Overview: The US dollar is trading firmer against nearly all the G10 currencies. The yen is the best performer, and it is virtually flat despite the swing toward BOJ hike next month. Expectations have steadied for a Fed cut next month around 80%. The November inflation reports from the largest eurozone members failed to inspire the market and the euro's four-day advance is being threatened. Sterling's favorable reaction to the government's budget stalled yesterday near $1.3270 after starting the week below $1.3100. Emerging market currencies are mixed. The Chinese yuan is a little firmer, even though the PBOC lifted the dollar's fix for the first time in six sessions.
Global equities are mostly higher. Markets in the Asia Pacific region were mixed, though, with losses in Samsung and SK Hynix dragging South Korea's Kospi down by 1.5%, though small cap stocks did better. The Hang Seng and mainland stocks that trade there fell. Europe's Stoxx 600 is little changed after advancing in the first four sessions this week. US index futures are firm. Benchmark 10-year yields are little changed and mostly narrowly mixed in Europe. The US 10-year yield, which settled below 4% on Wednesday, is barely above there now. Gold is firm, but the earlier momentum that carried it to a new two-week high (~$4193) has eased. Initial support now is seen around $4150. Oil is firmer ahead of the weekend OPEC+ meeting. January WTI is at a new high for the week, a little above $59.
USD: The Dollar Index fell for the fourth consecutive session yesterday to reach 99.40. It is threatening to snap that streak today and is consolidating between about 99.50 and 99.80 today. The market expectations have swung hard toward a Fed cut next month, but with a little more than an 80% chance now discounted, the pendulum might have swung as far as it might, pending more data, and today's calendar is empty. The Fed's quiet period ahead of the FOMC meeting begins this weekend, and the lack of opportunity makes it difficult for officials to push back against expectations. The market will be sensitive to articles written by journalists who cover the Federal Reserve closely, as some are wary of a repeat of past efforts when it appeared stories were planted to help shape expectations during the run-up to an FOMC meeting.
EURO: The euro reached an eight-day high yesterday slightly shy of $1.1615. The high for the month was near $1.1655. The euro has been buoyed by the shift in Fed expectations, but also the divergence between US and German two-year yields. The German yield is slightly firmer that at the start of the month, while the US two-year yield is lower. The net impact is that the US-German two-year rate differential has slipped to new lows for the year below 145 bp. It was above 160 bp as recently as November. This is not to suggest a one-to-one correspondence between the level of the differential and the euro. Rather the change in the spread seems to be the key. The euro has come back offered today. There are large options struck at $1.16 that expire today and Monday. There is another set at $1.1570 for 780 mln euros that also expires today. The low in Europe today is near $1.1555. The 20-day moving average is near $1.1560 and the $1.1550 area is the halfway mark of the bounce from the low last Friday (~$1.1490). Meanwhile, all four of the largest eurozone members reported November CPI figures earlier today. German states have reported, and the national figure will be reported shortly. A 0.5% decline in the EU harmonized measure will still see the year-over-year rate tick up to 2.4% from 2.3%. The 0.2% decline in France left the year-over-year rate unchanged at 0.8%. Spain's CPI fell by 0.2% in November, and the year-over-year rate eased to 1.1% from 1.3%. Italy's CPI was flat, and the year-over-year rate was slipped to 3.1% from 3.2%. The eurozone aggregate estimate is due next Tuesday, and it usually eases in November, but it must fall by more than 0.3% for the year-over-year rate to decline from October's 2.1% year-over-year pace. Germany, France, and Spain also reported consumption figures. In Germany, retail sales unexpectedly fell by 0.3% in October after a 0.3% gain September. French consumer spending rose by 0.4% in October, and the year-over-year rate is above zero (0.4%) for the first time since June. Spain's retail sales were flat in volume terms. The eurozone economy expanded by 0,2% in Q3 and is expected to do the same in Q4.
CNY: The dollar fell to new lows for the year yesterday against the offshore yuan, reaching almost CNH7.0650. It is consolidating inside yesterday's range today and has traded between about CNH7.0705 and CNH7.0795. Previous support in the CNH7.0850-CNH7.0900 may now offer resistance. The near-term tolerance of Chinese officials may be exhausted after setting the dollar's fix lower for the fifth consecutive session yesterday. The dollar's reference rate was set a little higher today (CNY7.0789 vs CNY7.0779 yesterday). The rolling 30-day correlation of changes in the Dollar Index and the dollar against the offshore yuan is around 0.55. This is the upper end of where the correlation has been since April. Over the weekend, the China Federation of Logistics and Purchasing will report the November PMI. It is expected to be little changed from the October readings of 49.0 for manufacturing and 50.1 for non-manufacturing. The composite was at 50 in October. The RatingDog, the successor to the Caixin version, will report its manufacturing PMI early Monday. It was at 50.6 in October. The services and composite measures will be reported next Wednesday.
JPY: The dollar consolidated inside Wednesday's range yesterday and is in a narrow JPY156.10-JPY156.60 range today. Options for around $515 mln at JPY156.50 expire today. Yet, unless the dollar's pullback is extended, a bullish flag pattern has possibly been forged. The dollar ran up sharply from the November 14 low (~JPY153.60) to a high on November 20 (~JPY157.90) but has since trended lower (~JPY155.65) on Wednesday. No serious technical damage was inflicted by the pullback. A break of the JPY155.00-25 area would weaken the technical tone and negate the flag pattern. Japan reported a flurry of data earlier today and the odds of a hike in the swaps market rose for the fifth session today and now is near 57% (~16% a week ago). The yen has not drawn much support today from the shift in expectations. Tokyo's November CPI at the headline was unchanged at 2.7% and the core was steady at 2.8%. The measure excluding food and energy was unchanged at 2.8%. The October unemployment rate was unchanged at 2.6%, but the job-to-applicant ratio fell to 1.18 from 1.20. October retail sales rose by 1.6%, twice as much as had been expected in the Bloomberg survey. Through September, despite the stronger wage growth, retail sales fell by an average of 0.1% a month. Last year it rose by an average of 0.3%. Industrial production has a particularly volatile series in Japan. Following the 2.6% jump in September, it had been expected to fall by about 0.5% but instead jumped 1.5%. In the three months through September, it was virtually flat after rising by an average of 0.5% a month in Q1 and 0.3% in Q2. It fell by an average of 0.3% in 2024.
GBP: Sterling continues to draw succor from the budget presentation on Wednesday. Sterling was trading near $1.3150 before the OBR mistakenly published its projections before the Chancellor presented the budget. After some confusion and choppy price action, sterling climbed to around $1.3245 by the end of the day and reached almost $1.3270 yesterday. The $1.3285 area corresponds to the (38.2%) retracement of sterling's losses since Fed Day on September 17 and the 200-day moving average is around $1.3315 Still, sterling has pulled back today to approach $1.3200, where options for nearly GBP760 mln expire today. The (38.2%) retracement of the leg up that began at the end of last week is near $1.3180,
CAD: The greenback broke down on Wednesday, reaching CAD1.4035 after having been turned back from CAD1.4125 on Tuesday. Yesterday's low was about CAD1.4030 and a marginal new low was set today near CAD1.4025, but has recovered to almost CAD1.4050 in the European morning. Trendline support is seen slightly above CAD1.40 today. A break of the month's low (~CAD1.3970) would strengthen the case that a bearish double top is in place. It projects toward CAD1.3800, which is slightly beyond the (50%) retracement of the greenback's gains since the year's low was recorded in mid-June (~CAD1.3540). Canada reports Q3 GDP today. Recall that the economy contracted by 1.6% at an annualized rate in Q2. The Bank of Canada projects 0.5% growth in Q3 and it is also the median forecast in Bloomberg's survey. The monthly prints in July and August were net-net flat. It is seen rising by 0.2% in September. In Q2, the cumulative monthly figures fell by 0.3%. It gets you into the ballpark of the quarterly estimate but not very precise.
AUD: The Australian has a five-day rally in tow coming in today, but it too is falling victim to a bout of profit-taking. In those five sessions, the Aussie rallied from a three-month low near $0.6420 to a high yesterday around $0.6540 and made a marginally new high today before slipping to almost $0.6520. A down trendline from the year's high on September 17 (~$0.6705) through the October high (~$0.6620), almost catches the November 13 high (~$0.6580) and comes in today near $0.6550. The futures market has nearly completely given up on another cut by the central bank and is beginning to think about a hike late next year, while the market has become more confident of a Fed cut. Australia reported a solid 0.7% rise in private sector credit growth in October, which was slightly better than August and September. The central bank meets on December 9, and the market is confident that it will standpat.
MXN: The dollar approached the year's low against the peso on November 13, recording a low around MXN18.25. It recovered to almost MXN18.5330 at the end of last week. It was unable to overcome it early this week and was sold for the first three sessions of this week. It firmed slightly to reach about MXN18.3620 yesterday and pushed back toward MXN18.3375 today. Nearby support is seen around MXN18.30, while the year's low set on September 17 (Fed Day) was near MXN18.20. Mexico reports the October unemployment rate today. It is seen easing for the first time in four months. It was nearly at 3% in September, the highest since August 2024, but the median forecast in Bloomberg's survey sees it easing to 2.77%.
Reviewed by Marc Chandler
on
November 28, 2025
Rating:
