Markets remained cautious early Friday as traders stayed on the sidelines ahead of key data releases, including the Core Personal Consumption Expenditures (PCE) Price Index and the University of Michigan (UoM) Consumer Sentiment Index. Sentiment was further constrained by mixed geopolitical and trade developments and the wait for next week’s Federal Open Market Committee (FOMC) meeting. Local markets were subdued on Thursday as investors awaited Friday’s U.S. Personal Income and Outlays report at 0830 ET, which will finally deliver the delayed September Personal Consumption Expenditures (PCE) and core PCE inflation readings following the government shutdown.
Japan’s economic data highlighted continued weakness in consumer demand. October household spending fell 3.0% year-over-year (y/y) and 3.5% month-over-month (m/m), well below expectations and reversing September’s modest gain. The drop underscores fragile household demand and complicates the Bank of Japan’s (BOJ) policy assessment ahead of its December meeting. Bloomberg reported that the Bank of Japan (BOJ) is leaning toward a 25 basis-point rate hike at its December 18–19 meeting, lifting the policy rate to 0.75%, the highest since 1995. The yen strengthened on the report as Japanese Government Bond (JGB) futures softened in anticipation of a potential policy shift.
Japan’s fiscal backdrop also drew attention. Prime Minister Sanae Takaichi sought to calm markets after announcing a 137 billion dollar stimulus package that raised concerns about fiscal sustainability. Rising long-term yields, a weak yen, and uncertainty over absorption of growing Japanese Government Bond (JGB) supply remain key challenges. Finance Minister Satsuki Katayama reiterated the government’s commitment to fiscal discipline, coordination with the Bank of Japan (BOJ), and close monitoring of markets ahead of December’s policy meeting.
Corporate and geopolitical developments included reports that SoftBank CEO Masayoshi Son is working with the White House on plans to build “Trump Industrial Parks” on federal land, potentially deploying hundreds of billions of dollars linked to the recent U.S.–Japan trade agreement.
In China, the USDCNY fixing on Friday removed much of the recent strengthening bias after the U.S. dollar’s rebound. By setting the fix near market estimates, the People’s Bank of China (PBOC) signaled comfort with current yuan levels and a preference for currency stability ahead of the Central Economic Work Conference and Politburo meetings later this month. The People’s Bank of China (PBOC) also appeared to push back against expectations for the yuan to strengthen beyond 7.00, abruptly shifting tone after weeks of firmer guidance. Bloomberg reported that since September, local-government financing vehicles (LGFVs) have borrowed billions of dollars from trust companies and leasing firms at rates above 8%, more than triple bond-market financing costs, reflecting tighter central oversight and restricted access to bank loans and bond issuance, contributing to weaker infrastructure investment.
On trade, U.S. Trade Representative Greer stated that Washington seeks a stable but recalibrated relationship with China, emphasizing more balanced and potentially smaller bilateral trade flows. He noted the U.S. goods trade deficit with China has already fallen roughly 25%, calling the shift positive, and highlighted ongoing issues under the United States–Mexico–Canada Agreement (USMCA).
The Reserve Bank of India (RBI) cut its repo rate by 25 basis points on Friday despite rupee weakness and resilient domestic growth, citing low retail inflation and a benign price outlook. The central bank also implemented liquidity measures and left the door open for further easing if inflation remains contained.
Thursday’s U.S. market action was steady but active. Initial Jobless Claims fell sharply, though the recent holiday likely distorted the data. The dollar dropped early, bottomed near the London fix, and then climbed steadily as yields rose, partly supported by speculation that Hassett may be selected as the next Federal Reserve chair.
Key U.S. data showed November Challenger Job Cuts declining to 71.32K from 153.07K. Initial Jobless Claims fell to 191K versus 220K expectations. The Chicago Federal Reserve Unemployment Tracker eased to 4.44% from 4.46%, while Revelio Labs reported a second consecutive month of job losses at minus 9.0K. September factory orders rose 0.2% versus 0.5% expected, with durable goods orders unrevised at 0.5% and non-defense capital goods orders unchanged at 0.9%. These delayed numbers were not expected to move markets. The Atlanta Federal Reserve GDP tracker edged down to 3.8% from 3.9%, though its reliability remains in question.
In technology, AMD’s compliance with the 15% export-fee regime signals a path to maintain limited access to China under tighter export controls, while licensed MI308 shipments may reduce semiconductor-sector uncertainty. Moore Threads surged more than 400% on its Shanghai Initial Public Offering (IPO), raising 1.1 billion dollars, reflecting investor enthusiasm for China’s domestic GPU ecosystem and rising competition in the global AI-computing market amid U.S. export restrictions.
In broader markets, the U.S. Dollar Index struggled after Thursday’s corrective bounce from a five-week low. Gold edged higher but lacked momentum. EURUSD and GBPUSD rebounded, USDJPY fell for a third consecutive day, AUDUSD reached an eight-week high, NZDUSD recovered from a recent decline, and USDCAD bounced from a five-week low. Crude oil retreated after two days of gains. Bitcoin (BTC) and Ethereum (ETH) posted modest gains, while equities moved slightly higher amid limited upside momentum.
Thursday’s slightly positive U.S. employment data triggered a corrective bounce in the U.S. Dollar and, along with mixed European Union (EU) data, led to EURUSD’s first daily decline in nine days. Early Friday, the U.S. Dollar’s pullback combined with cautious market sentiment to renew buying in EURUSD. GBPUSD also recovered, reversing the prior day’s retreat from a six-week high, despite the absence of major United Kingdom (UK) catalysts.
Meanwhile, ongoing discussion around the Bank of Japan (BOJ) rate hike, Japan’s stimulus package, and Japanese Government Bond (JGB) yields kept USDJPY weak for a third consecutive day, despite the mixed data noted above.
AUDUSD remained firmer for the fourth consecutive day, trading near the highest level since early October, while NZDUSD also picked up bids to reverse the prior day’s pullback from a multi-month high. Meanwhile, USDCAD retreated from the previous day’s corrective bounce off a five-week low ahead of Canada’s employment report and key U.S. data, even as crude oil prices, Canada’s main export, declined after a two-day uptrend.
Crude Oil earlier benefited from the OPEC+ inaction and concerns about supply distribution in the Middle East, but the market’s fears about the demand outlook and increasing inventories might have recently weighed on the black gold prices. That said, the WTI crude oil posts the first daily loss in three days early Friday.
Bitcoin (BTC) and Ethereum (ETH) both stalled their two-day winning streak on Thursday, despite lacking downside momentum. However, the cryptocurrencies recovered early Friday as the market sentiment restored and the U.S. Dollar retreated.
Talking about equities, equity markets traded in narrow ranges, with the S&P 500 near flat and META outperforming after scaling back investment in virtual reality (VR) and the Metaverse.
Corporate news included reports that Netflix is in exclusivity talks to acquire Warner Bros. Discovery’s studios and streaming assets at $28 per share.
Looking ahead, Friday is expected to be more active than Thursday due to a series of scheduled economic releases. Eurozone employment change, gross domestic product (GDP), and Canada’s employment data could engage traders ahead of the U.S. Core Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, and the University of Michigan (UoM) Consumer Sentiment Index for December, along with inflation expectations.
Notably, the recent upbeat U.S. job numbers did not fully curb dovish Federal Reserve (Fed) expectations, meaning that any further weakness in today’s U.S. data could trigger a U.S. Dollar pullback toward multi-week lows, potentially supporting risk assets such as equities and cryptocurrencies.
May the trading luck be with you!
