Despite mixed geopolitical developments and mostly positive US economic data, financial markets continue to reflect the post-US election mood, keeping the US Dollar strong. However, caution remains as traders await key economic reports from the UK and US, while uncertainty over Donald Trump's cabinet picks adds to the overall tension.
In addition to the market sentiment, Thursday’s strong US Producer Price Index (PPI), softer Jobless Claims, and Fed Chair Powell’s unexpected defense of higher rates set the US Dollar Index (DXY) up for its biggest weekly gain since late September. Moreover, several Federal Reserve officials opposed faster rate cuts, while weaker data from outside the US further boosted the Greenback’s strength.
Amid these factors, major currencies, Antipodeans, and commodities remain under pressure, while equities give back earlier gains and bond yields stay elevated. On Friday, China’s stronger Retail Sales and softer Industrial Production growth, alongside concerns over weaker domestic demand, weighed on market sentiment. However, US Dollar bulls pause, allowing other currencies and commodities to consolidate recent moves.
The US Dollar’s strength, combined with dovish ECB meeting minutes, weak EU data, and concerns over potential economic challenges during a Trump presidency, puts pressure on EURUSD. The pair also faces added pressure from ECB policymakers’ reluctance to pause rate cuts, at least for now.
USDJPY climbs for the fifth straight day, hitting a fresh 16-week high, as concerns grow over the Bank of Japan’s (BoJ) potential rate hikes and expectations of a modest economic recovery in Japan.
Despite attempts by BoE Governor Andrew Bailey and policymaker Katherine Mann to remain optimistic, weak UK data, geopolitical concerns, and a lack of confidence in the new government—especially after the underwhelming budget—put pressure on GBPUSD. As a result, the Pound remains at its lowest level since early July, with traders awaiting key UK data, including Q3 GDP, monthly GDP, and September's industrial production, manufacturing, and trade figures.
Like the British Pound, sellers of the Australian, New Zealand, and Canadian Dollars pause at recent multi-week lows. China’s weak economic data and concerns over a potential US trade war weigh on AUDUSD and NZDUSD, while boosting USDCAD. A dovish outlook from the central banks of Australia, New Zealand, and Canada, along with declining Crude Oil prices—Canada's key export—adds further pressure on these currencies.
Gold prices remain flat at a two-month low, battling a five-day downtrend and heading for the biggest weekly drop in 41 months. The decline is driven by a stronger US Dollar, concerns over China’s economy, and a technical breakdown following the end of India’s buying season.
Meanwhile, Crude Oil reverses a mid-week rebound from its monthly low, pressured by a large inventory build, OPEC's gloomy demand forecast, a stronger US Dollar, and concerns over China’s reduced buying.
Mixed on-chain data, along with a consolidation of gains from Trump’s victory, gives Bitcoin (BTCUSD) and Ethereum (ETHUSD) buyers a chance to pause. However, speculation about US SEC Chair Gensler’s resignation and hopes for more favorable regulations keep crypto market sentiment optimistic.
A busy day ahead for traders with key UK growth and activity data during the European session, followed by US Retail Sales for October and speeches from central bank officials to round out the week. Updates from the Trump administration and geopolitical developments, particularly concerning China and the Middle East, will also be in focus.
Given the current pessimism surrounding the UK, even positive data is unlikely to spark GBPUSD buying. Meanwhile, the US Dollar could maintain its recent gains, bolstered by a hawkish Fed outlook and optimism about the US economic transition, despite softer US data. This could keep EURUSD on the back foot, especially with negative EU catalysts, and support USDJPY. However, Antipodean currencies and crude oil may struggle for momentum, while Gold is expected to finish the week on a bearish note.
May the trading luck be with you!
