Market sentiment remained cautious on Thursday, as traders awaited key decisions from the European Central Bank (ECB) and the Bank of England (BoE), alongside U.S. inflation data (Consumer Price Index, CPI) and Initial Jobless Claims. The previous day saw a risk-off mood despite a lack of major events, as traders struggled to predict the Federal Reserve’s (Fed) next move. This uncertainty led to declines in U.S. technology stocks, which added to the cautious sentiment in global markets.
In currency markets, major FX rates traded within tight ranges, reflecting investor caution ahead of a busy 24 hours of central bank meetings and key data releases. The volatility was low, signaling a wait-and-see approach.
Regional equities largely tracked the soft performance in the U.S., with Wall Street’s weak price action weighing on sentiment and reinforcing a defensive stance across risk assets. Stocks in the region mostly moved lower.
In the U.S., President Trump announced a one-time “warrior dividend” of $1,776 for more than one million active-duty U.S. service members, totaling roughly $2.5 billion. This fiscal stimulus is expected to provide a short-term boost to consumption but is seen as a modest move in broader macroeconomic terms. Trump also mentioned that he would soon appoint a new Federal Reserve chair who favors lower interest rates, a statement that could raise concerns about policy credibility and influence market expectations.
On Wednesday, U.S. MBA Mortgage Applications hit a four-month low, falling 3.8% compared to the previous 4.8%. Following this, Fed Governor Christopher Waller indicated that the labor market remains soft, with payroll growth showing little improvement. He also expressed confidence that inflation, while slightly above target, would decline over the next few months and advocated for gradual action rather than drastic rate cuts.
The U.S. Treasury sold $13 billion worth of 20-year bonds at a yield of 4.798%, while U.S. stock markets closed lower.
In Europe, the final November Consumer Price Index (CPI) came in at 2.1% year-on-year, slightly lower than the preliminary 2.2%. Germany’s Ifo Business Climate Index for December also missed expectations, falling to 87.6 from the anticipated 88.2. Despite this, the ECB is expected to keep its policy unchanged, with Eurozone growth showing signs of stabilizing.
In Japan, bond yields continued to rise, with attention turning to the upcoming Bank of Japan (BoJ) meeting. Analysts cautioned that the BoJ should avoid raising rates prematurely, as the economy still faces significant challenges. The Japanese yen was a modest underperformer, with USDJPY edging higher to around 150.80. This movement followed mild verbal comments from Japan’s Chief Cabinet Secretary Minoru Kihara, who mentioned that authorities were closely watching market moves, especially long-term interest rates. The lack of any strong action or warning was interpreted as a signal that Japan is uncomfortable with yen weakness but is not yet ready to intervene.
In the UK, inflation data came in below expectations, with both headline and core inflation readings softer than forecast. This was due to a drop in food prices and core goods prices, likely influenced by discounts during Black Friday sales. However, services inflation remained stubbornly above 4%, which will be a key concern for the Bank of England (BoE) in the months ahead. Market players now expect the BoE to cut rates by 25 basis points to 3.75% in its upcoming meeting, with the possibility of further cuts next year.
In New Zealand, GDP growth for Q3 came in at 1.1% quarter-on-quarter, above expectations of 0.9%. Despite the positive data, the New Zealand dollar's reaction was muted, as markets remained focused on inflation and labor market conditions, which are likely to influence future policy decisions.
In the U.S., weekly crude oil inventories showed a larger-than-expected drawdown of 1.274 million barrels, compared to the forecasted 1.066 million. This helped support crude prices, while gold also benefited from the overall market uncertainty. Cryptocurrencies initially rose before pulling back.
The U.S. Dollar Index (DXY) bounced off a 10-week low, leading to a pullback in major currency pairs, especially the antipodean currencies. This also weighed on the New Zealand and Australian dollars. Meanwhile, crude oil recovered, supported by the draw in U.S. inventories, and gold rose amid market uncertainty. On the other hand, cryptocurrencies saw a brief rally before reversing course. Wall Street closed in the red, and Asian markets followed suit with slight declines.
Despite downbeat data from the EU and Germany, as well as the U.S. Dollar's recovery, EURUSD has fallen over the past two days, reversing from a three-month high. Early Thursday, the euro (EUR) halted its decline as traders awaited the ECB's announcements, with expectations that the central bank will keep rates unchanged and may adopt an optimistic tone. However, a cautious mood before the event, along with concerns over the Ukraine-Russia peace deal and internal political challenges within the bloc, has been weighing on the pair's buyers recently.
Downbeat UK inflation data, combined with concerns over Britain's economic weakness, weighed on GBPUSD the previous day, along with the U.S. Dollar's rebound. The pair remains under pressure early Thursday as traders brace for the Bank of England’s (BoE) interest rate decision, expecting a rate cut and dovish remarks.
Meanwhile, despite speculation about the Bank of Japan (BoJ) hiking rates on Friday and verbal interventions from Japanese officials, the yen (JPY) failed to attract buyers, with traders instead positioning for a more hawkish move.
Cautious mood and the USD rebound challenge the Antipodeans, namely the AUD, NZD, and the CAD, but the NZ GDP data, recovery in crude oil, and mixed bias surrounding the RBA allow a breather to the sellers. That said, AUDUSD stalls five-day losing streak while bounding off a two-week low, but lacks recovery momentum, while NZDUSD remains under pressure, maybe because they’re preparing for the RBNZ’s hawkish move in the coming months. Meanwhile, USDCAD fades the previous day’s recovery from a three-month low amid a corrective bounce in crude oil, Canada’s key export, and hawkish remarks from BoC Governor.
A better-than-expected draw in U.S. crude oil inventories, along with a lack of updates on the Ukraine-Russia peace deal and ongoing tensions between the U.S. and Venezuela, gave WTI crude oil the push it needed to rebound from its lowest level since 2021. However, the recovery lacks momentum, with the commodity struggling to extend gains amid a cautious mood early Thursday.
Meanwhile, gold remains sidelined after a positive performance within its four-day trading range, as upbeat Treasury bond yields continue to weigh on the precious metal.
Bitcoin (BTC) and Ethereum (ETH) both faced pressure after a volatile day. Although major cryptocurrencies initially recovered, they ended up in the red, reflecting the market's lack of confidence in digital assets as 2025 approaches, despite some positive industry news.
On the stock market side, the Dow Jones Industrial Average (DJI) fell by 243.51 points (-0.51%) to 47,870.75, the S&P 500 (SPX) dropped by 78.34 points (-1.15%) to 6,721.92, and the Nasdaq Composite slumped by 410.71 points (-1.78%) to 22,700.75. Oracle was hit hardest, losing nearly 50% since September, while Micron Technology’s strong earnings could offer some support to the tech sector moving forward.
Thursday’s economic calendar is packed with key events, focusing on the Bank of England (BoE) and European Central Bank (ECB) monetary policy decisions. Also in the spotlight are the U.S. Consumer Price Index (CPI), Jobless Claims, and the Philadelphia Fed Manufacturing Index.
Given the recent shift in the market’s risk profile and the U.S. Dollar’s positive move, dovish signals from both the UK and European central banks could help extend the Greenback’s rebound. This USD recovery could weigh on cryptocurrencies and equities unless any positive risk-related news emerges.
The ECB's "hawkish halt" might provide some support for EURUSD buyers, despite the pair’s two-day losing streak. However, given the market's lack of confidence in the ECB compared to the Fed, the pair could face further downside if the ECB President delivers a cautious tone. Meanwhile, GBPUSD is likely to continue its decline, driven by the BoE's expected rate cut and likely dovish comments.
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