Dollar rally gains momentum as Nvidia and geopolitics keep markets on edge

Frank Walbaum

Important news this week

Thu, 12th, 08:00 CET UK Gross Domestic Product.
Fri, 13th, 14:30 CET US Producer Price Index.

Dollar rally gains momentum as Nvidia and geopolitics keep markets on edge

The US dollar extended its recovery yesterday, gaining momentum throughout the session and pushing the Dollar Index above 102.50. Stronger inflation data and growing expectations of another Federal Reserve rate hike in December continue to support the greenback. With the Dollar Index now trading at its highest levels in around 19 months, the next test will be whether it can hold above this important technical area. The euro, Australian dollar and pound are all under pressure, with GBPUSD slipping back below its 50-day moving average.

Market talk

Precious metals remain under pressure as the stronger dollar and rising interest-rate expectations weigh on demand. Gold has moved below the $4,000 level, while silver is also struggling to regain momentum. Higher yields increase the opportunity cost of holding non-interest-bearing assets, leaving the metals vulnerable unless safe-haven demand returns.

Equity markets have been more resilient, although the latest Nvidia headlines are creating fresh uncertainty around the technology sector. Reports about a possible leadership change involving Jensen Huang, alongside ongoing scrutiny over alleged links to Chinese intelligence, have put the company back in the spotlight. Nvidia's importance to the AI trade means further developments could influence the Nasdaq and broader market sentiment. At the same time, the upcoming Anthropic IPO is keeping attention on the enormous valuations and investment expectations surrounding artificial intelligence.

In geopolitics, US-led efforts to negotiate an end to the war in Ukraine are becoming increasingly important. Recent talks have produced some progress on prisoner exchanges, but major disagreements over territory and Europe's future security arrangements remain. NATO's eastern flank and the question of security guarantees could become central issues in the negotiations. For markets, any credible progress could reduce geopolitical risk premiums, although continued military activity means the situation remains fragile.

Oil is trading slightly higher, balancing geopolitical supply risks against hopes for diplomatic progress. Developments around Ukraine and the Middle East remain important, particularly given the potential impact on energy infrastructure and shipping routes.

Meanwhile, cryptocurrencies are showing tentative signs of stabilisation after recent weakness. A sustained recovery would suggest that some appetite for risk is returning, even as the stronger dollar continues to challenge other asset classes.

Today's data calendar includes US existing home sales and UK third-quarter GDP, while markets will also be watching developments around Nvidia, the Fed outlook and the latest geopolitical headlines.

Tendencies in the markets

Equities sideways, USD at resistance, crypto weak, oil sideways, metals weak, JPY mixed.

Author

Frank Walbaum

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