Trading today was a whirlwind of activity, as market participants reacted in various ways to President Trump’s tariff threats, recent economic releases, and some upbeat geopolitical news.
What exactly influenced market movements today? Let’s dive into the latest updates!
Key Headlines:
- U.S. President Trump ramped up the tariff rhetoric against Canada, China, and Mexico.
- Reports suggest Russia might be escalating preparations for a cyber attack against the UK and its allies.
- NATO’s Military Committee Chair advised businesses to brace for "wartime-like" conditions.
- During an Economic Affairs Committee session at the House of Lords, the Bank of England’s Chief Economist, Huw Pill, noted that while the labor market remains tight, it has eased over the past year.
- Mexico’s President, Claudia Sheinbaum, mentioned retaliation tariffs against Trump’s proposed measures.
- U.S. consumer confidence for November came in at 111.7, above the expectation of 110.0 and the previous reading of 109.6.
- October saw a 17.3% drop in new U.S. home sales, a stark contrast to the expected 3.6% decline.
- FOMC Meeting Minutes indicated a preference for a careful path in future rate cuts.
- On Tuesday, Rhys Mendes, Deputy Governor of the Bank of Canada, hinted at more possible rate cuts, contingent on data feedback.
- Prime Minister Justin Trudeau emphasized Canada’s readiness to cooperate constructively with the new U.S. administration.
- President Biden disclosed that Lebanon’s and Israel’s prime ministers accepted the U.S.’s proposal to resolve the Israel-Hezbollah conflict.
Market Dynamics:
During early Asian trading, volatility spiked following Trump’s tariff announcements, causing a short-lived risk-off mood across markets. The dollar initially surged, while bonds wobbled, though as the situation settled, these moves were largely retraced as trading moved towards London.
The European session offered a more mellow atmosphere, marked by a slowly weakening dollar and falling bond yields. This setting might have lent some support to other financial assets or could point to profit-taking ahead of a packed U.S. agenda. Even as notable ECB voices like Centeno and de Guindos spoke, their comments seemed to have minimal market influence.
The U.S. session turned lively with the release of economic data—better-than-anticipated consumer confidence figures somewhat balanced out underwhelming housing stats and a lukewarm Richmond Fed manufacturing survey.
The auction of 5-year U.S. Treasury Notes revealed strong interest, with a bid-to-cover ratio of 2.43 compared to the usual 2.37 average, underscoring a continued appetite for U.S. government debt which buoyed the dollar somewhat.
Even the latest FOMC minutes didn’t stir much of a reaction, as the cautious stance on easing is seemingly baked into market expectations.
President Biden’s announcement of an Israel-Hezbollah peace agreement nudged oil prices down a touch, reducing the odds of a broader regional conflict.
FX Movements – U.S. Dollar vs. Key Currencies:
On Tuesday, the U.S. dollar gained some ground, with early gains tied to Trump’s mention of possible new tariffs aimed at Mexico and Canada. This was part of a push to address illegal activities and immigration issues.
However, as markets steadied through the remainder of the Asian and into the London trading day, the initial dollar gains were nearly wiped out. The lull might have set in due to investors taking profits in anticipation of significant U.S. economic indicators, including FOMC minutes and consumer confidence data.
As the U.S. session progressed, the dollar’s volatility linked to currency movements heightened, propelled by mixed housing data and an upbeat consumer confidence report. While housing numbers mostly aligned with expectations, the consumer index surpassed them. The dollar surged on these data points, possibly buoyed by the strong U.S. Treasury auction performance.
The FOMC minutes were a quiet event, reaffirming that members were not keen on aggressive rate cuts given steady economic indicators and persistent inflation signs. This lack of new information led to minimal market impact.
Finally, following President Biden’s announcement of a truce between Israel and Hezbollah, the dollar experienced some softness, likely reflecting a reduction in geopolitical tensions and fear of a potential broader conflict.
Upcoming Economic Events to Watch:
- Australia’s Q3 Construction Work Done at 00:30 GMT
- Australia’s CPI at 00:30 GMT
- New Zealand’s RBNZ Interest Rate Decision at 01:00 GMT
- New Zealand’s RBNZ Press Conference at 02:00 GMT
- Germany’s GfK Consumer Confidence at 09:30 GMT
- France’s Unemployment Benefit Claims at 11:00 GMT
- U.S. Core Durable Goods Orders at 13:30 GMT
- U.S. Durable Goods Orders at 13:30 GMT
- U.S. Goods Trade Balance at 13:30 GMT
- U.S. Wholesale Inventories at 13:30 GMT
- U.S. GDP Price Index at 13:30 GMT
- U.S. Retail Inventories Ex-Autos at 13:30 GMT
- U.S. GDP Growth Rate at 13:30 GMT
- U.S. Core PCE Price Index at 13:30 GMT
- U.S. Personal Spending at 13:30 GMT
- U.S. Personal Income at 13:30 GMT
- U.S. Initial Jobless Claims at 13:30 GMT
- U.S. Chicago PMI at 14:45 GMT
- U.S. Pending Home Sales at 15:00 GMT
- U.S. EIA Crude Oil Stocks Change at 15:30 GMT
The Asian session is likely to be buzzing with high-impact news coming from Australia and New Zealand. Kicking things off is Australia’s CPI update for October, anticipated to rise to 2.3% annually, up from 2.1%—a move that could back the Reserve Bank of Australia’s current stance.
Next, the RBNZ is expected to continue its easing cycle with a significant rate cut, likely slicing 50 basis points to bring the Official Cash Rate down to 4.25%.
With the U.S. holiday looming, today’s economic reports are stacked, but primary attention might focus on U.S. GDP updates and the core PCE price index. The new GDP figures provide a second glance at Q3 2024 growth, which, if different from first readings, could spark significant market shifts.
Expect eyes to be on the core PCE price index, the Fed’s favored inflation measure, forecasted to maintain a monthly increase of 0.3%, with the annual rate steady at 2.7%. An inflation figure persistently above target could keep the Federal Reserve wary about making steep rate reductions soon.
Be sure to stay tuned for market surprises during these events, and don’t forget to check our Currency Correlation tool if you’re making any trades!
