The US dollar exhibits a stronger inclination today, yet remains largely confined to the range established yesterday. Four key developments warrant attention. Initially, China’s October data largely fell short of expectations; however, the PBOC established the dollar’s reference rate at its lowest point since October 2024. Secondly, reports indicate that the UK government has adjusted its strategies to concentrate on bracket thresholds and targeted tax increases, rather than breach campaign commitments. Sterling is positioned within the mid-range of yesterday’s trading activity, whereas Gilts have experienced a sell-off. Third, the various Fed officials who have addressed the market in recent days have observed a reduction in expectations for a Fed cut next month, now sitting at just below 50%. Fourth, while the US administration contends that the tariffs are not driving inflation, there may be announcements today regarding tariff reductions on staple groceries aimed at lowering prices for coffee, bananas, beef, beans, and certain citrus fruits.

Stocks are facing downward pressure. Today, several major markets in the Asia Pacific region have experienced losses exceeding 1%, including the Nikkei, Hang Seng, China’s CSI300, Taiwan, South Korea, and Australia. Europe’s Stoxx 600 has declined by 1.1%, and if this trend continues, it would mark the most significant drop in over a month. US index futures indicate the potential for a lower opening gap. Bonds have also been divested. Benchmark 10-year yields in Europe are predominantly 2-3 basis points elevated, with the 10-year Gilt experiencing a notable increase of eight basis points. The US 10-year Treasury yield remains stable, ranging from 4.12% to 4.13%. Gold is currently stabilizing within the range established yesterday and shows minimal movement. A recent assault on Russian facilities has contributed to an increase in oil prices, with December WTI now surpassing $60 after maintaining a level of $58 yesterday.

The Dollar Index experienced a decline to nearly 99.00 yesterday, marking its lowest point this month, and it remains at that level today. DXY has also closed beneath the 20-day moving average, which it has predominantly remained under today (~99.35). The momentum indicators are showing a downward trend, and the five-day moving average appears poised to cross beneath the 20-day moving average early next week, marking the first occurrence of this since late September. The forthcoming downside target could potentially be in the range of 98.55-75. With the conclusion of the longest government shutdown in US history, we can expect a significant influx of data to commence next week. The futures market reduced the likelihood of a rate cut next month to just under 50% from approximately 66% at the close of last week.

The euro reached its session peak yesterday in the New York afternoon, approaching $1.1655, which aligns with the (38.2%) retracement of the decline that began after the year’s high was noted on September 17 around $1.1920. The upcoming retracement level at 50% is approximately $1.1695. The five-day moving average is currently crossing above the 20-day moving average for the first time since late September. The euro has yet to build on yesterday’s gains, currently consolidating within the range of approximately $1.1610 to $1.1650. Options are available for 1.6 billion euros at $1.1625, along with an additional amount of approximately 955 million euros at $1.1650, both set to expire today. A decline beneath the $1.1585-$1.1600 range would be disappointing. The eurozone’s trade surplus for September expanded to 19.44 billion euros, an increase from 12.29 billion euros recorded in September 2024. The monthly trade surplus averaged 14.06 billion euros in the first nine months of the year, in contrast to an average of 15.06 billion euros during the January-September 2024 timeframe.