Equity Indices Slip on AI Valuation Concerns; CPI Data in Focus

The EUR/USD pair traded sideways near the 1.1750 level on Wednesday as a modest US Dollar rebound offset pressure from softer Eurozone inflation and weakening German business sentiment. A quiet US economic calendar allowed the greenback to recover slightly during North American trade, keeping the pair rangebound.

The single currency struggled to gain traction after fresh data showed Eurozone inflation cooling, a development that offers some relief to the European Central Bank as it signals that its easing cycle may be nearing an end. Adding to the Euro’s woes, Germany’s IFO Business Climate survey showed business confidence deteriorating for a second consecutive month, reinforcing concerns about the region’s growth outlook.

Meanwhile, commentary from US Federal Reserve officials struck a broadly neutral-to-dovish tone. Atlanta Fed President Raphael Bostic said he expects US GDP growth to remain solid into 2026, suggesting a resilient economy could ease pressure on the labor market.

Looking ahead, market participants will turn their attention to upcoming US inflation data and Initial Jobless Claims for the week ending December 13, which could provide fresh direction for the Dollar.

In Europe, focus is firmly on the ECB’s December monetary policy meeting. The consensus view is that policymakers, led by President Christine Lagarde, will leave interest rates unchanged, with little expectation that the meeting will materially shift market pricing. Current expectations suggest rates may remain on hold well into next year.

Bitcoin remained largely subdued early on Thursday, extending its period of consolidation as continued exchange-traded fund (ETF) outflows and cautious positioning ahead of key US inflation data weighed on sentiment.

After sharp gains earlier in the year, price action now reflects a market in consolidation rather than renewed expansion.

Persistent capital outflows from US-listed spot Bitcoin ETFs have continued to sap institutional demand, extending a trend of net redemptions that had previously underpinned Bitcoin’s rally. Recent data show sustained ETF withdrawals, which market participants say have removed a key layer of price support and intensified downside pressure.

Investor focus on Thursday is firmly on the release of the US Consumer Price Index (CPI) for November, a key input into the Federal Reserve’s interest-rate outlook.

Comments from President Donald Trump added another layer of uncertainty after he said his preferred candidate for the next Federal Reserve chair would favor significantly lower interest rates, fueling debate over the future direction of US monetary policy.

Oil prices gained on Wednesday after US President Donald Trump ordered a blockade targeting sanctioned oil tankers entering and leaving Venezuela, heightening concerns over global crude supply. Prices were further supported by reports that Washington is preparing tougher measures against Russia’s energy sector, adding to geopolitical risk premiums in the oil market.

US-Venezuela tensions and Russia sanctions drive supply concerns

On Tuesday, President Trump announced a blockade aimed at tankers carrying Venezuelan oil that are already subject to US sanctions, intensifying pressure on President Nicolás Maduro’s government and raising fears of further disruptions to exports from the OPEC member.

Venezuelan crude shipments have been constrained for years by US sanctions, and stricter enforcement could tighten supply further if the measures are fully implemented. Analysts say the market impact will hinge on both the effectiveness and duration of the blockade.

On the data front, weekly figures from the US Energy Information Administration showed that crude oil inventories fell by 1.27 million barrels in the week ended December 12, smaller than market expectations for a 2.4 million barrel draw.

The report also showed rising refined product inventories, with gasoline stocks increasing by 4.81 million barrels and distillate fuel inventories rising by 1.71 million barrels, pointing to softer demand for fuel products and tempering some of the supply-driven optimism.

US equities closed lower on Wednesday, extending their recent decline as sharp losses in Oracle and Nvidia weighed on investor confidence in the artificial intelligence trade.

Shares of Oracle Corp. fell more than 5% after reports that Blue Owl Capital will not back the company’s proposed $10 billion AI data center project in Michigan, which was expected to support OpenAI-related workloads The negative development rippled across the AI sector, with Broadcom and Nvidia among the biggest decliners, further pressuring the broader market.

Federal Reserve Governor Christopher Waller said the central bank still has scope to lower interest rates, citing signs of softening in the US labor market. Speaking at the Yale School of Management CEO Summit in New York, Waller said policy remains “50 to 100 basis points” above neutral, suggesting additional easing is possible. However, he emphasized there is no urgency to move quickly, adding that rates can be brought down gradually as inflation continues to moderate. The Fed lowered interest rates by 25 basis points last week, pointing to concerns about a weakening labor market despite ongoing inflation pressures.

Investors are also watching corporate developments closely. Chipmaker Micron Technology was set to report earnings after the closing bell, with analysts expressing strong optimism around a potential multi-year upcycle driven by demand for high-bandwidth memory used in advanced AI processors.

In media, Warner Bros. Discovery’s board rejected a $108.4 billion hostile bid from Paramount Skydance, citing insufficient financing assurances. The decision to recommit to Netflix’s buyout offer marked another turn in the contest for Warner Bros.’ film and television assets.