Analysis: Last week, risk assets were collectively frustrated. This week enters the Christmas holiday, and overall liquidity is not good

News on December 23, the Federal Reserve's interest rate cut dominated last week's market situation. Although the expected 25 basis point cut was made on Wednesday, the hawkish stance in the dot plot and post-meeting remarks far exceeded expectations. The prospect of a rate cut next year was halved, causing the risk market to face its biggest pullback since December. The market fell into panic. According to related monitoring, after PCE data were released on Friday, US stocks rebounded with all three major indices closing up more than 1%. The S&P 500 index fell by 1.99% for the week, Dow Jones dropped by 2.25%, and Nasdaq declined by 1.78%.

The cryptocurrency market experienced its first weekly decline following Trump's election victory with an overall slump across all markets. Bitcoin bounced back from $92k to nearly $100k on Saturday before starting another round of volatile declines; at time of writing it is reported at $94,010 USD - down by 3.19% in almost past day and down by over10 .35% in seven days; Ethereum broke below $3300 USD falling more than18 % over seven days while altcoin markets also saw significant drops.The Bitcoin spot ETF funds witnessed their first net outflow after a gap of fifteen days.

In terms of forex commodities,the dollar index rose cumulatively this week due to Fed’s hawkish interest rate cuts , marking three consecutive weeks of gains as non-US currencies fell throughout the week; oil prices dropped more than2 % forthe week ; spot gold also decreased cumulativelyby0 .96 %. This drop has hit risky assets collectively mainly due to selling panic brought about under circumstances where interest rate reduction expectations have been impacted.It is not a narrative about economic fundamentals declining but rather re-pricing around next year’s expectation for lower rates which still provides long-term solid support for risky assets.

This week marks the start of the Christmas holiday in European and American markets, overall liquidity is poor which will further increase market volatility. The market sentiment is heavily risk-averse.