Insights 
VT 
Key Points
- AI infrastructure investment continues to be a major influence on US equity sentiment.
- Traders assess whether elevated capex can continue to justify current valuations.
- US Non-Farm Payrolls and the BOJ policy decision headline this week’s macro calendar.
- USD, gold, oil, and Bitcoin consolidate near key technical zones.
The AI narrative continues to dominate equity positioning, but the tone has shifted. Markets are moving away from enthusiasm around innovation and toward a more grounded focus on costs, returns, and sustainability.
The current phase of the AI cycle is centered on infrastructure: power demand, semiconductor supply, and data center expansion, rather than on software breakthroughs.
Major US technology firms are collectively allocating more than $400 billion this year toward AI-related chips, energy capacity, and infrastructure, while near-term AI-driven profits remain comparatively limited.
This imbalance keeps valuations highly sensitive to earnings guidance and capital discipline. Traders are increasingly alert to the risk that AI adoption may unfold more slowly, or deliver lower returns, than current equity pricing suggests.
This dynamic helps explain why US indices have struggled to sustain upside momentum.
The S&P 500 recently printed a fresh all-time high before pulling back, reflecting growing hesitation rather than outright risk aversion. Momentum remains constructive, but tolerance for disappointment has narrowed.
For traders, AI continues to underpin the broader equity trend while also acting as a volatility trigger when expectations falter.
Dollar Pressure Builds Ahead of Key US Data
The US dollar enters the week on a softer footing, with the USD Index finding support near 97.90. Recent price action reflects rising conviction that the Fed may need to ease further as labor conditions show signs of cooling.
This week’s Non-Farm Employment Change is forecast at 50K, down from 119K previously, while the unemployment rate is expected to tick up to 4.5% from 4.4%.
A reading near expectations would reinforce concerns around slowing growth and could extend downside pressure on the dollar.
Dollar softness continues to support select risk assets, though traders remain cautious ahead of data confirmation.
Central Banks Add Cross-Currents to FX Markets
Central bank decisions introduce additional complexity. The Bank of England is expected to cut its Official Bank Rate to 3.75% from 4.00%, shifting focus to forward guidance rather than the cut itself.
Sterling’s reaction will likely depend on whether policymakers signal further easing into early 2026.
In Japan, the Bank of Japan is forecast to raise its policy rate to 0.75% from 0.50%. Any indication that policy normalization will continue could support the yen and limit USDJPY upside, particularly if US data underperforms.
Key Symbols to Watch
USDX | SP500 | XAUUSD | USOIL | BTCUSD
Upcoming Events
| 16 Dec | USD | Non-Farm Employment Change | 50K | 119K | Soft data may extend USD weakness |
| 16 Dec | USD | Unemployment Rate | 4.50% | 4.40% | Rising unemployment supports easing expectations |
| 18 Dec | GBP | Official Bank Rate | 3.75% | 4.00% | Focus on BoE guidance beyond the cut |
| 18 Dec | USD | CPI y/y | 3.00% | 3.00% | Stable inflation keeps outlook steady |
| 19 Dec | JPY | BOJ Policy Rate | 0.75% | 0.50% | Hawkish signals may strengthen JPY |
Key Movements of the Week
SP500
- The index posted a new all-time high before retreating.
- AI-heavy stocks remain key drivers, though valuations face tighter scrutiny.
- Holding above 6,790 keeps upside open; failure could accelerate profit-taking.
Gold (XAUUSD)
- Gold pulled back from 4,360 and is consolidating near 4,220.
- Holding this zone may allow a retest of 4,300.
- US data remains the primary short-term catalyst.
US Dollar Index (USDX)
- USDX found support near 97.90 after last week’s decline.
- Resistance stands near 98.30 and 98.55.
- Weak labor data could expose the 97.40 level.
Bitcoin (BTCUSD)
- Bitcoin continues to consolidate within a descending channel.
- A close below 87,712 could expose deeper downside toward the 70K region.
- Recovery attempts depend on stabilizing risk sentiment.
Bottom Line
The AI theme continues to support US equities, but traders are becoming increasingly selective as infrastructure costs rise and earnings expectations face closer examination.
US labor data, inflation prints, and key central bank decisions will shape whether easing expectations remain justified.
Softer data backdrop could keep pressure on the dollar while supporting gold and risk assets, while any upside surprise may trigger sharper pullbacks as positioning adjusts.
