Markets have thus far largely brushed off deepening geopolitical fractures around the world, with stocks rallying and currencies and bonds little budged following the U.S. intervention in Also on traders' radar, China on ‌Tuesday banned exports ‌of dual-use items to Japan that can be used for military purposes, marking Beijing's latest move in reaction to an early November remark by ‌Japanese Prime Minister Sanae Takaichi about Taiwan. "I think there is still a lot of uncertainty as to whether the regime ...

Core Viewpoint - The U.S. dollar is under pressure, leading to gains in the euro and pound, as the Federal Reserve's recent rate cut and comments from Fed Chair Jerome Powell were perceived as less hawkish than expected, reinforcing dollar selling momentum [1][6]. Group 1: Currency Movements - The euro was steady at $1.1741 after a 0.37% rise, while the pound was firmer at $1.33955, both poised for their third consecutive week of gains [1]. - The dollar index, measuring the U.S. currency against six major rivals, was at 98.34, set for a weekly drop of 0.7% and down over 9% this year, on track for its steepest annual drop since 2017 [6]. - The Japanese yen is expected to gain slightly, trading at 155.61 per dollar, while the Australian dollar remained steady at $0.6667 and the New Zealand dollar was 0.14% firmer at $0.5815 [7][9]. Group 2: Federal Reserve and Monetary Policy - The Federal Reserve cut rates as expected, but the comments from Powell were seen as less hawkish, which may help avoid negative surprises for investors [2][6]. - There is uncertainty regarding the U.S. monetary policy path next year, with traders pricing in two rate cuts in 2026, while policymakers anticipate only one cut next year and one in 2027 [6]. - Economic data lagging from the recent federal government shutdown will influence future monetary policy decisions, with the upcoming midterm elections likely focusing on economic performance [6]. Group 3: Economic Outlook - The Swiss National Bank maintained its policy rate at 0% and noted that a recent agreement to reduce U.S. tariffs on Swiss goods has improved the economic outlook, despite inflation being below expectations [8][9]. - Concerns regarding the U.S. labor market are expected to drive the Federal Open Market Committee (FOMC) to consider further interest rate cuts next year [6].

Core Viewpoint - The first week of December exhibited a dip-buying seasonal pattern with major indices rising, while significant price movements occurred in the forex market due to changing central bank expectations and improved global risk sentiment [1] Forex Market Analysis - The U.S. Dollar underperformed against G10 currencies, influenced by softer private employment data, mixed labor indicators, and a decrease in the Fed's preferred inflation gauge to its lowest year-on-year level since May, reinforcing expectations for a rate cut [2] - Despite a rebound in longer-dated Treasury yields, this did not significantly boost the Dollar as investors shifted towards higher-beta currencies amid improved risk sentiment [3] Currency Performance - The Swiss Franc lagged as defensive positioning faded, with rising yields outside Switzerland and stable equity markets [4] - The Euro struggled to gain traction despite the Dollar's weakness, hindered by concerns over the euro area's growth and yield advantages [4] - The Australian Dollar rose sharply, driven by market speculation that the RBA may need to resume tightening in 2026, supported by comments from Governor Michele Bullock regarding inflation risks [4][5] - The Canadian Dollar also strengthened due to robust labor market data, leading to expectations that the Bank of Canada will maintain rates into 2026, while Sterling benefited from positive sentiment following the Autumn Budget [5] Market Focus and Expectations - The upcoming week is centered on the Fed's December decision, with the CME FedWatch tool indicating a nearly 90% probability of a rate cut [10] - With the rate cut already priced in, the focus will shift to how the Fed communicates its easing trajectory into 2026 and whether upcoming market data supports a more aggressive rate-cut profile [11]

Group 1 - The article provides a market analysis focusing on various currency pairs including the US Dollar against the Japanese Yen, Australian Dollar, and New Zealand Dollar, as well as the US Dollar Index Futures [1] Group 2 - The analysis highlights the performance trends of the US Dollar in relation to other currencies, indicating potential investment opportunities and market movements [1] Group 3 - The report emphasizes the importance of monitoring these currency pairs for investors looking to capitalize on foreign exchange fluctuations [1]

Group 1 - The article provides a market analysis covering various financial instruments including the Australian Dollar, New Zealand Dollar, Gold Spot against the US Dollar, S&P 500, and Dow Jones Industrial Average [1] Group 2 - The analysis highlights the performance trends of the Australian Dollar and New Zealand Dollar, indicating fluctuations in their values against major currencies [1] - Gold Spot prices are discussed in relation to the US Dollar, reflecting changes in investor sentiment and market conditions [1] - The S&P 500 and Dow Jones Industrial Average are analyzed for their performance metrics, showcasing the overall health of the equity markets [1]

Core Insights - The rebound in the dollar was short-lived due to renewed strains in U.S.-China trade relations, leading investors to seek safe havens like the yen and Swiss franc [1][4] - Despite a temporary conciliatory tone from U.S. President Trump regarding tariffs, tensions between the U.S. and China remain high, as indicated by recent developments [2][5] - Beijing's countermeasures against U.S.-linked subsidiaries and the introduction of additional port fees by both nations have escalated trade tensions [3][6] Currency Movements - The dollar experienced a broad decline, with the euro rising 0.14% to $1.1585 and sterling increasing 0.12% to $1.3351 [4] - The Australian dollar, a risk appetite proxy, fell 0.63% to $0.6475, while the New Zealand dollar decreased by 0.5% to $0.5697 [4] - Safe-haven currencies like the Swiss franc and yen gained against the dollar, with the Swiss franc up 0.2% to 0.8027 and the yen rising 0.3% to 151.86 [6][7] Geopolitical Context - The current U.S.-China relationship is characterized as a structural feature of new geoeconomic realities, indicating that tensions are unlikely to resolve easily [5][6] - China's commerce ministry has communicated with the U.S. regarding rare earth export controls, highlighting ongoing negotiations despite the tensions [6]

Currency Market Overview - The Japanese yen is experiencing a significant decline, currently at 153.12 per U.S. dollar, marking a nearly 4% drop for the week, the largest since early October last year [1][10] - Concerns are rising that the Bank of Japan may not raise interest rates again this year, particularly following comments from potential future Prime Minister Sanae Takaichi [2][10] - Traders are pricing in a 45% chance of a rate hike from the Bank of Japan in December, with a full 25 basis point hike expected in March [5][10] Euro and Political Turmoil in France - The euro is trading at $1.15635, close to two-month lows, and is on track for a 1.5% weekly drop, the sharpest decline in 11 months due to political instability in France [6][10] - French President Emmanuel Macron is seeking his sixth prime minister in under two years, complicating efforts to pass a budget amid a significant deficit [6][7][10] - The political paralysis in France has led to increased volatility in FX markets as traders adjust their positions based on central bank expectations and political risks [7][10] U.S. Dollar Performance - The U.S. dollar index is at 99.4, near a two-month high, and is on course for a 1.7% gain, the largest increase in a year [7][10] - Market sentiment is mixed regarding the dollar's ability to surpass the 100 level in the index, with skepticism about sustained upward movement [8][10] - Traders are anticipating a 95% chance of a 25 basis point rate cut by the Federal Reserve in October, with the likelihood of an additional cut in December decreasing to 80% [8][10] Other Currencies - The Australian dollar is slightly up at $0.6563, while the British pound is at $1.33044, close to its two-month low [8][10] - The New Zealand dollar is at $0.57475, near a six-month low after a 50 basis point rate cut by its central bank, indicating concerns about the economy [9][10]

Core Insights - The U.S. dollar is experiencing a strong performance, on track for its best week in nearly a year, primarily due to the weakness of the Japanese yen and political turmoil in Japan and France [10][11] - The Japanese yen is expected to weaken further, especially with the confirmation of Takaichi as Prime Minister and the upcoming Bank of Japan (BOJ) meeting, which may signal no interest rate hikes in the near term [1][10] - The euro is facing pressure from France's political crisis, following the resignation of Prime Minister Sebastien Lecornu, although a new prime minister is expected to be appointed soon [2][11] Currency Performance - The euro last traded 0.09% higher at $1.1639, reversing three consecutive days of losses, but remains nearly 0.9% down for the week [3][11] - The U.S. dollar is up more than 1% for the week, supported by the movements in the yen and euro, while the British pound rose 0.07% to $1.3413 and the Australian dollar increased by 0.11% to $0.6594 [3][11] - The New Zealand dollar edged up 0.1% to $0.5792 after a significant interest rate cut of 50 basis points by the Reserve Bank of New Zealand, indicating concerns about the economy [5][11] Federal Reserve Insights - Federal Reserve officials acknowledged increased risks to the U.S. job market that may justify a rate cut, but they remain cautious about high inflation [6][11] - Markets are still pricing in two more rate cuts by year-end, with expectations of approximately 44 basis points of easing by December, despite potential delays in economic data due to a prolonged U.S. government shutdown [7][9][11]

Core Viewpoint - The yen carry trade is expected to make a comeback due to the anticipated slower interest-rate hikes under Sanae Takaichi's leadership, which could attract traders back to borrowing the low-yielding yen to invest in higher-yielding currencies [1][2][4]. Currency Market Reaction - Japan's currency has depreciated approximately 2% against G-10 currencies this week, driven by expectations of Takaichi's pro-stimulus policies leading to a delayed timeline for the Bank of Japan's (BOJ) policy tightening [2][4]. - The yen is nearing a six-month low against the dollar, with market concerns about increased government spending and inflation under Takaichi's potential administration [4][6]. Interest Rate Expectations - Market participants have reduced their expectations for immediate policy tightening, with swaps indicating a 22% chance of a BOJ rate hike at the upcoming meeting, down from about 57% prior to the leadership vote [6]. - Etsuro Honda, an advisor to Takaichi, suggested that a rate increase this month would be premature, advocating for a more suitable timing in December [5]. Carry Trade Dynamics - Analysts believe that if Takaichi maintains her stance that a weak yen is not detrimental to Japan's economy and opposes rate hikes, the carry trade could resume, leading to further yen depreciation [8]. - Masayuki Nakajima from Mizuho Bank predicts that yen selling may accelerate, potentially pushing the currency towards 180 per euro [7].

Group 1: Market Overview - The global foreign exchange market experienced significant volatility this week, influenced by trade negotiations, Federal Reserve interest rate decisions, global central bank policy dynamics, and geopolitical risks [1][6] - The focus of the market is on the progress of tariff negotiations, the direction of Federal Reserve policies, and the performance of global economic data, with geopolitical risks and trade policy uncertainties remaining key factors affecting market sentiment [6] Group 2: Dollar Performance - The US dollar index showed a fluctuating trend, opening around 99.8, reaching a high of 100.64, with an increase of approximately 1.03% [3] - Initially pressured by expectations that the Federal Reserve might maintain interest rates, the dollar rebounded after comments from Fed Chair Powell regarding inflation and trade policy, closing at 100.42 [3] - The dollar exhibited "bull-bear divergence," with investors remaining cautious due to the complexity of US economic data and global economic uncertainties [3] Group 3: Euro and Pound Performance - The euro experienced a volatile week, initially rising for two consecutive trading days before declining on Wednesday and Thursday, closing with a slight rebound at 1.12511 [3] - The euro is expected to face long-term resistance at 1.2150, with insufficient upward momentum, likely maintaining a narrow ascending channel in the short term [3] - The British pound weakened due to uncertainties surrounding the Bank of England's interest rate decision and economic data, closing around 1.3300 [3] Group 4: Safe-Haven and Commodity Currencies - Safe-haven currencies like the yen and Swiss franc performed poorly this week, with the USD/JPY pair showing a V-shaped trend as market risk aversion eased amid tariff negotiations [4] - Commodity currencies were mixed, with the Australian dollar weakening due to global economic growth concerns and commodity price fluctuations, while the Canadian dollar stabilized and rebounded due to rising oil prices [5] Group 5: Global Central Bank Dynamics - Several central banks maintained their policies this week, including the Federal Reserve and the Bank of Japan, which continued their accommodative stances [7] - The Norwegian central bank kept high interest rates to address rising inflation [7] - The Hong Kong Monetary Authority took actions to stabilize the Hong Kong dollar, emphasizing the importance of regional financial stability [6][7]