To wrap up a wildly volatile week jam-packed with macroeconomic events, the United States Dollar is trading on the front foot this morning and looks set to close the week in positive territory for a sixth straight time following the US election and FOMC’s interest rate cut yesterday
Overview
Jerome Powell & company cut the US’ interest rate by 25 basis points yesterday afternoon, as widely expected. The fireworks came, as always, during Powell’s press conference following the release during which defended the Fed’s political independence and fought back against murmurs that he would either resign or be ousted by the incoming Trump administration before the end of his term in 2026.
While the Fed’s actual decision yesterday was already priced in by markets, as always, Powell’s press conference and the language in the statement accompanying the decision caused some speculation amongst traders that there is a potential for a pause at December’s meeting. Powell himself appeared to leave the door open for no change next month, referencing a higher-than-expected CPI print in September in particular and stating that “by December we’ll have more data.” Markets will be paying extra attention to November’s employment data, due out in early December, following a noisy October print impacted by both severe weather and strikes. Of course, there is also substantial risk that through next year the incoming Trump administrations trade and domestic fiscal policy could reignite inflation, increasing deficit and debt and induce corporate price hikes to combat the cost of tariffs, all which could spell a longer-term hawkish shift from the Federal Reserve. Many market strategists have begun to tamp down on calls for easing in 2025, at least until the new administration’s proposed policy platform is actualized.
The data calendar finally takes bit of a breather after the “super bowl” of busy weeks, with more than 20 central bank decisions issued in the last 4 days on top of the US election. University of Michigan Consumer Sentiment and forward-looking inflation expectations are due out at 10am this morning.
What to Watch This Week…
- U. of Michigan Consumer Sentiment, Friday 10AM
- Monex USA Online is always open
JPY ⇑
Japanese Yen is the lone winner against the Buck across the G10, managing to consolidate some gains and trade 0.2% stronger since the open this morning. The USDJPY pair is the lone pair in the G10 that is not set for a weekly loss, after further announcement on stimulus out of China kept the Yen afloat even as Chinese Yuan and the Antipodean currencies lost ground. Bank of Japan officials have gotten more forceful on warnings on behalf of the currency over recent days, following a dramatic slide for JPY Tuesday night and into Wednesday as the Dollar ran up the score on the heels of US election results. Speculation continues that the Yen’s recent weakness may force the Bank of Japan to raise interest rates in December.
EUR ⇓
The single currency, after attempting to stage a comeback against USD late Wednesday and through trading yesterday, slid once again this morning, at one point notching more than half a percent decline before paring off its losses. As volatility subsides following this busy week, EUR is emerging as the G10’s worst performer amidst fears that the incoming Trump administration will pursue aggressive tariff policies against the economic bloc. The European Central Bank will release the minutes from its October meeting next week as well, after Christine Lagarde last month gave little indication on the bank’s path forward.
