As we step into the new year, global markets are already feeling the strain of economic headwinds. From central bank policy shifts to tariff threats and sectoral slowdowns, here’s a breakdown of the key developments this week.

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ECB Signals Rate Cuts Ahead

European Central Bank (ECB) member Peter Kazimir announced that the ECB is likely to initiate three to four rate cuts starting next week. This comes amid growing concerns over stagnating growth in the Eurozone, signaling a pivot from the bank’s tightening stance. Markets are closely watching how these moves will influence inflation and broader economic recovery.

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Trump’s Tariff Threats Shake Global Trade

Former U.S. President Donald Trump’s renewed threats of tariffs are rattling global markets. The potential for a fresh wave of protectionism has sparked fears of a prolonged disruption in global trade, with analysts dubbing this a new era of economic uncertainty. Gold prices surged toward $2,750 as investors flocked to safe-haven assets.

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NZ Services Sector Slumps

New Zealand’s services sector continues to show signs of contraction. The Performance of Services Index (PSI) fell to 47.9 in December, marking a deeper dip below the 50.0 threshold that separates expansion from contraction. This decline underscores growing pressures on the Kiwi economy, which has been grappling with slowing demand.

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Aussie Dollar Falls on Tariff Risks

The Australian dollar tumbled near 0.6250 as escalating tariff talks triggered risk aversion. Investors are pulling back from risk-sensitive assets, with the Aussie bearing the brunt of market uncertainty. The situation reflects a broader shift in sentiment amid trade and geopolitical concerns.

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Yen Strengthens Amid Verbal Intervention

The Japanese yen briefly dipped below the 155.00 mark against the U.S. dollar, buoyed by speculation of intervention from Japanese authorities. Policymakers have been vocal about addressing the yen’s volatility, prompting traders to tread cautiously.

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US Foreign Investment Surges

Amid global turmoil, the U.S. share of foreign direct investment has reached a record high. This surge underscores the relative strength of the U.S. economy, even as other regions grapple with policy uncertainty and economic slowdowns.

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German Political Showdown in Davos

In Germany, Chancellor Olaf Scholz and opposition leader Friedrich Merz brought their election rivalry to the international stage at the World Economic Forum in Davos. The two leaders presented contrasting visions for Germany’s future, drawing attention from global investors and policymakers.

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Apple’s iPhone Sales Plunge in China

Apple reported an 18% drop in iPhone sales in China during the holiday quarter. The decline reflects challenges in the Chinese market, where economic pressures and rising competition have weighed on consumer demand. This marks a significant setback for the tech giant’s growth strategy in the region.

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Oil Majors Brace for LNG Revenue Hits

Oil and gas majors are bracing for a decline in LNG revenues as global prices stabilize. After years of volatility, the market is entering a period of relative calm, which could weigh on profits for energy companies heavily invested in LNG production.

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Gold and Oil: Safe Havens and Stability

As tariff threats mount, gold prices are climbing, with investors eyeing $2,750 per ounce. Meanwhile, oil prices remain stable, though energy companies are navigating the impact of softened LNG demand. Both commodities reflect the broader tug-of-war between risk aversion and market stability.

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The week’s developments underscore the fragility of global markets in 2025. Central banks, policymakers, and corporations are all grappling with a rapidly shifting landscape, with protectionism, political tensions, and economic slowdowns shaping the narrative. Investors should brace for continued volatility as the year unfolds.