The risk tone remains uncertain early Wednesday after a strong start to the week and a mixed Tuesday, as traders brace for the U.S. political showdown in the House of Congress. Sentiment is weighed down by mixed Federal Reserve comments, weaker third-tier U.S. data, and geopolitical headlines involving China, Japan, Spain, and the U.S.
The U.S. dollar came under pressure after the latest ADP weekly employment report showed a sharp drop in late October jobs, adding to concerns following weak Challenger data.
A bipartisan bill to end the 43-day government shutdown now heads to the House after Senate approval, supported by eight Democrats and President Donald Trump. If House Republicans stay united, they can pass it without Democratic votes, though the margin for error is narrow. Trump also said in a Fox interview that he plans to lower tariffs on coffee.
In data, the U.S. NFIB Small Business Optimism Index for October slipped to 98.2 from 98.8, slightly below the 98.3 forecast but close to the 52-week average of 98.0. The Uncertainty Index fell by 12 points to 88.0, its lowest of 2025. The U.S. Automatic Data Processing (ADP) Weekly Employment Change averaged -11,250 for the four weeks ending October 25, signaling ongoing labor market weakness.
Federal Reserve divisions have deepened as policymakers debate whether inflation or employment poses the greater risk. According to the Wall Street Journal, the month-long government shutdown has worsened the split by cutting off access to vital data, forcing reliance on private surveys. Doves highlight labor market fragility, while hawks warn that unchecked rate cuts could revive inflation. The outcome of the December 9–10 meeting remains uncertain, with some officials supporting a small cut and cautious guidance, and others favoring a delay until January.
Beijing is developing a “validated end-user” export system to accelerate rare-earth shipments to civilian buyers while restricting U.S. military access. The plan mirrors U.S. export-control laws but is designed to protect China’s strategic advantage. During a signing ceremony in Beijing, President Xi Jinping and Spain’s King Felipe VI pledged to deepen China–Spain relations, calling the partnership stable and based on mutual trust.
Japan’s new Prime Minister, Sanae Takaichi, said Japan could use its Self-Defense Forces if China attacks Taiwan, citing the 2015 security law’s “survival-threatening situation” clause. China’s foreign ministry condemned the comments as “egregious,” with state media warning that Takaichi “may have to pay a price.”
The November Reuters Tankan survey showed Japanese manufacturers’ sentiment at a near four-year high of +17, up from +8 in October, boosted by a weaker yen and strong demand for cars and electronics. Non-manufacturing sentiment held steady at +27, supported by tourism and services.
Japan’s 10-year government bond yield hit its highest since 2008, and the 40-year yield neared record highs, signaling the end of a multi-decade financial era. The move adds fiscal strain, tightens funding for banks and insurers, and could impact global bond markets, including U.S. Treasuries.
In Australia, Q3 Home Loans Value rose 9.6% quarter-on-quarter, the fastest since Q1 2021, beating expectations of 2.6%. Owner-occupier loans rose 4.7%, while investor loans surged 17.6%.
Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser said policy remains restrictive but under review, with the board debating how tight settings still are. He cited mixed consumption data and said policy changes will depend on sustained recovery.
RBA Assistant Governor Brad Jones told the Association of Superannuation Funds of Australia (ASFA) Conference that markets are underpricing geopolitical risks and that early signs of fragmentation are emerging in global central bank gold reserves.
The Trump administration plans to lift Biden-era limits on offshore drilling, reopening projects off California, Alaska, and the Gulf of Mexico, according to the Wall Street Journal. The move would reverse previous bans and renew debate over U.S. energy policy. Oil advanced amid concerns over Russian supply disruptions and rising U.S.–Venezuela tensions.
Amid these developments, the U.S. Dollar Index (DXY) rebounded from a two-week low while challenging gold, crude oil, and major currencies. EURUSD retreated from a weekly high, GBPUSD extended losses, and USDJPY hit a new high since February. AUDUSD and NZDUSD stayed under pressure, while USDCAD logged a four-day losing streak with slower downside momentum. Crude oil paused its three-day rally after its biggest gain in three weeks. Gold eased from a three-week high, and Bitcoin (BTC) and Ethereum (ETH) steadied after a weak session. Asia-Pacific markets mirrored Wall Street’s mixed tone as the Dow reached a record high, the S&P 500 closed slightly higher, and the Nasdaq ended modestly lower.
Despite weakness in the U.S. Dollar, mixed comments from European Central Bank (ECB) officials, and disappointing November ZEW data for Germany and the EU, dragged on EURUSD. GBPUSD also stayed under pressure after weak UK employment figures and concerns over the upcoming British Budget on November 26.
Meanwhile, strong Japanese yields, stimulus headlines, and upbeat Japan Tankan Survey results supported USDJPY’s rally, driving it to its highest level since February amid cautious market optimism.
AUDUSD and NZDUSD both post mild losses, while USDCAD struggles after the latest crude oil recovery, Canada’s key export, and talks surrounding the BoC’s readiness to stall the rate cuts, and mixed trade news. However, stimulus updates from China and mixed sentiment exert downside pressure on the antipodeans.
WTI crude oil rose for three straight days before easing today as traders await the American Petroleum Institute (API) weekly inventory data. The pullback comes amid Donald Trump’s push for expanded oil drilling and concerns over potential supply disruptions linked to geopolitical tensions involving Russia, Venezuela, and Iran. Oil traders also stay cautious ahead of the monthly OPEC report and amid hopes that the U.S. government shutdown may soon end.
Gold paused its three-day rally at a three-week high as traders awaited the political showdown in the U.S. House of Representatives. A corrective rebound in the U.S. Dollar and China-related headlines also weighed on sentiment, though the overall outlook for XAU remains bullish.
Major cryptocurrencies had a weak session before rebounding today, as traders stayed cautious ahead of the key U.S. political event. Weaker institutional inflows and technical pressure also weighed on digital assets. Bitcoin (BTC) paused its two-day recovery before posting modest early Wednesday gains, while Ethereum (ETH) fell for a second straight day despite limited downside momentum.
Markets were quiet due to holidays in the U.S. and Canada, with debt markets closed. The open markets initially fell as chipmakers declined after SoftBank disclosed it had sold its entire Nvidia (NVDA) stake in October. Chip stocks stayed under pressure, but energy shares led a midday rebound, lifting the S&P 500 slightly, leaving the Nasdaq marginally lower, and pushing the Dow Jones Industrial Average to a record high. Investors rotated into traditional Dow 30 sectors while technology lagged. SoftBank’s full exit from Nvidia in favor of OpenAI added further weight to chip stocks.
A busy day is expected as several mid-tier U.S. data releases, Federal Reserve commentary, and the ongoing political drama in the U.S. converge to shape markets.
The U.S. Dollar may reclaim some of its recent losses, putting pressure on risk assets like cryptocurrencies and antipodean currencies, though equities could edge higher, and gold may continue its rally. Any disappointment in the U.S. House vote could weigh on the Dollar but may not provide much boost to risk assets, potentially supporting further gains in gold.
Crude oil faces headwinds as well, with a sustained rise in inventories and a firmer U.S. Dollar likely to extend its recent pullback, particularly if the upcoming OPEC report signals weaker demand or higher supplies.
Overall, investors will navigate a mix of political, economic, and geopolitical developments, keeping markets volatile and closely watched across equities, currencies, commodities, and digital assets.
May the trading luck be with you!
