Strong US services growth fuels a firmer dollar and triggers profit-taking across US and Asia-Pacific stock markets.Fed rate cut odds for March lowered.
Profit-taking in global equities, USD rose, gold struggled below $4,500
Key takeaways
US data dents rate-cut bets: A stronger-than-expected ISM Services PMI pushed down expectations for a March 2026 Fed rate cut, reinforcing a firmer US dollar.
Risk assets face profit-taking: US equities pulled back from record highs, dragging most Asia-Pacific markets lower, though Australia’s ASX 200 showed relative resilience.
Gold under pressure: XAU/USD remains capped below US$4,500 and slipped toward US$4,430, signalling near-term downside risks amid a firmer dollar.
The ISM Services PMI for the US increased for a third consecutive month to 54.4 in December 2025, from 52.3 in November, and was well above forecasts. The latest reading pointed to the strongest growth in the services sector, which is a significant driver of US economic growth since October 2024.
The better-than-expected reading from the ISM Services PMI reduced the odds of the expected fourth rate cut by the US Federal Reserve in March 2026’s FOMC meeting to 47% based on the latest data from the CME FedWatch tool, a reduction from a probability of 54% seen a day earlier.
The scaling down of Fed rate cut bets by Fed funds futures traders has created a negative sentiment feedback loop in the US stock market and reinforced profit-taking activities after the major US stock indices started the new year on a strong bullish footing that saw the S&P 500 and Dow Jones Industrial Average soar to their respective fresh all-time highs on Tuesday, 6 January.
The S&P 500, the Dow Jones Industrial Average, and the small-cap Russell 2000 ended Wednesday, 7 January, with losses ranging from 0.3% to 0.9%, while the tech-heavy Nasdaq 100 closed almost unchanged.
The US dollar rose for a second consecutive day, as the US Dollar Index rallied marginally by 0.1% on Wednesday, and in today’s Asia session, it traded almost unchanged below its 50-day and 200-day moving averages that are acting as an intermediate resistance at around the zone of 98.86/99.22.
A firmer US dollar and a lacklustre overnight performance from Wall Street have sucked out some bullish tailwinds in most Asia Pacific stock markets today that succumbed to profit-taking activities.
Japan’s Nikkei 225 and Hong Kong’s Hang Seng Index slipped by 1.6% at the time of writing in tandem with weakness in the Chinese stock market, dragged down by financial stocks. Singapore’s Straits Times Index recorded an intraday loss of -0.4% while Australia’s ASX 200 has managed to buck the trend with a modest gain of 0.3%.
Gold (XAU/USD) continues to struggle for the second consecutive session below a key short-term resistance of US$4,500. The yellow metal traded lower today by 0.6% intraday to US$4,430, breaching below Wednesday's low of US$4,423 at the time of writing.
Our YouTube video above contains the latest intraday technical analysis on the US Wall Street 30, US Nas 100, US SPX 500, Hong Kong 33, Japan 225, Germany 30, EUR/USD, GBP/USD, AUD/USD, USD/JPY, Gold (XAU/USD), and West Texas Oil.
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