It was a rally and reverse kind of Monday for the U.S. dollar, as traders returned from their Thanksgiving holidays eager to price in NFP expectations and Fed policy biases.
Commodities like gold and crude oil also enjoyed elevated volatility while bitcoin hovered just below its record highs.
Here are the latest updates driving financial market price action:
Headlines:
- Japan capital spending jumped 8.1% q/y in Q3 (6.7% forecast, 7.4% previous), suggesting resilient business confidence
- Australia showed mixed economic signals:
- Retail sales rose 0.6% m/m in October (0.4% forecast)
- Company operating profits fell 4.6% q/q in Q3 (0.6% expected)
- China Caixin manufacturing PMI rose to 51.5 (50.6 forecast) from 50.3 in November
- European manufacturing PMIs mostly disappointed:
- Italian manufacturing PMI: 44.5 (46.1 expected, 46.9 previous)
- French final manufacturing PMI: downgraded to 43.1 from 43.2
- U.K. final manufacturing PMI: revised down to 48.0 from 48.6
- Canada manufacturing PMI improved to 52.0 (50.8 forecast) from 51.1, reaching its strongest level since early 2023
- U.S. ISM Manufacturing PMI rose to 48.4 (47.7 forecast) from 46.5, though tariff concerns emerged
- FOMC official Waller indicated he’s leaning towards an interest rate cut in December
- Trump threatened 100% tariffs on a bloc of nine nations if they were to create a rival currency to the U.S. dollar
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Markets showed mixed price action as traders digested various manufacturing PMI reports and comments from FOMC member Waller, while keeping a close eye on geopolitical developments.
The trading day began with positive momentum following better-than-expected Chinese manufacturing figures. Crude oil bulls were in a good mood for the most part of the Asian and London sessions, before tanking during the U.S. session despite strong manufacturing PMI reports.
Gold was off to a rough start but eventually pulled higher as the London market hours rolled along, then retreated back to negative territory before the end of the U.S. session.
FOMC member Waller’s comments suggesting openness to a December rate cut likely contributed to a bit of dollar weakness, along with fresh geopolitical tensions stemming from Trump’s threats to impose tariffs on BRICS nations.
Still, U.S. equity indices managed to cruise higher and hold on to modest gains, with the S&P 500 up 0.29%. The dollar index (DXY) closed up 0.65%, while gold retreated 0.28% and WTI crude declined 0.35%.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Major Currencies Chart by TradingView
The U.S. dollar demonstrated broad-based strength against its major counterparts, likely supported by a combination of strong U.S. manufacturing data and Waller’s carefully-worded comments about a December cut.
The Australian dollar showed particular weakness despite positive retail sales data, possibly due to disappointing company operating profits. The euro faced pressure following weaker-than-expected manufacturing PMIs across the eurozone and political backlash in France while the British pound’s losses may have been amplified by the downward revision to the economy’s manufacturing PMI.
The Canadian dollar showed relative resilience, likely supported by stronger-than-expected domestic manufacturing data, though it still ended lower against the greenback.
Upcoming Potential Catalysts on the Economic Calendar:
- Swiss CPI at 7:30 am GMT
- Spanish unemployment change at 7:45 am GMT
- U.S. JOLTS job openings data at 3:00 pm GMT
- U.S. RCM/TIPP Economic Optimism Index coming up
- New Zealand GDT auction coming up
- FOMC member Kugler’s speech at 5:35 am GMT
- FOMC member Goolsbee’s speech at 8:45 pm GMT
Volatility could kick into high gear for the Swiss franc during the London session, as the economy gears up to print its latest CPI reading that could impact SNB policy expectations.
Later in the day, NFP expectations could take center stage while Uncle Sam prints the JOLTS job openings figure for October. Fed rhetoric could also influence U.S. dollar direction with a couple of FOMC member scheduled to deliver testimonies.
Make sure you’re glued to the tube in case we see increased volatility during their events, and don’t forget to check out our Currency Correlation tool when taking any trades!