Good morning traders. As we head into Thursday, 18th December 2025, we are facing one of the most significant trading days of the month, with multiple catalysts converging that could drive substantial volatility across both equity and currency markets. Today’s session promises to be anything but quiet, and I want to walk you through what I am watching and how I am positioning myself for the opportunities ahead.
The Inflation Question
The centrepiece of today’s market action will undoubtedly be the release of November’s US Consumer Price Index data. This marks the first consumer inflation report issued to the public since the government shutdown ended last month, and expectations are running high. Economists are forecasting headline inflation to print at 3.1% on a year-over-year basis, which would represent a slight uptick from previous readings.
What makes this particularly interesting is the timing. We are seeing inflation remain stubbornly above the Federal Reserve’s 2% target, and this data will be crucial in shaping expectations for the Fed’s next moves. The market has already been pricing in potential rate cuts for early 2026, but if inflation comes in hotter than expected, we could see those expectations rapidly repriced. Conversely, a softer reading could reinforce the dovish narrative and provide support for risk assets.
Equity Markets Under Pressure
US equity markets are coming off a challenging session, with the S&P 500 and Dow Jones Industrial Average posting their fourth consecutive negative day. The Nasdaq Composite has been the weakest of the three major indices, declining 1.8% in the previous session as technology stocks faced renewed selling pressure.
The catalyst for this tech weakness was Oracle’s troubles, with the cloud infrastructure company seeing its shares slide more than 5% after reports emerged that its primary investor pulled out of a $10 billion Michigan data centre deal. This has raised broader concerns about the high capital costs associated with massive data centre projects, and we saw sympathy selling across the semiconductor space. Broadcom fell 4.5%, whilst Nvidia and Advanced Micro Devices also declined.
However, I want to emphasise that despite this recent weakness, the technology sector is still on pace to end 2025 with a roughly 19% advance. As Ryan Detrick from Carson Group aptly put it, “some air is being let out of the balloon, but the overall market is hanging in all things considered.” This is a healthy correction in what has been an extraordinary run for tech stocks.
The bright spot overnight came from Micron Technology, which jumped more than 7% in after-hours trading. The chipmaker posted fiscal first-quarter results that exceeded Wall Street expectations and, more importantly, issued a rosy revenue forecast of approximately $18.70 billion for the current quarter, significantly higher than the $14.20 billion analysts had expected. This demonstrates that the underlying demand for AI-related infrastructure remains robust, even as investors take a more cautious stance on valuations.
Central Bank Theatre
Beyond the US inflation data, we have two major central bank decisions today that will shape currency market dynamics. The Bank of England is widely expected to cut its policy rate by 25 basis points to 3.75%, following softer UK inflation data. What is notable about this decision is that there will be no press conference, which means the market will need to parse the policy statement carefully for clues about the future path of rates. Governor Andrew Bailey is expected to “side with the doves” in what some are calling an “early Christmas present” for markets.
Across the Channel, the European Central Bank is anticipated to maintain its current policy settings at its final meeting of the year. However, the ECB will publish revised macroeconomic projections, and President Christine Lagarde’s press conference at 13:45 GMT will be closely watched for any hints about the policy outlook for 2026. The eurozone is forecast to enjoy a strong 2026, which could influence the timing and magnitude of future rate adjustments.
Currency Markets Bracing for Volatility
In the forex markets, we are seeing a period of consolidation ahead of today’s major events. EUR/USD is trading around 1.1745, having recovered from a decline towards 1.1700 in the previous session. The pair is likely to remain range-bound until we hear from the ECB and see the US inflation data.
GBP/USD is trading at approximately 1.3365, having come under pressure following the soft UK inflation data that has paved the way for today’s expected BoE rate cut. The pair approached 1.3300 on Wednesday but managed to recover some ground. I will be watching the 1.3300 level closely as a key support area. If the BoE delivers a dovish cut with language suggesting further easing ahead, we could see the pound test that level again.
Volatility and Safe Havens
The VIX volatility index has been showing signs of life, rising approximately 6% overnight to push above the 17 level. This is a notable move after an extended period of subdued volatility, and it reflects the market’s uncertainty ahead of today’s data releases and central bank decisions. We have seen the VIX ranging between 16.45 and 17.39 in recent sessions, and a sustained move higher could signal that investors are seeking protection against potential downside risks.
Gold continues to trade near record levels, hovering around $4,330 to $4,334 per ounce. The precious metal has been supported by expectations of further US rate cuts and ongoing geopolitical uncertainties. Whilst we have seen some profit-taking ahead of the US inflation data, gold remains well-bid, and any signs of persistent inflation could provide further support for the yellow metal.
Here in the UK, the FTSE 100 had a positive session on Wednesday, rising 87 points or 0.9% to close at 9,772. Housebuilders led the gains, with Barratt Redrow up nearly 4% and Phoenix Holdings advancing 3.88%. The UK market has shown resilience, though today’s BoE decision will be crucial in determining whether this momentum can be sustained.
Trading Strategy for Today
Given the multiple catalysts at play, I am approaching today with a focus on managing risk whilst remaining positioned to capitalise on volatility. Here is how I am thinking about the opportunities:
For equity traders, I would be cautious about chasing the recent weakness in technology stocks until we have more clarity on the inflation picture. If the CPI data comes in softer than expected, we could see a sharp relief rally in the Nasdaq, particularly in the semiconductor names that have been under pressure. Micron’s strong results suggest that the AI infrastructure buildout remains intact, which could provide a floor for the sector.
In the currency markets, I am watching for a potential GBP/USD short opportunity if the BoE delivers a dovish message alongside the rate cut. A break below 1.3300 could open the door to a move towards 1.3250. Conversely, if the BoE strikes a more balanced tone, we could see the pound find support and rally back towards 1.3400.
For EUR/USD, I expect the pair to remain choppy until we hear from both the ECB and get the US inflation data. A hot CPI print combined with a dovish ECB could push the pair lower towards 1.1700, whilst a softer inflation reading could see it test 1.1800.
Gold remains a hold for me at current levels. The risk-reward for chasing it higher is not compelling ahead of the inflation data, but I would be looking to add to positions on any dip towards $4,300, as the longer-term bullish case remains intact.
Final Thoughts
Today is shaping up to be a pivotal session for markets, with the potential for significant moves across asset classes. The key is to remain disciplined, respect your risk management rules, and avoid the temptation to overtrade in what will likely be a volatile environment. The inflation data, combined with the central bank decisions, will provide important clues about the trajectory of monetary policy heading into 2026.
As always, I will be monitoring these developments closely and sharing my thoughts throughout the day. Stay focused, stay disciplined, and remember that in volatile markets, patience is often the most profitable strategy.
Good trading.
Samuel Leach
