The US dollar is predominantly down today. The momentum has decisively turned towards a rate cut next month, which has diminished the dollar’s strength. The New Zealand dollar is at the forefront of today’s movement following the central bank’s decision to reduce rates, potentially for the final time in this cycle. The Australian dollar further strengthened following the stronger than anticipated October CPI results. The other G10 currencies are showing slight increases as the North American session approaches, while the Japanese yen is down approximately 0.3%. Most emerging market currencies are showing strength. The appreciation of the Chinese yuan to new annual peaks was confirmed by the PBOC, which adjusted the dollar’s reference rate downward for the fourth consecutive session. The US presents a variety of high-frequency data reports, with the Fed’s Beige Book standing out as a key focus during the late North American session. Additionally, the UK’s budget is yet to be released.

Equities are experiencing a rally today. All the major exchanges in the Asia Pacific experienced a significant rally. Today, indices in Japan, Taiwan, South Korea, and India experienced an increase of at least 1%. The regional index is experiencing its third consecutive increase, mirroring the performance of Europe’s Stoxx 600, which has risen approximately 0.40% during the majority of the European morning session. US index futures are showing slight gains, poised to continue their upward momentum. In Australia and New Zealand, benchmark 10-year yields have experienced a notable increase, while in Europe, they remain largely unchanged. The 10-year UK Gilt remains stable, hovering around 4.49%. The 10-year US Treasury yield, which fell below 4% yesterday for the first time this month, is currently slightly above that level. Gold is recovering from yesterday’s slight decline (~0.15%) and has increased by approximately 0.7% during the European morning session. It encountered resistance close to $4170, marking an eight-day peak. January WTI is fluctuating within a range of approximately 30 cents around $58. Yesterday, it noted the month’s low, approximately $57.10. Last month’s low was approximately $56.

The Dollar Index is currently in a consolidative phase, facing challenges as the market adjusts expectations for a Fed cut next month to over 80%. With the blackout period before the FOMC meeting starting this weekend, Fed officials have limited time to counter these sentiments. Yesterday, in North America, it declined to a four-day low around 99.65. The asset recorded a slight new low today at 99.60. Proximal chart support appears to be approximately 99.50, followed by 99.20. A bearish double top pattern appears to be developing; however, confirmation requires a break below the 99.00 level. The US releases weekly initial jobless claims and September durable goods orders; however, market sensitivity is likely to be heightened by the headlines surrounding the Beige Book. The lack of prompt real sector data could lend greater weight to the anecdotal report than typically observed. That being noted, Chair Powell has frequently alluded to it. Surveys indicate that consumer sentiment is weak, with elevated levels of household debt stress and heightened anxiety about job security, reaching a five-year peak. Walmart and the Gap, for instance, have demonstrated robust quarterly earnings. In September, Boeing recorded net new orders totaling 95 aircraft, consistent with the figures from August. In October, orders decreased to 15. Orders surged this month at the Dubai Air Show.

The euro achieved a four-day peak, trading at approximately $1.1585 yesterday. The asset encountered significant resistance today around $1.1600, bolstered by over one billion euros in options at $1.1595 set to expire today, along with an additional layer at $1.1575 expiring tomorrow. At this point, a movement beyond the mid-November peaks near $1.1655 is likely necessary to indicate a shift from mere broad consolidation. The contraction of the US two-year premium to a new low for the year around 145 bp is favorable for the single currencies. The eurozone is set to release money supply and lending figures tomorrow, with the key event of the week being the national November CPI figures from the largest members of EMU, scheduled for Friday.

With the US 10-year yield declining to nearly 4%, the dollar reached a new four-day low against the yen yesterday, approaching JPY155.80. The JPY155.75 level represents the (50%) retracement of the recent upward movement that commenced from approximately JPY152.60 on November 14. The dollar exhibits strength today, testing session highs around JPY156.50 as the European morning progresses. In recent days, the market has heightened the likelihood of a Fed cut next month, while the probabilities of a BOJ hike have also risen. At the conclusion of the previous week, the swaps market stood at approximately 16%. The current figure is approximately 40%. Japan has announced that the Producer Price Index for services experienced a decline, registering at 2.7% in October, down from 3.1% in September. The peak was recorded at 3.7% last year, while this year it has not exceeded 3.4%. Tomorrow, it is expected to validate the increase in machine tool orders of 16.8% year-over-year in October, up from 11.0% in September. This marks the highest level observed since June 2022. On Friday, we can expect to see several key high-frequency data releases, which may feature a marginally softer Tokyo CPI for November, a decrease in the unemployment rate to 2.5% from 2.6%, robust retail sales at 0.8%, and a decline in October’s industrial output following the significant 2.6% increase observed in September, marking the largest rise since March 2024.

The Australian dollar faced ongoing challenges in maintaining upward momentum. It rebounded from a proximity to a 3-month low around $0.6420 before the weekend but encountered resistance near $0.6470 on Monday. Following a near return to $0.6435 yesterday, the Aussie gained momentum and surpassed $0.6470 by a few hundredths of a cent, achieving a three-day high. The stronger-than-anticipated CPI today pushed the Australian dollar slightly above $0.6510. Resistance levels are observed around $0.6520. Options for approximately A$1.2 billion at $0.6500 and A$1.7 billion at $0.6535 are set to expire today. Australia reported a stronger than anticipated headline CPI, which increased to 3.8% from 3.6%, while the core (trimmed mean) rose to 3.3% from 3.2%. The futures market has relinquished earlier expectations of a rate cut in the upcoming month. The peak odds at the start of this month reached approximately 27%, but they have since declined to below 5%. The other significant development was that the Reserve Bank of New Zealand implemented another reduction in the easing cycle that commenced in August 2024. The updated target rate stands at 2.25%. The RBNZ’s decision was characterized as a “hawkish cut,” as there were no indications of further reductions in the future. The market appeared to interpret today’s cut as likely marking the conclusion of the cycle, and this sentiment was further solidified. The New Zealand dollar experienced a rebound from a seven-month low at the end of last week (~$0.5380) to nearly $0.5700 today, recovering approximately half of this month’s losses. The upcoming retracement level at 61.8% is approximately $0.5720. It has retraced to approximately $0.5670, coinciding with the expiration of options valued at nearly NZD800 million.