Financial markets began on Wednesday with caution, awaiting the Federal Open Market Committee (FOMC) interest rate decision. Additionally, the Bank of Canada (BoC) was set to announce its interest rate decision, and speeches from the Governor of the Bank of England (BoE) and the President of the European Central Bank (ECB) added further market interest. Concerns about the U.S. Federal Reserve's (Fed) hawkish stance increased after strong U.S. employment data, helping the U.S. Dollar rise. Meanwhile, President Donald Trump’s comments on various issues kept traders on edge.
Market movements were limited initially. Silver briefly reached a new high above $61 but quickly retreated. Trump’s remark about President Joe Biden allegedly using an autopen to sign Fed Governor appointments drew attention, though this was seen as a joke since such appointments require Congressional approval. It also highlighted Trump’s ongoing push for lower interest rates.
The U.S. Bureau of Labor Statistics (BLS) released September and October Job Openings and Labor Turnover Survey (JOLTS) data. September showed 7.658 million job openings, surpassing expectations of 7.2 million, and October's data also exceeded forecasts at 7.67 million. The U.S. ADP National Employment Report indicated a four-week average of +4.75K job changes, a recovery from the previous -13.5K. The National Federation of Independent Business (NFIB) Small Business Optimism Index for November rose to 99.00, higher than the expected 98.3.
White House Economic Advisor Kevin Hassett, a potential candidate for the Fed Chair position, suggested there was room for more than a 25-basis-point rate cut. Trump’s comments about possible changes at the Fed and lowering tariffs caught attention. Trump also made remarks about Ukraine's elections, Russia’s strategic positioning, and the possibility of U.S. troops in Venezuela.
Treasury Secretary Steven Mnuchin emphasized President Trump’s commitment to lasting peace in Ukraine, and Ukrainian President Volodymyr Zelenskyy expressed readiness to discuss a peace plan with U.S. and European security guarantees.
Trump also hinted at replacing more Fed Governors, which could allow him to shape policy unchecked. Such a move would undermine the Fed's independence, which would likely be bearish for the U.S. Dollar and bullish for precious metals and hard assets.
After a 46-day shutdown, the U.S. government is beginning to catch up on economic data releases. The delayed November Consumer Price Index (CPI) report is set for December 18, and the December CPI will be released on January 13. The U.S. Employment Situation report, typically published on the first Friday of each month, will be released on January 9, about a week later than usual.
In China, the November Consumer Price Index (CPI) came in as expected at 0.7%, but the month-over-month CPI showed weakness, as did the Producer Price Index (PPI) at -2.2%. This, combined with new stimulus talks and speculation about a required reserve ratio (RRR) cut, kept attention on Chinese stocks.
In Japan, Prime Minister Takaichi expressed concerns over rising yields, stating that the government was closely monitoring market movements. Japan’s November Corporate Goods Price Index (CGPI) rose by 2.7%, in line with expectations, while the month-over-month Producer Price Index (PPI) showed a slight increase of 0.3%. Japan’s manufacturing index dropped to +10 from +17. The probability of a Bank of Japan (BOJ) rate cut next week rose to 77%, reflecting inflation pressures.
Silver surged to a new all-time high above $60, driven by tightening global supply, rising industrial demand, and increasing investor interest.
The Reserve Bank of New Zealand (RBNZ) emphasized a flexible, data-driven approach, focusing on inflation, GDP, and its core mandate. Governor Anna Breman noted that there is no preset course for monetary policy and that they are closely monitoring key economic indicators.
Oil prices faced pressure due to hopes of peace, as President Trump and Russia suggested that sanctions relief could follow a peace deal, potentially allowing Russian crude to flow more freely. U.S. weekly private oil inventories showed a significant drawdown in crude supplies, though gasoline inventories increased.
The U.S. Dollar Index (DXY) remained relatively flat after a two-day winning streak, putting pressure on risk assets. Gold prices were stable, while crude oil extended its three-day losing streak. The U.S. Dollar rebounded against the Canadian Dollar (CAD), while the AUDUSD and the NZDUSD posted modest losses after hitting multi-day highs. Bitcoin stalled after a three-day recovery, while Ethereum edged higher. The Asia-Pacific markets followed a mixed trend after Wall Street's performance.
EURUSD pauses its four-day losing streak, showing little momentum as traders stay cautious ahead of the key Federal Open Market Committee (FOMC) monetary policy updates and European Central Bank (ECB) President Christine Lagarde's speech. Some ECB policymakers have shown interest in halting rate cuts, while others have raised concerns about potential rate hikes.
Meanwhile, GBPUSD posts its first gain in three days, recovering from a one-week low as traders await signals from the Fed and the Bank of England (BoE).
USDJPY retreats from a two-week high, ending its three-day uptrend. Market reactions to Japanese data, comments from Prime Minister Takaichi, and preparations for the potential divergence between the Fed and Bank of Japan (BoJ) have allowed sellers to take a pause.
The market's cautious mood and the U.S. Dollar’s corrective bounce are putting pressure on AUDUSD buyers after they reached their highest level since September 18. Similarly, NZDUSD retreats after climbing to a six-week high, with additional pressure from comments by the Reserve Bank of New Zealand (RBNZ) Governor. Along with concerns over the Federal Reserve's policies, weaker China data, and mixed geopolitical factors are also weighing on the Antipodean currencies.
USDCAD posts modest gains, marking its first positive week in three, as traders prepare for the upcoming Federal Open Market Committee (FOMC) and Bank of Canada (BoC) interest rate decisions. Weaker crude oil prices, a key export for Canada, alongside concerns about Canada's trade relations with the U.S. and China, are also weighing on the Canadian Dollar (CAD). This is happening despite expectations of no rate change from the BoC, while the Fed is anticipated to cut rates by 0.25%. Despite this, USDCAD is largely ignoring these factors in favor of a slightly stronger U.S. Dollar.
Gold remains sidelined after breaking its two-day losing streak the previous day, while WTI crude oil continues to face downward pressure for the third consecutive day, disregarding the API’s weekly U.S. crude oil inventories report. Crude prices are weighed down by hopes that Russia may re-enter the energy market if a Ukraine-Russia peace deal is reached, alongside concerns over OPEC+ production cuts and fears of lower demand. Meanwhile, spot gold (XAU) is on hold, awaiting the Federal Reserve’s decision and President Trump’s efforts to influence the Fed. Despite the inaction, ongoing geopolitical tensions keep gold buyers optimistic.
Bitcoin (BTC) and Ethereum (ETH) remain inactive after rising for three and four consecutive days, respectively, largely due to a softer U.S. Dollar. Despite mixed sentiment, strong institutional interest and lower interest rate expectations continue to support crypto buyers. Meanwhile, Asia-Pacific equities are trading mixed, reflecting the mixed performance of Wall Street.
In U.S. stock markets, the Dow Jones Industrial Average and S&P 500 Index both declined, while the NASDAQ Composite saw a slight increase. The Russell 2000 Index hit a new intraday high but closed below its record. Reports about the potential export of Nvidia’s H200 chips to China raised optimism, though concerns remained about China possibly shifting to domestic alternatives. At the same time, merger talks involving Netflix-Warner Bros. and Paramount Skydance-Warner Bros. stalled as President Trump suggested he might get involved in reviewing them.
Speeches from the Governor of the Bank of England (BoE), Andrew Bailey, and the President of the European Central Bank (ECB), Christine Lagarde, will precede the Bank of Canada (BoC) interest rate decision, keeping traders on alert ahead of the key Federal Reserve (Fed) rate verdict. With a 0.25% interest rate cut largely priced in, traders will focus on the Federal Open Market Committee (FOMC) statement and Jerome Powell’s press conference for clearer guidance. Additionally, updates on President Donald Trump’s selection of the Fed Chair, the Ukraine-Russia peace deal, and other geopolitical events will likely add volatility to the day.
If the U.S. central bank’s monetary policy statement or Jerome Powell’s comments appear hawkish or cautious about further rate cuts, the U.S. Dollar (USD) may rise despite the expected rate cut. This could put downside pressure on risk assets, such as equities and cryptocurrencies.
For USDCAD, the outlook remains uncertain. A rebound in crude oil prices, a steady Bank of Canada (BoC) rate, and a dovish Federal Reserve stance could put downside pressure on the Canadian Dollar (CAD). However, given the many variables in play, a modest positive performance for USDCAD cannot be ruled out.
May the trading luck be with you!
