On November 25, Goldman Sachs projected that the Federal Reserve would implement a third consecutive rate cut at its December meeting. The bank cited slowing inflation and a cooling labor market as factors providing policymakers room for further monetary easing.

"Next year’s risks lean toward additional rate cuts, as core inflation trends remain favorable, while labor market deterioration... may prove difficult to contain even with the modest cyclical growth acceleration we anticipate," said Goldman Sachs Chief Economist Jan Hatzius in a report. The bank also expects two more rate cuts in 2026—in March and June—ultimately bringing the federal funds rate to a range of 3.00%–3.25%.

Goldman’s baseline view is that the Fed will grow increasingly confident that disinflation will persist, reducing the need for maintaining a significantly restrictive monetary policy stance. Analysts noted that while the Fed may maintain a cautious tone in the near term, the trajectory of core prices and wage growth suggests a gradual shift toward a neutral policy stance next year.

Meanwhile, San Francisco Fed President Mary Daly voiced support for a rate cut next month, arguing that the risk of a sudden labor market downturn outweighs the threat of renewed inflation spikes. "I’m no longer as confident that we can stay ahead of the curve in the labor market," she said in an interview, noting its current fragility and potential for nonlinear disruptions. In contrast, she downplayed inflation risks, as tariff-driven cost increases have been milder than earlier projected.

Daly reiterated her belief that the Fed can bring inflation back to its 2% target without triggering higher unemployment, though failure to do so would signal policy missteps. She cautioned against delaying rate cuts due to fears of future policy reversals, stating, "I’m unwilling to assume we’ll be boxed in next year"—whether unable to cut further amid a sharp downturn or hike if necessary.

Key data releases to watch include Germany’s Q3 GDP revision, U.S. September PPI and retail sales figures, and October pending home sales.

**Gold/USD** Gold surged yesterday, breaching the $4,100 level to hit a six-day high, currently trading near $4,146. Short-covering and dovish Fed remarks bolstering December rate-cut expectations drove the rally, alongside declining Treasury yields. Resistance is eyed at $4,200, with support at $4,100.

**USD/JPY** The pair edged up slightly, hovering around 156.70, supported by concerns over Japan’s fiscal health and fading BoJ rate-hike bets. However, Fed easing expectations and intervention fears capped gains. Resistance looms at 157.50; support at 156.00.

**AUD/USD** The Aussie consolidated with modest gains near 0.6460, aided by dollar weakness and improved risk sentiment. Resistance tests 0.6550; support holds at 0.6350.