Global markets saw strong activity on Monday, driven by a risk-on mood following news of a ceasefire between Israel and Lebanon. This weighed on safe-haven assets like the US Dollar and Gold while boosting Crude Oil prices. Dovish comments from the US Fed, ECB, and BoE supported sentiment. However, concerns over trade and geopolitical developments and caution ahead of key data later in the week led to a rebound in Gold and the US Dollar.
US President-elect Donald Trump announced plans to impose tariffs on the US’s top three trading partners, including a 25% tariff on Mexico and Canada, and a 10% tariff on Chinese goods. He also reiterated his pledge to end the wars but provided no details on his strategy. Meanwhile, NATO's Admiral Rob Bauer urged businesses to prepare for a "wartime scenario," advising production lines be brought back home from countries like China and Russia.
In response to Trump’s tariff plans, China warned that no one would win a trade war, while Canada’s PM Justin Trudeau called Trump to discuss trade and border security.
Elsewhere, the EU proposed sanctions on Chinese individuals and companies with ties to Russian firms involved in Moscow's war effort in Ukraine. Germany's defense minister stated that the Russia-Ukraine war has become an international conflict.
Lastly, the Financial Times reported that Russia is planning cyber-attacks on NATO members, including Britain, to undermine support for Ukraine.
While the US Dollar started the week weaker, EURUSD briefly bounced off its yearly low. However, disappointing German Ifo Business Sentiment data for November and dovish comments from ECB officials pulled the pair back toward recent lows. President of the Deutsche Bundesbank and a European Central Bank (ECB) member Joachim Nagel highlighted growth risks and supported gradual rate cuts. At the same time, ECB Chief Economist Philip Lane suggested flexibility on the pace and scale of rate moves.
Meanwhile, Japan’s Prime Minister Shigeru Ishiba called for greater business cooperation on wage hikes, and Japan’s October PPI Services rose to 2.9% YoY, up from 2.6%.
GBPUSD struggled to hold onto the previous day’s bounce from a 13-month support line, amid mixed news from the UK. The British Retail Consortium’s November shop price index showed a slight improvement at -0.6% YoY, compared to -0.8%. However, Bank of England policymaker Swati Dhingra stated that the economic outlook is uncertain and difficult to predict, adding that the UK no longer stands out for high inflation among advanced economies.
Trump’s tariff plans for China and Canada weighed heavily on commodity-linked currencies, particularly the Canadian Dollar (CAD), amid falling crude prices. The AUDUSD hit its lowest point since August, while NZDUSD dropped to a new low since November 2023, as traders anticipate a rate cut by the Reserve Bank of New Zealand (RBNZ). Meanwhile, USDCAD saw its biggest daily jump in seven months.
Gold experienced its biggest daily drop since June, and Crude Oil also fell on Monday as market sentiment shifted. On Tuesday, Gold struggled to recover as the US Dollar rebounded, while Crude Oil bears paused amid talks of a delay in the OPEC+ supply increase deal.
On Monday, Bitcoin (BTCUSD) experienced a sharp drop after failing to break the $100K mark. However, it quickly recovered following Rumble’s announcement to allocate up to $20 million of its cash reserves to Bitcoin as part of a treasury diversification strategy. Meanwhile, Ethereum (ETHUSD) saw increased buying pressure, helping ETH bulls maintain their momentum despite Bitcoin's decline.
CB Consumer Confidence, Fed Minutes and Central Bank Talks Eyed
Looking ahead, the FOMC meeting minutes and November’s CB Consumer Confidence data will be in focus, along with a speech from BoE Chief Economist Huw Pill at the UK’s House of Lords. Geopolitical and trade war developments also remain key, as they could lead to unexpected market moves.
With the US Dollar recovering, supported by a risk-off mood, hawkish Fed signals, and strong US data, the Greenback could continue its recent rally, pressuring Gold and major currency pairs like EURUSD and GBPUSD. The USDJPY may stay under pressure due to its haven status and carry trade dynamics, while the Antipodean currencies will likely remain vulnerable unless a sharp risk-on shift occurs.
Predictions for Key Assets
May the trading luck be with you!
