On major decision days, FX charts often appear unusually calm as the market hovers in tight ranges. Then, almost instantly, it turns into chaos. Central bank meetings from the Fed, ECB, or BoE compress a huge amount of macroeconomic expectation into a few minutes of statements, projections, and press-conference remarks. Once released, the market absorbs this information in a single burst, and price action reacts accordingly.
Europe has long traded at a valuation discount to the US, visible across simple headline metrics such as P/E and P/B. What is more striking is that, even in 2026 and even after periods of strong performance in European indices, the discount remains wide enough to keep resurfacing in allocation discussions. So, the question is not whether Europe is “cheap” in relative terms, but whether the discount is beginning to look excessive in relation to the region’s earnings outlook and balance-sheet resilience, or whether it still reflects deeper, structural differences that are unlikely to disappear.
Investor sentiment was shaped by steady (not accelerating) macro signals and a market that is increasingly priced for policy inertia. In the US, inflation remained contained (Dec CPI ~+2.7% YoY; core ~+2.6% YoY), reinforcing expectations that the Fed is unlikely to change rates at its January meeting. With growth data only producing modest surprises (rather than persistent upside/downside momentum), markets continued to treat the near‑term outlook as “stable but not strong,” which kept risk appetite contained and encouraged selective positioning rather than broad risk‑on exposure.
Gold’s been moving higher in recent weeks; not with fireworks, but with steady intent. It’s not like some shock headline lit the fuse. Instead, the backdrop has quietly shifted in gold’s favour. That old inverse link between gold and real yields isn’t behaving the way it used to.
Major central banks mostly held a steady course amid broadly easing inflation. US price data remained benign – headline CPI was about 2.7% year-on-year in December, about the same as November – supporting expectations that the Fed may only cut rates later in 2026 rather than move quickly.
