The ongoing sell-off in equities persists, while the foreign exchange market remains subdued, with the dollar largely trading within narrow ranges. The currency exhibits strength against the majority of its counterparts, with the dollar bloc demonstrating notable resilience today. The dollar has achieved a new nine-month peak in its exchange rate with the yen. In light of the recent statements from the Ministry of Finance, the market is driving the dollar upward, fueled by apprehensions surrounding the impending fiscal package that the government is poised to announce, which may exacerbate tensions with China. Emerging market currencies face significant pressure, with the Turkish lira reaching new record lows.

Today, there has been a sell-off across all major equity markets. The primary indices in Japan, South Korea, and Taiwan experienced declines of over 2-3%, whereas Hong Kong and Australia faced losses nearing 2%. Europe’s Stoxx 600 has declined approximately 1.3%, marking the largest drop since early September. The decline marks the fourth consecutive decrease. US index futures are experiencing a decline of approximately 0.25%. Benchmark 10-year yields are reduced in regions outside of Japan. European yields are generally down by less than a basis point, whereas the 10-year US Treasury yield has decreased by approximately three basis points, now sitting just below 4.10%. Gold dipped below $4000 for the first time in a week but rebounded to approximately $4050 in Europe. December WTI is currently stabilizing within the range established yesterday (~$59.30-$60.45) and is approaching the $60 mark from a lower position during the late European morning trading session.

The Dollar Index is testing the upper boundary of last Thursday’s range (~99.00-99.60), which has limited market activity. Initial resistance could be observed around the 99.85 level. The 200-day moving average stands slightly under 100.00, and DXY has remained below this level since early March. The recalibration of expectations surrounding US interest rates appears to have reached its limit prior to forthcoming updates. The two-year note seems to be limited around 4.60%, while the December Fed funds futures suggest approximately a 40% likelihood of a rate cut, a decrease from the 100% expectation prior to last month’s FOMC meeting. ADP is set to release its weekly update tomorrow, just before the BLS September jobs report on Thursday. ADP’s monthly report has demonstrated a notable level of accuracy throughout this year. In the three months ending in August, the BLS estimated that US private sector employment increased by an average of 29k per month, whereas ADP projected an average of 26k per month. During the eight months leading up to August, the Bureau of Labor Statistics indicates that an average of 74,000 private sector jobs were generated, whereas the estimate from ADP stood at 73,000. In September, ADP forecasts a decline of 29k private sector jobs, marking the highest loss since March 2023. Nonetheless, it demonstrated a recovery of 42k in October. The weekly jobless claims from mid-October were reported earlier today at 232k, slightly below the previous four-week average of nearly 238k. The BLS has also indicated that it will release the September CPI on Friday, which will allow for the calculation of an annual cost-of-living adjustment for Social Security.

Following the peak for the month close to $1.1655 last Thursday, the euro has paused and entered a phase of consolidation. It tested last Thursday’s low (~$1.1580) today and is barely holding on. The low this month was approximately $1.1470, while the $1.1585 level aligns with a (38.2%) retracement, and the (50%) retracement is just above $1.1560. The daily momentum indicators continue to trend upward, and the five-day moving average remains above the 20-day average. The US 2-year premium over Germany attained a notable two-month high of approximately 162 basis points in late October and early November. It has declined, but a movement below 150 bp is required to indicate any significant developments. The key data point to monitor this week is the preliminary PMI scheduled for release on Friday. An increase in manufacturing could be counterbalanced by a decline in services, resulting in the composite remaining relatively stable at approximately 52.5.