The dollar experienced a decline following the FOMC decision announced yesterday. Today, there has been a notable absence of significant follow-through selling in both the Asian and European markets. The dollar exhibits a varied performance as market participants in North America resume trading activities. The Swiss franc has emerged as the strongest currency following the central bank’s decision to maintain its key policy rate at zero, while also emphasizing a significant threshold for any potential return to negative rates. Conversely, the underwhelming Australian labor report prompted the market to delay expectations for the initial interest rate increase next year, leading to a decline in the Australian dollar as investors engaged in profit-taking activities. Emerging market currencies are displaying a varied performance. The PBOC established the dollar’s reference rate at its lowest point since last October, while both the onshore and offshore yuan continued to strengthen.

The majority of significant equity markets in the Asia-Pacific region experienced a sell-off, potentially influenced by Oracle’s underwhelming performance results. The prominent outliers in the region included Australia, New Zealand, Singapore, and India. The Stoxx 600 index in Europe is showing a modest increase, building on the gains observed yesterday. The S&P futures have declined approximately 0.5%, while the Nasdaq futures have decreased by about 0.7%. Australia’s 10-year yield decreased by nine basis points following the disappointing jobs data, while the 10-year JGB yield fell by 2 basis points. European 10-year benchmark yields are showing slight variations, while the 10-year US Treasury yield, which approached 4.20% yesterday, remains relatively stable around 4.14%. Gold is currently maintaining its position within the recent range, and as of today, it remains above the $4200 mark. January WTI is under pressure and has hit a new monthly low around $57.50 today. The low recorded last month was approximately $57.10.

The recent Federal Reserve meeting has introduced a degree of volatility into the Dollar Index. The asset broke below the lower boundary of the four-day range, which was approximately 98.75 to 99.30. The losses observed yesterday have seen a slight extension today, reaching nearly 98.50. The upcoming technical target appears to be approximately 98.30, coinciding with the 50% retracement of the rally initiated by the rate cut on September 17. The 61.8% retracement level is positioned at approximately 97.80. The Federal Reserve implemented the anticipated hawkish cut, with next year’s GDP projections being revised upward. The median “dot” continues to indicate a single cut in 2026, consistent with the September outlook. The primary distinction in the voting occurred when Chicago Fed President Goolsbee aligned with Kansas City Fed President Schmid to express dissent in favor of maintaining the current stance, whereas Governor Moran continues to dissent in support of a 50 basis point reduction. Nonetheless, there was an unexpected dovish development with the Federal Reserve’s announcement of $40 billion in bill purchases for reserve management purposes, which the Fed asserts is entirely separate from the implementation of monetary policy itself. It is anticipated that weekly US jobless claims have rebounded following the holiday-related drop observed during the Thanksgiving week. The trade figures for September are likely to attract increased scrutiny due to the current tariff policies in place. As of August, the United States has experienced an average monthly deficit amounting to $89.2 billion. During the first eight months of 2024, the average monthly shortfall amounted to $71.4 billion. Exports have increased by an average of 0.5% per month this year, in contrast to the 0.7% observed during the January-August 2024 timeframe. During the three-month period ending in August, there was an average monthly increase of 0.7% in exports. During the three-month period ending in August 2024, exports experienced an increase at nearly double the rate, averaging 1.3% growth per month. Imports experienced a decline averaging a month through August, while showing an increase of 0.8% on average during the corresponding period in 2024. Over the three-month period ending in August, US imports experienced a decline, averaging a decrease of 0.9% per month, following an increase of 0.7% per month during the same timeframe in 2024.

The euro reached $1.1700 following the FOMC meeting, marking its highest point since October 17. The asset reached the 50% retracement level of the declines observed since the peak recorded on September 17. During the initial trading session in the Asia Pacific region today, the value approached nearly $1.1710, but a modest wave of profit-taking subsequently brought it down to approximately $1.1680. The euro has revisited its previous highs during the early European trading session and is currently in a phase of consolidation. The peak observed on October 17 approached $1.1730. The upcoming retracement level at 61.8% is positioned around $1.1750. The economic calendar for the eurozone remains relatively sparse until the release of Monday’s report on October’s aggregate industrial production. The key event to watch next week is the ECB meeting. Its impact may be negligible, yet this instance highlights that the message conveyed holds greater significance than the actions taken. The swaps market indicates a slight inclination towards an interest rate increase late next year, with recent remarks from ECB President Lagarde appearing to support this outlook. However, the 17-30 basis point rise in two-year yields across the majority of members could lead to counterproductive premature tightening. The Swiss National Bank has maintained its key deposit rate at zero. The organization has adjusted its inflation forecasts, lowering the projection to 0.3% for 2026, down from 0.5%, and to 0.6% for 2027, reduced from 0.7%. The growth projection has been adjusted upward to 1% for the upcoming year, from a figure that was previously slightly below that mark. The euro achieved a three-month peak against the Swiss franc on Monday, approximately CHF0.9395, and is currently evaluating last week’s lows, around CHF0.9325. The threshold for reverting to a negative policy rate is considerable.

In the last 30 sessions, the relationship between fluctuations in the Dollar Index and the dollar’s value against the offshore yuan has been slightly below 0.65, yet remains within the higher spectrum of this year’s range. Should Beijing aim to temper the yuan’s recent gains, the dollar’s decline post-FOMC meeting complicates the situation further. In December to date, the dollar has been fluctuating within the CNH7.0540 to CNH7.0770 range. The dollar neared CNH7.0575 yesterday and recorded a slight new low for the year today at approximately CNH7.0530. The People’s Bank of China has established the dollar’s reference rate within the range of CNY7.0733 to CNY7.0794 for this month. The adjustments made last month ranged from CNY7.0779 to CNY7.0905. The current fix has been established at a new low of CNY7.0686, reflecting a decrease of approximately 0.09 from yesterday, marking the most significant reduction in nearly three months. The dollar has declined to approximately CNY7.0573, marking a new low since October 2024.