Investor and forex trader activity remains subdued amid the Christmas holidays. Notably, today official Beijing announced sanctions against twenty U.S. defense companies and ten of their executives in response to arms supplies to Taiwan. The measures include asset freezes, bans on certain individuals doing business with Chinese companies, and entry restrictions to mainland China, Hong Kong, and Macau. Analysts note that the impact of these steps is likely to be limited, as most of the targeted corporations have little direct trade exposure to China. However, a response from the White House and a broader deterioration in relations between the world’s two leading economies cannot be ruled out.

Eurozone

The euro is weakening against the U.S. dollar but strengthening versus the pound and the yen.

Traders continue to observe the Christmas period with low activity, which may persist until the end of next week, when December manufacturing activity data are released. The index is expected to decline from 49.6 to 49.2 points, potentially weighing on the single currency. Meanwhile, the White House has imposed visa bans on five EU officials, including former European Commissioner Thierry Breton, accusing them of attempting to restrict free speech and unfairly targeting U.S. technology giants through burdensome regulations. Between 2019 and 2024, Breton was among the architects of the EU Digital Services Act (DSA), under which Brussels imposed sanctions on Elon Musk’s X platform, fining it €120.0 million for violations of online content rules. Representatives of the European Commission condemned the U.S. move and signaled the possibility of retaliatory measures.

United Kingdom

The pound is weakening against the yen and the U.S. dollar but strengthening versus the euro.

The next set of key releases will not arrive until next Friday. Preliminary estimates suggest that the December manufacturing PMI will rise from 50.2 to 51.2 points, confirming sector resilience and supporting expectations of a broader economic recovery. These data could also strengthen the position of policymakers within the Bank of England who favor a pause in monetary easing, providing additional support for the national currency.

Japan

The yen is weakening against the euro, the pound, and the U.S. dollar.

Markets are assessing inflation data from the Tokyo metropolitan area. In December, the Consumer Price Index fell from 2.7% to 2.0% year-on-year, while core inflation slowed from 2.8% to 2.3%, driven by lower food and energy prices. Overall, inflation in Japan’s most developed region remains above the Bank of Japan’s 2.0% target but is decelerating faster than expected, which could limit further monetary tightening. Meanwhile, industrial production contracted by 2.6% versus an expected 1.9%, confirming the continued impact of U.S. tariffs, while retail sales accelerated by 1.0% compared with forecasts of 0.9%.

Australia

The Australian dollar is strengthening against the yen and the U.S. dollar, while showing mixed dynamics against the euro and the pound.

The period of reduced investor activity may extend until next Friday, when December manufacturing activity data are published. The index is expected to rise from 51.6 to 52.2 points, increasing the likelihood that the Reserve Bank of Australia (RBA) will maintain its current monetary policy stance. At present, analysts increasingly believe that the central bank could even raise interest rates next year amid rising inflation risks.

Oil

Oil prices are correcting lower amid relatively calm holiday trading, although investors continue to monitor developments in U.S.–Venezuelan relations. Recently, the White House instructed the armed forces to focus on blocking Venezuelan crude exports for at least the next two months. Analysts believe this directive suggests the U.S. administration is currently more inclined to apply economic rather than military pressure on Caracas and do not expect an escalation of the conflict.

In addition, Russian authorities have reported a new meeting with U.S. officials to discuss a potential compromise peace agreement regarding the Russia–Ukraine conflict. If such a deal is reached, sanctions on Russia’s energy sector could be partially lifted, increasing supply and putting downward pressure on oil prices.