On Wednesday morning, markets appeared slightly positive, boosted by higher chances of a Fed rate cut in December, weak U.S. economic data, and hopes for Ukraine-Russia peace talks. However, growing concerns over Taiwan and doubts about the U.S. Federal Reserve's independence, especially with Kevin Hassett’s potential nomination for Fed chair, dampened the mood.
U.S. economic data, delayed due to the recent government shutdown, showed mixed results. Retail sales for September rose by 0.2%, while the Producer Price Index (PPI) increased by 0.3%. Consumer confidence sharply fell to 88.7, the second-lowest reading since April, signaling concerns about a potential recession.
In housing, the Case-Shiller Home Price Index rose by 1.4% year-over-year in September, while pending home sales increased by 1.9% in October. However, labor market data showed a negative trend, with private employers losing an average of 13,500 jobs per week over the past four weeks.
Expectations for a Fed rate cut in December surged to 83%, up from 35% last week after comments from New York Fed President Williams.
In bond markets, yields dropped due to rate cut expectations, with 2-year yields at 3.458% and 10-year yields at 4.001%.
Geopolitical risks remained high, with renewed hopes for Ukraine-Russia peace despite previous setbacks. Meanwhile, Taiwan expressed concerns over China’s military pressure, and Beijing warned Japan and Taiwan against interference.
The Australian dollar rose after stronger-than-expected inflation data for October, suggesting the Reserve Bank of Australia may hold off on rate cuts.
The RBNZ cut rates by 25 basis points, with expectations that this might be the final cut of the cycle, boosting the NZD. Meanwhile, oil prices were mixed, with a private survey showing a crude oil draw.
The U.S. Dollar Index dropped to a week’s low for the fourth straight day, allowing major currencies and commodities to strengthen. However, the NZDUSD ignored the RBNZ rate cut, as the central bank's governor suggested no more cuts until 2026. The USD also softened, benefiting the AUD and other currencies. Cryptocurrencies trimmed earlier gains, and the USDJPY remained flat at a four-day low. The EURUSD rose to a weekly high, while the GBPUSD climbed for the fifth consecutive day, reaching a two-week high ahead of the key UK budget. Notably, Wall Street marked a strong day, despite a sluggish start, amid a rally in the technology shares and the market’s optimism.
Major currencies strengthened early Wednesday, lifted by broad U.S. Dollar weakness and cautious market optimism. EURUSD extended its three-day rally and held at weekly highs, while GBPUSD climbed for the fifth straight day near a two-week high ahead of today’s UK budget. USDJPY stayed flat at its lowest level in four days as traders weighed Japan-China tensions, concerns about a possible Bank of Japan rate hike, and mixed Japanese data.
AUDUSD posted its strongest rise in two weeks and hit a weekly high, extending a four-day uptrend as stronger Australian inflation reduced expectations of RBA rate cuts and a softer USD supported broader risk-on sentiment. USDCAD continued its decline to a four-day low, overlooking weaker crude oil prices, Canada’s key export, while benefiting from the softer USD and improved outlook for Canada’s economic transition and potential trade agreements with major economies.
The RBNZ delivered a 0.25% rate cut as expected, but NZDUSD posted its biggest jump since May after Governor Hawkesby signaled no more cuts are likely before early 2026 and declined to reveal the vote breakdown behind today’s decision. Hopes for a possible China stimulus and a potential NZ-US trade deal also supported the Kiwi.
Oil prices remain under pressure despite a brief rebound from a one-month low after a surprise crude inventory draw in the latest API data. The market is ignoring the softer USD, weighed down instead by expectations of higher Russian output if the Ukraine-Russia war winds down, the possibility of an OPEC+ production increase, and the lack of new supply disruptions in Venezuela. Concerns about weaker global demand due to ongoing trade and geopolitical tensions add further downside pressure.
Spot Gold (XAUUSD) climbed to its highest level since November 14, supported by the softer USD, rising expectations of a Fed rate cut in December—now near 85% compared with 50% last week—and its traditional status as a safe-haven asset.
Bitcoin (BTC) and Ethereum (ETH) traded mixed but slightly higher, helped by the softer USD and cautious optimism, though technical breakdowns and a wary institutional outlook continued to cap gains.
U.S. stocks were choppy early after reports that Google and Meta may shift AI workloads to Google’s custom chips, pressuring Nvidia and AMD while lifting Alphabet. Even so, major indices closed higher, with the Dow up 1.43%, the S&P rising 0.91%, and the NASDAQ gaining 0.67%.
In corporate news, HP announced a companywide AI transformation that will cut 4,000–6,000 jobs by 2028.
After a volatile Asian session, Wednesday is expected to be busy, with the UK’s annual budget release joining a slew of U.S. data and key events. Durable Goods Orders, initial Jobless Claims, ECB President Lagarde’s speech, other central bank talks, updates on the Ukraine-Russia peace deal, China-Japan and China-Taiwan tensions, and the odds of a December Fed rate cut will shape markets.
Markets’ reassessment of December FOMC odds, along with weak U.S. data, could add pressure on the USD, supporting risk assets like equities and cryptocurrencies amid trade and geopolitical optimism. Still, the USD is approaching a short-term key support, so any stronger-than-expected data could lift the greenback, weigh on cryptocurrencies, and slow equities’ recent gains. Gold is likely to remain firm amid mixed market sentiment, while antipodeans like AUD and NZD may hold their recent gains if the USD stays soft.
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