Christmas holiday global markets are dormant, offshore RMB hits a new high since September, gold and silver soar to historic highs

Due to the Christmas holiday, major global markets experienced a significant decline in activity. The US stock market was closed all day on December 25th and resumed trading on the 26th; Hong Kong stocks and major European exchanges (London, Frankfurt, Paris) also closed simultaneously, while Asia-Pacific markets such as Australia and Singapore paused trading according to local customs. Despite the light trading environment, several noteworthy market movements have emerged.

Offshore RMB Returns to “6” Range, Year-End Currency Conversion Demand Accelerates Appreciation

Market focus is on the strong performance of the RMB exchange rate. On Thursday (December 25th), USD/CNH (offshore RMB) broke below 7.0, reaching a low of 6.9960, the lowest since September 2024; USD/CNY (onshore RMB) also fell to 7.0051, a record low since May 2023. The appreciation of offshore RMB is mainly driven by strong year-end currency conversion demand, coupled with the lack of rebound momentum in the US dollar, forming a one-sided upward trend for the RMB.

Market participants indicate that the RMB is likely to continue approaching the 7.0 level in the short term, with the pace of appreciation mainly depending on the stance of large state-owned banks. A trader from a Chinese-funded bank stated that there are many currency conversion orders in the market, and the external US dollar remains weak, leading to a consensus of bullish expectations.

Goldman Sachs in its latest report disclosed that the People’s Bank of China (PBOC) has been alternating between statements of “resilience” and “flexibility” in recent months. This signals that the central bank leans toward a stronger RMB exchange rate but still aims to avoid rapid appreciation. Goldman Sachs economist Xinquan Chen analyzed that in September, the PBOC emphasized “enhancing exchange rate resilience,” during which RMB appreciated rapidly from August to September; after entering November, with USD/CNY stabilizing around 7.10, the central bank shifted to emphasizing “maintaining exchange rate flexibility,” showing tolerance for further appreciation; now, the policy committee’s minutes for Q4 reaffirm resilience, reflecting the central bank’s intention to moderate the pace of appreciation. Goldman Sachs expects RMB to have further upside potential, forecasting exchange rates of 6.95, 6.90, and 6.85 in 3, 6, and 12 months respectively. Additionally, Goldman Sachs anticipates the PBOC will cut reserve requirements by 50 basis points and interest rates by 10 basis points in Q1, with another 10 basis point rate cut in Q3.

Precious Metals Reach New Highs, Gold Breaks Through $4,500

Supported by expectations of easing monetary policy, safe-haven assets performed strongly. On Friday (December 26th), gold briefly broke through the psychological level of $4,500, reaching $4,504; silver surged to $73.67, both hitting new all-time highs. The strong momentum in precious metals reflects market expectations of abundant global liquidity in 2026.

Fed Rate Cut Expectations Rise Next Year, Bank of America Adjusts Long-Term Outlook

Bank of America in its latest outlook stated that the Federal Reserve is expected to cut interest rates twice in June and July 2026, and forecasts the 10-year US Treasury yield to fall back to the 4% to 4.25% range by the end of the year, with further downside possibilities. This indicates that the overall borrowing environment in 2026 will be more relaxed than in 2024-2025, but not returning to the era of ultra-low interest rates.

Bank of Japan Maintains Hawkish Tone, Budget Surges to New Highs but Debt Controlled

Bank of Japan Governor Ueda Kazuo stated that Japan’s core inflation is steadily approaching the 2% target, and the central bank is prepared to continue raising interest rates. He pointed out that the structural tightening of the labor market is difficult to reverse, and companies are passing on rising labor costs across various sectors, forming a mechanism where wages and inflation rise in tandem. Considering that real interest rates remain low, the central bank will continue to raise rates based on improvements in the economy and prices.

Japanese Prime Minister Suga Sanae announced that the FY2026 budget will total approximately 122.3 trillion yen, an increase of 6.3% from this fiscal year’s 115.2 trillion yen, setting a new record for initial budgets. Despite the record scale, new government bond issuance is controlled at 29.6 trillion yen, the second consecutive year below 30 trillion yen; debt dependence ratio decreased from 24.9% in FY2025 to 24.2%, the first time below 30% in 27 years. Following this news, the yield on Japan’s 40-year government bonds fell 7 basis points to 3.62%, a new low since November 17th.

Technology Stocks Show Divergence, AI Chip Competition Intensifies

Vivek Arya, a semiconductor analyst at Bank of America, stated that AI development remains in the middle of a decade-long structural transformation, with industry trends upward led by leading companies. He predicts that by 2026, global semiconductor sales will grow by 30%, surpassing $1 trillion for the first time. Companies with high gross margins and strong market positions will attract capital, with Bank of America naming NVIDIA, Broadcom, Lam Research, KLA, AMD, and Cadence Design Systems as the most confident investment targets for 2026.

On the other hand, CFRA Chief Investment Strategist Sam Stovall believes that achieving double-digit gains in US stocks again will be challenging, estimating the S&P 500 target for the end of 2026 at 7,400 points, only about 7% higher than current levels, with increased risks making a strong year unlikely.

In the chip sector, NVIDIA’s collaboration with AI chip startup Groq has progressed. NVIDIA and Groq reached an licensing agreement to use Groq’s chip technology, and appointed Groq CEO Simon Edwards; Groq will continue to operate as an independent company. Groq founders Jonathan Ross, President Sunny Madra, and engineering team members will join NVIDIA. Groq completed a $750 million funding round in September, valuing the company at $6.9 billion, more than doubling from $2.8 billion in August last year. The company focuses on the “inference” domain, while NVIDIA, although leading in AI training markets, faces increasing competition in inference business.