac technology continues to gain ground, and some operators are now exploring trimul-frac and even quattro-frac methods executing three or four hydraulic fracturing stages simultaneously to boost scale and efficiency.

A key constraint is the water logistics required to sustain these high-intensity operations. However, increasing acreage consolidation among top-tier operators is enabling the development of clustered pad designs that can support continuous high-volume pumping across longer horizontal sections.

Additionally, ExxonMobil’s recent experimentation with petcoke-blended proppants has reignited industry interest in lightweight proppant formulations, particularly as Tier 1 acreage becomes scarce. Such innovations may extend economic recovery rates and improve well productivity across maturing basins.

A New Era of Global Expansion for U.S. Shale?

Finally, 2025 may mark the start of a new outward-facing phase for American shale producers. After more than a decade of domestic focus, companies are reentering the global upstream landscape. Continental Resources’ acquisitions in Argentina’s Vaca Muerta and joint ventures in Turkey, along with EOG’s exploratory interests in the UAE and Bahrain, suggest a pivot toward international diversification.

While not driven solely by short-term concerns about domestic Tier 1 inventory, these moves reflect growing recognition that medium-term growth options within the Lower 48 may be narrowing. For mature producers, international plays offer both resource renewal and portfolio resilience.

Transition and Tension Define the U.S. Shale Landscape

2025 has been a year of paradox for the U.S. shale sector. While oil economics remained fragile, gas ascended as a strategic fuel driven by LNG expansion, AI infrastructure, and rising domestic power needs. Firms navigated a challenging price environment by doubling down on efficiency and scale, while positioning for longer-term diversification.

Heading into 2026, the industry’s trajectory will hinge on its ability to manage cost inflation, deliver on LNG timelines, and adapt to the dual demands of capital discipline and energy security. For now, shale’s resilience continues but the path ahead demands greater innovation, global reach, and operational precision than ever before.

To stay updated on all economic events of today, please check out our Economic calendar

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Pepperstone

Commodity

Looking back at 2025, gold delivered one of the most striking performances across global markets. Prices repeatedly pushed to new highs, breaking historical records more than 50 times, with peak gains reaching as much as 67%.

In historical terms, this marked the strongest annual performance since 1979. In relative terms, gold significantly outperformed major equity benchmarks such as the S&P 500 and the Nasdaq.

What stood out even more was the breakdown of traditional correlations. Under conventional trading logic, gold typically moves inversely to interest rates or risk assets. Yet over the past year, gold and U.S. equities rose side by side—an unusual and telling development. This signals a fundamental shift in how the market is pricing gold.

As the year draws to a close, traders are asking two key questions: can the bullish momentum of 2025 extend into 2026? And what forces may continue to support gold—or cap its upside—from here?

What Drove Gold Higher in 2025?

Gold's rally in 2025 was not the result of a single catalyst, but rather the convergence of several powerful forces.

Central bank buying formed the backbone of gold's resilience at elevated levels. Global central banks have remained net buyers for multiple consecutive years. In the first three quarters of 2025 alone, net purchases reached 634 tonnes, with full-year demand expected to exceed 1,200 tonnes. The People's Bank of China, in particular, added gold for 13 straight months, lifting gold's share in its FX reserves to a record high.

At a deeper level, this reflects a structural shift in the global monetary system. Concerns over U.S. fiscal sustainability and the erosion of dollar credibility have accelerated reserve diversification. Gold—sanction-proof and strategically neutral—has emerged as a preferred anchor asset. This demand is both cycle-insensitive and price-insensitive, effectively lifting gold's long-term valuation floor.

At the same time, expectations of lower rates and a weaker USD reduced the opportunity cost of holding gold. Throughout 2025, markets increasingly priced in the Fed's next rate cut, pushing yields lower and weighing on the dollar—both supportive for a non-yielding asset priced in USD. Improved global liquidity conditions associated with easing cycles added another tailwind.

Geopolitical and macro uncertainty also played a critical role. Persistent tensions across Ukraine, the Middle East, and parts of Southeast Asia continued to disrupt financial systems, trade routes, and supply chains.

Meanwhile, global growth slowed and recession concerns around the U.S. economy resurfaced intermittently. Add to that policy uncertainty—ranging from volatile tariff rhetoric under Trump to perceived threats to Fed independence—and markets grew more sensitive to systemic risk. In such an environment, gold's appeal as a hedge remained strong.

Finally, price momentum itself reinforced the trend. Global gold ETFs saw cumulative inflows of around USD 77 billion in 2025, highlighting the importance of sentiment and structural shifts in driving demand. Asia—particularly China and India—stood out, with retail and institutional demand for both physical gold and ETFs surging. Rising prices attracted incremental capital, which in turn pushed prices higher, creating a self-reinforcing loop.

Taken together, central bank buying, safe-haven demand from geopolitical and economic uncertainty, and strong ETF inflows provided gold with demand largely independent of interest rates or equity market performance. Also, falling yields and a weaker dollar lowered holding costs.

Capital flowed simultaneously into equities and gold under a dual logic of return-seeking and risk hedging—producing the rare phenomenon of synchronized gains.

Can Gold Stay Strong in 2026?

Looking ahead to 2026, I think gold still has upside potential—but a repeat of 2025's extreme gains looks unlikely. Whether the U.S. economy slips into recession, or whether the narrative of U.S. exceptionalism regains traction, will be key in defining gold's upside range. Beyond that, data releases and event risk are likely to shape short-term trading rhythms rather than the broader trend.

From a strategic perspective, it matters less to pinpoint an exact price level than to understand gold's role across different macro scenarios. Central bank buying, physical demand, and geopolitical hedging remain medium- to long-term anchors, while Fed policy and real rates continue to drive cyclical swings. Broadly, three scenarios stand out:

· Base case:If global growth slows modestly and the Fed continues its easing cycle, real rates are likely to drift lower while the dollar weakens. This reduces the opportunity cost of holding gold and supports further gains. In this environment, gold behaves more like a "defensive growth" asset—delivering steady positive returns rather than explosive rallies.

· Bull case:If the global economy falls into a "vicious cycle"—with recession signals intensifying, trade tensions escalating, and geopolitical risks surging—tail risks could materialize. Safe-haven demand may be released all at once, driving sharp short-term spikes in gold prices. While this scenario has a low probability, its impact would be significant. In such a case, markets may actively speculate on Fed and Trump-led rescue measures, with simultaneous fiscal and monetary easing further amplifying gold's upside.

· Bear case:If U.S. economic resilience surprises to the upside, the exceptionalism narrative returns, fiscal stimulus ramps up ahead of midterm elections, and signs of re-inflation emerge, the Fed may be forced to keep rates higher for longer. Gold could then face corrective pressure. However, such pullbacks would likely resemble valuation adjustments rather than a breakdown in market structure. Equity market volatility also poses an additional risk—forced deleveraging could prompt traders to liquidate even safe-haven assets to raise cash, temporarily weighing on gold.

It is also worth noting that the buyer base is expanding. Beyond central banks, institutions, retail traders, and physical demand, new entrants—such as stablecoin issuers like Tether and certain corporate treasury departments—are beginning to allocate to gold. This broader capital base adds resilience to demand. Even in the face of corrections, gold's strategic role in global portfolios appears firmly entrenched.

Trading Gold in 2026: Balancing Discipline and Flexibility

Heading into 2026, gold remains supported by multiple structural tailwinds: persistent central bank buying, a dollar and rate environment broadly favorable to gold, and elevated geopolitical and macro uncertainty. In other words, the path of least resistance still points higher.

For traders, the key is to recognize gold's evolving role and adapt positioning to different macro regimes. In a mild slowdown or downturn, buying on dips remains a core strategy. In the event of extreme risk-off shocks, selectively adding exposure may help capture short-term upside.

Conversely, if growth surprises to the upside or the dollar strengthens materially, reducing exposure or hedging becomes essential to manage downside risk. Short-term XAUUSD volatility, cross-currency opportunities driven by global policy divergence, and shifts in ETF flows all offer valuable trading signals.

Opportunities along the gold supply chain also deserve attention. Rising gold prices directly improve profitability across mining and related industries, creating additional trading and investment angles. Price transmission along the value chain not only offers speculative opportunities, but also provides useful insight into broader gold market dynamics.

Overall, the gold market in 2026 calls for a combination of clear-headed macro analysis and tactical flexibility—capturing short-term opportunities while respecting gold's enduring value as a medium- to long-term strategic allocation.

Source: Pepperstone

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Liam Peterson

John C. Williams, New York Federal Reserve President, affirms no urgency for further interest rate cuts after three reductions in 2025, impacting crypto market expectations for January 2026.

Traders speculate on steady rates, with 73-77% betting against a rate cut, influencing Bitcoin and Ethereum prices amid broader market declines.

John C. Williams, President of the New York Federal Reserve, emphasized no urgency for further rate cuts, having already reduced rates three times in 2025. This decision appears to hold significant implications for the global financial landscape, as seen by a recent news article.

The statement by Williams, a key member of the Federal Open Market Committee, was primarily relayed through market pricing tools like CME FedWatch, indicating restrained action on further monetary policy adjustments.

The crypto markets reacted with increased bets against a rate cut in January 2026, reflected in CME FedWatch's 73-77% likelihood of steady rates. This scenario has substantial short-term effects on market sentiment. Bitcoin (BTC), for instance, saw notable volatility. You can stay updated on such events by following CoinGap Media on Twitter.

This move signals a potential pause in monetary stimulus, likely affecting liquidity-sensitive assets, including cryptocurrencies. Ethereum (ETH) and other assets may experience similar speculative adjustments. For instance, Phemex offers platforms to trade these assets effectively.

The policy direction contrasts with some Federal Reserve presidents calling for action. The polymarket data showed traders weighing limited rate changes across 2026, reflecting broader economic expectations.

Analysts suggest that high inflation remains a primary concern despite a forecasted 2.5% by 2026. Historically, a hawkish Fed stance has suppressed crypto valuations but prompted rallies with easier policy sentiments.

John C. Williams, President, New York Federal Reserve, "Inflation remains 'dangerously high' despite progress to 2.5% projection by 2026, with policy 'well placed'; November CPI distorted by technical factors."