In an unexpected turn of events, the financial markets have been significantly impacted by the rising popularity of DeepSeek, an AI model developed by a China-based company. This development has overshadowed OpenAI's ChatGPT in the US market, leading to a swift decline in the stock market, with NASDAQ plunging over 3%. At the same time, the USD has shown modest strength, supported by rebounding US bond yields and US President Donald Trump's uncertain trade policies. The USD/JPY pair has bounced back above the psychologically significant 155.00 mark, while RBA rate cut bets and China's economic struggles have driven spot prices away from a one-month peak.
The unexpected surge in DeepSeek's popularity has sent shockwaves through the tech sector, prompting several Chinese companies to make their AI model offerings open source. This strategic move is reshaping the competitive landscape in AI technology and affecting cryptocurrency markets. Bitcoin, for instance, slipped below $100,000 as DeepSeek's influence grew.
In addition to these developments, the non-yielding yellow metal, XAU/USD, faces challenges due to rebounding US bond yields. Fed rate cut bets and a weaker risk tone are anticipated to limit XAU/USD's downside, yet the headwinds remain strong. Meanwhile, service-sector inflation data from Japan has been released, adding another layer of complexity to the global financial landscape.
The USD's modest strength is further supported by the rebounding US bond yields, which continue to bolster the currency. However, the implications of President Trump's trade policies remain uncertain, providing additional support to the USD against other major currencies.
The article emphasizes that these views and opinions do not reflect the official policy or position of FXStreet. Market participants are advised to remain vigilant as they navigate this volatile environment. Global economic factors, including RBA rate cut bets and China's economic issues, continue to play a pivotal role in shaping market dynamics.