Markets Split as AUD Bulls Push Higher, USD Strengthens on Services Data, Oil Slumps on Venezuelan Supply Shock

Global markets traded with mixed momentum on Wednesday as investors weighed diverging policy outlooks, fresh economic data, and renewed supply concerns in the energy market. Strength in the Australian dollar contrasted with a firmer US dollar, while crude oil prices extended losses amid rising fears of global oversupply linked to Venezuela.

Dollar Firms on Resilient US Services Activity

The US dollar strengthened broadly, with the Dollar Index climbing to a four-week high near 98.7 after US services-sector data surprised to the upside. December’s ISM Services PMI rose sharply, signalling renewed momentum in the largest segment of the US economy and offsetting softer signals from recent labour market indicators.

While ADP employment growth and JOLTS job openings pointed to cooling labour demand, the improvement in services activity helped stabilise Treasury yields and reinforced short-term dollar demand. Market participants continue to price Federal Reserve rate cuts later in 2026, but near-term USD support remains data-dependent and driven by relative growth resilience.

Australian Dollar Outperforms as RBA Hike Expectations Persist

The Australian dollar remained one of the strongest performers across G10 currencies, holding a clear bullish structure despite signs of near-term overbought conditions. Although headline inflation slowed more than expected, underlying price pressures remained elevated, keeping expectations of further Reserve Bank of Australia tightening alive.

Strong building permits data also supported sentiment, reinforcing confidence in domestic demand. AUD/USD traded near multi-month highs, while the currency continued to outperform against both the euro and the pound, reflecting widening policy divergence in Australia’s favour.

Sterling Softens as Risk Sentiment Shifts

Sterling edged lower against the US dollar as stronger US data lifted the greenback and market volatility increased. With little in the way of fresh UK economic catalysts, GBP price action remained driven by external factors, including US macro releases and shifting risk appetite.

GBP/USD consolidated below recent highs, with investors showing caution ahead of key US labour market data later in the week, which could set the next directional move.

Gold Retreats from $4,500 on Profit-Taking

Gold prices pulled back modestly after failing to sustain a break above the $4,500 level, as traders locked in profits following a strong multi-session rally. The retreat came despite ongoing geopolitical tensions and continued expectations of Fed rate cuts later in 2026.

Stronger US services data reduced immediate safe-haven demand, but analysts noted that gold remains well supported structurally, underpinned by central bank buying, geopolitical risks, and declining real yields over the medium term.

Oil Slides as Venezuela Supply Concerns Deepen

Crude oil prices extended losses as markets reacted to confirmation that Venezuelan crude supply could return to global markets under US oversight. The development reinforced concerns that global oil markets could face a deeper surplus in 2026.

The bearish supply shock outweighed supportive factors such as a larger-than-expected US crude inventory draw and OPEC+’s decision to pause production increases in the first quarter. Analysts cautioned that while Venezuelan supply increases may take time, the shift in expectations has already altered sentiment and capped upside potential for oil prices.

Market Outlook

With major economic releases still ahead, including US labour data and key inflation figures across major economies, markets are likely to remain sensitive to incoming data and policy signals. Currency performance is expected to stay driven by relative growth and rate expectations, while commodities remain vulnerable to geopolitical developments and shifting supply dynamics.

Volatility is likely to persist as investors reassess positioning early in the year, balancing optimism around resilient growth pockets against rising uncertainty in global trade and energy markets.