Market sentiment was slightly positive on Monday, following a tough week, driven by mixed signals from the U.S. Federal Reserve and anticipation of key economic data. Headlines suggested that the U.S. would release delayed data, including the September employment report, due on Thursday. There is also cautious optimism that U.S.-China trade relations may improve, though geopolitical tensions continue to rise. However, anxiety over the upcoming employment report, November PMI readings, and FOMC meeting minutes kept some traders on edge, especially with concerns about the potential cost of a U.S. government shutdown.
Over the weekend, there was a flurry of central bank commentary. Atlanta Fed President Raphael Bostic expressed caution about supporting another rate cut in December, emphasizing that data should dictate further easing.
European Central Bank member Olli Rehn warned that inflation in the euro zone could fall below the ECB's 2% target, driven by weak energy prices and a stronger euro, though he did not rule out a December rate cut.
In U.S. politics, former Fed Governor Adriana Kugler came under scrutiny for violating personal trading rules, though it's unclear whether the trades were hers or her husband's.
Geopolitical tensions also escalated between Japan and China. Four Chinese Coast Guard vessels entered Japanese-controlled waters near disputed islands, and China issued travel warnings for its citizens visiting Japan. Japan will send a senior diplomat to Beijing in an effort to stabilize relations.
In the Americas, U.S. Secretary of State Marco Rubio announced plans to designate Venezuela’s Cartel de los Soles as a Foreign Terrorist Organization, accusing it of corrupting Venezuelan institutions and collaborating with other terrorist groups in drug trafficking. This development comes as the U.S. continues to increase its military presence near Venezuela.
In Japan, the government is preparing a ¥17 trillion stimulus package to help ease cost-of-living pressures and boost investment in AI and semiconductors. The package is expected to be approved later this week. Japan’s preliminary Q3 GDP showed a contraction of 1.8%, slightly better than the expected 2.4% decline, but still the first drop in six quarters. Japanese government bond yields continued to climb, signaling a major shift after two decades of low-to-negative rates. This marks the beginning of a significant global market shift that may not be smooth.
In the U.K., housing market data showed that asking prices fell sharply in early November, driven by uncertainty ahead of Chancellor Rachel Reeves’ budget. The average asking price dropped 1.8% over the four weeks to November 8, the steepest seasonal drop since 2012. This was partly due to a surge in available supply and concerns about expected tax increases.
In New Zealand, the Food Price Index dropped by 0.3% month-on-month, and the services PMI showed a slight improvement but remained in contraction. Meanwhile, China is ramping up its gold purchases, which could be ten times higher than reported, as part of its strategy to de-dollarize its economy.
Against this backdrop, the U.S. Dollar Index (DXY) bounced off a two-month support level, following a two-week downtrend, while USDJPY extended its corrective bounce, reaching new highs. Other major currencies traded mixed, oil retreated slightly, and cryptocurrencies showed mild gains. Wall Street closed mixed, while Asia-Pacific shares edged higher. Gold ended a two-day losing streak but lacked strong recovery momentum.
EURUSD and GBPUSD both post a two-day losing streak early Monday as the U.S. Dollar’s rebound joins cautious remarks from the ECB official and the UK housing market woes. Additionally, geopolitical tensions surrounding the Eurozone and anxiety ahead of the November 26 British Budget also exert downside pressure on the Euro (EUR) and the British Pound (GBP).
USDJPY posted mild gains after a strong week, supported by a slightly firmer market mood and the U.S. Dollar’s recovery, alongside fresh economic and political updates from Japan. While Japan’s Q3 GDP fell short of expectations and disappointed BoJ hawks, mixed data on industrial production and capacity utilization, along with rising geopolitical tensions in Tokyo, tested the USDJPY bulls. The bulls are eyeing the key 155.00 level, which the Bank of Japan has been aggressively defending recently.
The currencies of Australia, New Zealand, and Canada post losses early Monday, following an upbeat week, as previous optimism surrounding China stimulus and upbeat data at home fades. Also weighing on the Antipodeans could be the mixed data/updates from Australia and New Zealand, as well as the downbeat prices of WTI crude oil, Canada’s key export. Above all, the USD’s preparations for this week’s bumper data/events and earnings from top-tier equity firms like Nvidia, Walmart, and Home Depot, seem to weigh on the AUDUSD and NZDUSD, as well as trigger the USDCAD’s rebound.
On Friday, Wall Street opened lower but managed to recover and close flat for the day. Technology stocks showed strong momentum early on, but the enthusiasm faded by the close, leaving most major indices flat for the week. The S&P 500 finished unchanged, the Nasdaq rose by 0.1%, and the DJIA dropped 0.6%.
Early Monday, U.S. equity futures saw a slight uptick after news broke that Berkshire Hathaway had acquired a $4.3 billion stake in Alphabet.
Meanwhile, Bitcoin (BTC) and Ethereum (ETH) reversed Sunday’s losses, ending a three-week downtrend as the market consolidated ahead of a big week. The rebound came despite the U.S. Dollar’s recovery. Notably, Japan’s actions seemed to benefit crypto traders, and there was speculation that MicroStrategy's Michael Saylor had not sold significant amounts of BTC in the past week, which some believe could have weighed on Bitcoin’s price.
As Monday unfolds, the market will digest a mix of mid-tier data from Europe, Canada’s inflation figures, and updates from Japan, setting the stage for the week ahead.
However, all eyes will be on Thursday and Friday’s key U.S. economic releases, particularly with the official confirmation of the September U.S. Non-Farm Payrolls (NFP) report due on November 20.
Along with other crucial data, this could help the U.S. Dollar recover some of its recent losses ahead of the December FOMC meeting.
A stronger USD may put additional downward pressure on risk assets such as equities, cryptocurrencies, and the Antipodean currencies, while gold could edge higher as investors seek safe-haven assets. As the market braces for these major events, volatility is likely to pick up, and the data will shape the outlook for the remainder of the year.
May the trading luck be with you!
