Markets are ending the week of a bit of a sour note. The USD has been clipped back somewhat in overnight trade as investors ponder a looming US government shutdown. Talk amongst US lawmakers about suspending or removing the debt ceiling has not worried US Treasurys unduly but investors do appear to be paying a bit more attention to the risk of (more) fiscal slippage in the US ahead. Volatility is elevated and stocks are wondering where the Santa Clause rally has gone in all of this, Scotiabank’s Chief FX Strategist Shaun Osborne reports.
USD edges lower as markets ponder shutdown
“Beyond this week’s losses of around 3% for the major markets, there has been a worrying slide in market breadth in NYSE stocks, with less than 50% trading about their 200-day MA. The JPY and the CHF are the top performers on the day, suggesting some demand for havens into the weekend. Japan’s November CPI rose in November, as expected, reaching 2.9%, from 2.3%. Japanese monetary officials expressed “deep concern” about the recent weakening in the currency. The AUD is a relative underperformer on soft iron ore prices.”
“US Personal Income and Spending data are expected to reflect healthy levels of consumption in November. Data will likely show PCE inflation edging up last month in core and headline terms—to 2.9% (from 2.8%) and 2.5% (from 2.3%) respectively. Sticky PCE data will support the outlook for the Fed to remain on hold in the near-term at least. Markets are pricing in significantly less than 50bps of Fed easing over the coming 12 months.”
“Firm US yields will support the USD in the longer run but overnight price action does suggest the risk of some short-term weakness in the dollar broadly in the short run after the DXY nudged above 108.50 in overnight trade. The Fed’s blackout is over; Daly and Williams are speaking today; expect a repeat of the cautious messaging on the policy outlook.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD accelerates losses to 1.0930 on stronger Dollar
The US Dollar's recovery regains extra impulse sending the US Dollar Index to fresh highs and relegating EUR/USD to navigate the area of daily troughs around 1.0930 in the latter part of Friday's session.
GBP/USD plummets to four-week lows near 1.2850
The US Dollar's rebound keep gathering steam and now sends GBP/USD to the area of multi-week lows in the 1.2850 region amid the broad-based pullback in the risk-associated universe.
Gold trades on the back foot, flirts with $3,000
Gold prices are accelerating their daily decline, steadily approaching the critical $3,000 per troy ounce mark as the Greenback's rebound gains extra momentum and US yields tighten their retracement.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.