The risk appetite is slightly positive early Monday despite mixed geopolitical news, weak data from China, and uncertainty ahead of this week's key U.S. economic reports. Optimism may stem from the Federal Reserve’s dovish stance and hopes for a U.S.-driven Russia-Ukraine peace deal.
The Federal Reserve Chair nomination could be announced this week. Treasury Secretary Scott Bassent has been interviewing candidates to replace Jerome Powell, with indications that President Donald Trump could name a new Fed Chair before Christmas. If the choice is someone like White House Economic Advisor Kevin Hassett, it could raise concerns about political influence over the Federal Reserve's independence.
U.S. Secretary of State Marco Rubio said talks with Ukraine made "additional progress," focusing on Ukraine's long-term security and prosperity. Rubio emphasized the U.S. goal to make Ukraine "safer, stronger, and more prosperous." Ukrainian Defense Minister Rustem Umerov thanked the U.S. team, including Rubio, U.S. envoy Steve Witkoff, and Jared Kushner, for their "tremendous work" and described the talks as “productive and successful.”
Elsewhere, President Donald Trump confirmed he had spoken with Venezuelan President Nicolás Maduro, noting that Venezuela is "not a friendly country" but urging markets not to over-interpret the temporary closure of Venezuelan airspace, which does not signal an imminent military strike.
The Japanese yen strengthened as Japanese government bond yields surged to multi-year highs following Bank of Japan (BOJ) Governor Kazuo Ueda’s speech. Japan's 2-year government bond yield hit 1.00%, its highest in 17 years, while the 5-year yield rose 4 basis points to 1.35%, and the 10-year yield climbed 4.5 basis points to 1.845%, levels not seen since June 2008. Ueda’s hawkish tone suggested the BOJ will consider raising interest rates at its December meeting. Japanese Prime Minister Takaichi also pledged continued fiscal management while closely monitoring interest rate trends.
Japan's Q3 corporate results were mixed. Companies cut capital spending after five quarters of growth, reflecting softer sentiment, partly due to U.S. tariffs. However, profitability surged by 19.7% year-on-year, far exceeding expectations. The BOJ will likely take this divergence into account when evaluating its December policy stance. Japan's November manufacturing PMI showed a slight improvement to 48.7, suggesting stabilization, although weakness in orders, especially in autos and semiconductors, continues to pressure JPY-sensitive sectors.
Bundesbank President and ECB policymaker Joachim Nagel stated that ECB rates are near neutral, as the inflation outlook stabilizes ahead of December's forecasts. This has reinforced expectations that the ECB will keep rates unchanged for now, supporting euro resilience and stabilizing euro-area yield curves.
In the UK, the Confederation of British Industry (CBI) reported a sharp drop in services sector optimism to a three-year low, driven by rising costs that squeezed profitability. The CBI’s services optimism index dropped to –50 in November, from –29 in August, signaling weaker demand.
Gold prices rose, while silver surged more than 5%, extending a six-day rally. In China, November PMI data indicated the economy is losing momentum. The official manufacturing PMI rose to 49.2, still in contraction for the eighth consecutive month, while non-manufacturing slipped to 49.5, marking its first decline since late 2022. A private manufacturing PMI survey from RatingDog fell to 49.9, from 50.6 in October, with weaker domestic orders overshadowing stronger export demand. Smaller, export-oriented manufacturers saw a return to contraction, signaling a slowdown after three months of modest growth.
In Australia, the Melbourne Institute inflation gauge remained firm, with the monthly Consumer Price Index (CPI) rising 0.3% month-on-month and the annual CPI edging up to 3.2%. This supports expectations that the Reserve Bank of Australia (RBA) will remain cautious. However, Q3 inventories fell by 0.9%, worse than the expected 0%, which could negatively affect Wednesday’s GDP report.
In New Zealand, October building permits fell by 0.9% month-on-month, following a prior increase of 7.3%. Anna Breman, the first woman and first foreigner to lead the Reserve Bank of New Zealand, begins her term this week, with a mandate to restore credibility and stability to the central bank after a period of tension under her predecessor, Adrian Orr.
OPEC+ agreed to maintain its oil production quotas for 2026 and approved a long-awaited framework to assess each member’s maximum production capacity. A subset of eight OPEC+ producers also agreed in principle to extend their output freeze through Q1 2026. Oil prices rose following this decision, as the U.S. continues to push for a Russia-Ukraine peace deal, which could significantly impact the oil market. A successful peace deal could bring sanctioned Russian crude back into the market, while failure could tighten supplies further.
Meanwhile, the U.S. Dollar Index (DXY) fell to a two-week low, pressured by dovish Fed expectations, supporting both gold and crude oil prices. Major currencies remained firm, but the Australian Dollar (AUDUSD), New Zealand Dollar (NZDUSD), and Canadian Dollar (USDCAD) stalled due to concerns over China and mixed domestic data. Cryptocurrencies slumped, while equities stayed sidelined, and bond yields remained stable ahead of the key week for U.S. data.
The U.S. Dollar's weakness and the potential for a Ukraine-Russia peace deal favored EURUSD to stay firmer after a positive week, also supported by a likely trade deal resolution with the U.S. Additionally, the Euro gained from a slightly hawkish tone from an ECB official.
Meanwhile, GBPUSD ignored negative UK sentiment data and concerns about the UK budget's impact, managing to halt a two-day losing streak, especially amid a softer USD.
USDJPY, on the other hand, benefited from several factors: a hawkish Bank of Japan (BoJ) bias, the Yen’s role as a safe-haven asset, and a weaker USD, as it hit a 10-day low during its three-day losing streak.
AUDUSD ended its six-day winning streak, while NZDUSD also posted its first loss in five days. Meanwhile, USDCAD bounced off a four-week low, breaking its four-day losing streak, despite strong crude oil prices, which are a key export for Canada. This shift could be attributed to a softer USD and the market’s cautious optimism, even in the face of disappointing China PMI data.
WTI crude oil began the trading week with an upside gap, supported by OPEC+ (Organization of the Petroleum Exporting Countries and its allies) maintaining its output policy. Crude oil buyers were also encouraged by discussions around potential forced policy measures for some OPEC+ members, as well as optimism that the global economy will improve, leading to higher energy demand. However, concerns about potential increased Russian output if the war with Ukraine ends, combined with weak data from China and ongoing issues in the Chinese property sector, created some pressure on oil buyers. Despite these challenges, the bullish momentum remained strong, and the market couldn’t stop the rise.
Gold rose to a six-week high on softer USD and the market’s traditional haven status, backed by China’s heavy demand and technical breakout.
On the other hand, cryptocurrency slumped as Bitcoin dropped again, falling from above $91K to under $88K amid concerns over Tether’s reserves. S&P downgraded Tether’s ability to maintain its USD peg, citing risks related to its Bitcoin and gold reserves. BitMEX co-founder Arthur Hayes warned that Tether could become insolvent if the value of its reserves dropped by about 30%, although the specific cause of Bitcoin’s price drop remains unclear.
Meanwhile, the Asia-Pacific equities edged higher after downbeat China data joined the hawkish BoJ bets and cautious mood ahead of this week’s top-tier U.S. data/events.
Monday’s economic calendar will feature November Manufacturing PMIs for Germany, the EU, Canada, and the U.S., along with developments in the Ukraine-Russia peace talks and ongoing Federal Open Market Committee (FOMC) rate expectations.
During the week, the potential announcement of a successor to Federal Reserve Chair Jerome Powell, U.S. ISM PMIs, PCE data, Canadian jobs numbers, and Swiss CPI.
With a December Federal Reserve rate cut almost confirmed, markets will be focused on data that could guide 2026. Strong statistics may have little impact on the U.S. Dollar, especially after it broke key short-term support. This could favor equities and commodity-linked currencies, while cryptocurrencies may continue to struggle for different reasons.
May the trading luck be with you!
