• The next couple of weeks before 2026, the light agenda starts with a bang
• Dominating US data: ISMPMIS, GDP and NFP reports, plus Fed Minutes
• UK GDP, Tokyo CPI and Eurozone and Australian CPI also on tap
• But caution is likely ahead of the Supreme Court’s tariff ruling and Trump’s Fed pick

Markets to go into hibernation

As the festive period officially begins next week, many traders have emptied their desks for the entire first week of January, making way for thinner trading volumes and fewer high-end releases. However, plenty of action is expected in the first full week of January 2026 when the US jobs report returns to its normal schedule.

But what are the risks of volatile episodes such as a flash crash or geopolitical flare-up during these quiet days when extreme low liquidity can lead to sudden surges in movement?

Holiday lull or new crisis?

With tensions rising between the US and Venezuela, further escalation is possible. President Trump may decide to take further action against the country by extending military strikes against drug traffickers at sea to Venezuela’s mainland. This week the US blocked all approved oil tankers from entering or leaving Venezuela and Trump may decide to pile more pressure on President Madura.

A fresh strain will probably add to it and to some extent.

There is also a risk of panic selling on Wall Street if the AI ​​jitters persist. Equity markets have not seen a Santa rally this year despite high expectations. But while some prices are clearly overstated, the AI ​​revolution is just getting started, so new winners may enter the scene just as others unexpectedly become losers in the race.

Still, thin liquidity in this year’s slightly longer holiday period raises the risk of a negative AI-related headline triggering a new round of selling in tech stocks if fresh doubts are cast over valuations.

Big decisions await at the beginning of 2026

However, overall investors would probably prefer to stay on the sidelines, as they await two key decisions in early January. First, the U.S. Supreme Court will deliver its ruling on Trump’s rates, ending uncertainty about whether most levies have been announced since April. However, a decision against tariffs may not necessarily be the best outcome, as it could worsen uncertainty and potentially cost the US government billions if it forces businesses to return tariff revenue.

The other big decision is who President Trump will nominate to head the Federal Reserve when Jerome Powell’s term ends in May 2026. Given that Trump keeps changing his mind and has a new favorite on a weekly basis, a surprising choice cannot be ruled out. Moreover, selecting someone who can achieve consensus within the split FOMC. After all, whoever Trump chooses, the new Fed chair will almost certainly be more dovish than Powell, so the announcement is likely less of a risk to markets.

US data to keep markets on edge

Focusing on economic data, the US agenda is by far the busiest. The first highlight is the advance reading for Q3 next week. On Tuesday, the report is expected to show the U.S. economy grew at a solid annual rate of 3.2 percent in the third quarter, much slower than the 3.8 percent shown in Q2. For October and the latest index is also out on the same day.

On Tuesday, December 30, the Fed will publish its December policy meeting. There won’t be a lot of Fed speakers over the Christmas and New Year period and, with that, the minutes will be scrutinized for any clues about the timing of the next rate hike, as well as to see how strong inflation concerns still remain among policymakers who voted to keep rates on hold.

Moving into January, things will start to heat up as the ISM Manufacturing PMI for December is out on Monday, January 5, followed by Jolts’ job openings, the ADP Employment Report and the ISM Services PMI on Wednesday.

NFP report to kickstart the new year

Most importantly, December will be released on Friday, January 9 without any delay. Any further weakness in the labor market in December will fuel expectations for a January rate cut, after mixed payrolls data and a weak expectations report for November.

In particular, if the rate hits a four-year high of 4.6 percent in November, Fed hawks will find it increasingly difficult to defend their position.

Finally, the University of Michigan’s preliminary survey for December will also be published on Friday.

For this, ISM and NFP data are likely to have the biggest impact. Risks to the greenback are currently tilted to the downside so a bad set of prints could add to any selling pressure.

Canada employment numbers are also due on January 9. The money rally against the greenback stalled over the past week after November’s weak CPI prints. But an encouraging labor market report could recharge the bulls.

Does Tokyo CPI Matter After BOJ’s Latest Move?

As most businesses close for the Christmas long weekend, it will be business as usual in Japan. The December data for the Tokyo region comes alongside the November reading for industrial production on Friday, December 26, and.

After the Bank of Japan’s rate hike in December, the focus is now on how soon the next hike will come. The BOJ will publish a summary of the meeting’s views on Monday, December 29, but before then, a rise in inflationary pressures could make the BOJ’s rate hike more difficult, leading to a hike.

Similarly, investors may want to watch the wage growth and household spending numbers that are scheduled for January 8 and 9, respectively.

Australian CPI eyed for RBA clues

Elsewhere in Asia, Chinese manufacturing PMIs may be out on New Year’s Eve and on January 2. But Aussie traders will mainly be watching the November domestic data on Wednesday, January 7.

While the Reserve Bank of Australia is unlikely to announce any policy changes at its next meeting in February, any fallback in monthly CPI, which unexpectedly moved to 3.8% y/y in October, could push back the timing of a potential rate hike, weighing on the Aussie.

Euro and Pound can remove data

In Europe, it will be extremely quiet except for Q3 data out of the UK on Monday, and the Eurozone is forecast for a December flash on Wednesday, January 7.

Both the Bank of England and the European Central Bank have just held their final policy decisions of the year, with neither release nor move in likely.

The ECB is firmly on hold until mid-2026, while any disappointing growth numbers for the UK after the bank delivered a surprise hawkish cut will not be enough to significantly change the outlook for the BOE rate.