The United States Dollar, after a risk reversal prompted a selloff in the afternoon session yesterday, is trading stronger across the board this morning ahead of several key speakers from the Federal Reserve
Overview
After Vladimir Putin signed a new and more loose nuclear doctrine and Ukraine struck Russian territory with US-made missiles prompted a heavy risk-off move in the European and American morning sessions, the afternoon proved to weigh on USD after the US signaled there would be no specific response to the morning’s events. Reuters also reported overnight that Putin is open to discussing a ceasefire with the incoming Trump administration that would freeze the conflict along each nation’s current lines, contributing to the more buoyant global mood through the back half of the day yesterday. The Dollar’s move stronger, however, is back on the table this morning as Treasury yields continue to rise. The ten-year note’s yield moved three basis points, and all tenors shifted moderately higher.
Corporate earnings for Q3 are heavily in focus today, with Nvidia due to report after the US market close. The massive tech company’s current market cap is larger than the entire value of two combined European indices, and equities traders are bracing for heavy volatility following the report. Several Federal Reserve speakers will also hit the wire today, including Barr, Cook, Collins, and Bowman. Markets are, once again, paying attention to new appointments by incoming President Donald Trump as well. Howard Lutnick of Cantor Fitzgerald is now set to run Commerce, but the battle over Treasury rages on as Trump is set to interview both former Fed governor Kevin Warsh and Marc Rowan from Apollo. Betting markets currently heavily favor Warsh, a renowned hawk, which is giving the Dollar some small tailwind at the moment.
The data calendar is fairly quiet through the rest of the week, and as the US begins to enter the holiday season volume and volatility may both begin to thin out in FX markets. Traders will receive the S&P Global flash PMI for the month of November at the end of this week.
What to Watch This Week…
- S&P Flash PMI NOV, Friday 9:45AM
- Monex USA Online is always open
GBP ⇓
Pound Sterling, though still declining against the Dollar this morning, is gaining some ground back against the rest of the G10 after last week’s dismal performance for GBP. CPI from the UK, released earlier this morning, showed that inflation resurged to an annual rate of 2.3% in October, above estimates and substantiall above September’s inflation rate of 1.7%. This also marks the largest monthly increase in UK inflation since October of 2022. In response to this release, gilts sold off and traders have trimmed bets on the Bank of England’s rate-cut path as hopes of an imminent cut fade away.
JPY ⇓
Japanese Yen is at the bottom of the G10 board this morning as the Dollar bounced higher and shorter-term traders unwind JPY positions that were prompted by geopolitical jitters yesterday. USDJPY is currently 0.7% higher on the trading day after news that Russian president Vladimir Putin may be open to discussing the possibility of a cease-fire with Ukraine hit the wires. JPY’s traditional position as a haven currency gave it a substantial leg up in early trading yesterday, but such haven positioning has been completely unwound this morning as US yields continue to climb. Traders are currently split close to evenly on whether or not the Bank of Japan will raise interest rates at its December 19th meeting.
