The risk environment remained uncertain early Tuesday, following a tough day that hurt risk assets and the U.S. Dollar. Key factors driving this were a dovish Federal Reserve (Fed) stance, a record surge in Japanese bond yields, mixed geopolitical updates, and disappointing U.S. data. The S&P Global PMI exceeded expectations slightly at 52.2, compared to 51.9 last month. However, the more widely watched ISM manufacturing index stayed below 50 for the 10th consecutive month, coming in at 48.2, lower than the expected 49.0.
The Atlanta Federal Reserve’s GDPNow model maintained its Q3 growth estimate at 3.9%. It expects the solid growth in Q3 to slow in Q4. The next update will be by Thursday, December 4. The first model forecast for Q4 GDP growth will be available by December 23.
In White House news, President Trump is set to meet with his National Security team to discuss Venezuela, with multiple options under consideration. On his health, Trump's MRI results were normal, showing no issues with his heart or abdominal health. He also expressed optimism regarding Ukraine, following good talks with a Ukrainian delegation in Florida.
Costco, along with other companies, plans to sue for refunds if Trump’s tariffs are overturned by the U.S. Supreme Court. Trump warned that such a move would be “devastating” and argued that without the tariffs, the global economy would be in a depression.
In Europe, the European Central Bank (ECB) officials stated that current interest rates are appropriate. ECB Vice President Luis de Guindos mentioned that slight deviations from the 2% inflation target should not trigger any immediate rate changes. Meanwhile, ECB member Isabel Schnabel said that inflation within the Eurozone should align in the coming year.
The Bank of Japan (BOJ) Governor, Kazuo Ueda, warned that delaying a rate hike for too long could lead to a sharp rise in inflation. This caused the USDJPY to move lower earlier in the day. However, as bond yields rose, the U.S. Dollar strengthened, pushing the USDJPY back up.
In trade news, the U.S. Trade Representative (USTR) confirmed a deal between the U.S. and the U.K. on pharmaceutical pricing. The U.K. National Health Service (NHS) will increase payments by 25%, and the U.S. will not target the U.K.'s pricing practices.
In New Zealand, Reserve Bank of New Zealand (RBNZ) Governor Adrian Orr emphasized the importance of sticking to the core mandate. While there is a small chance of a rate cut in the near future, market expectations now lean toward a rate hike by next September.
Canada’s S&P Global Manufacturing PMI for November dropped to 48.4, down from 49.6 the previous month.
Over the weekend, OPEC+ kept production levels unchanged, as expected, while geopolitical risks related to Venezuela and the ongoing Russia-Ukraine conflict continue to affect the market.
Meanwhile, the U.S. Dollar Index (DXY) fell for the sixth consecutive day, reaching its lowest point since November 13, before bouncing back slightly. This decline helped gold hit a six-week high and brought USDJPY to a three-week low, as the currency pair continued its three-day downtrend. The Euro edged higher, while the British Pound fell after rising to a month-high. The risk-averse market environment weighed on AUDUSD and NZDUSD, and boosted USDCAD, despite rising crude oil prices. U.S. equity indices snapped their five-day winning streak, and the cryptocurrency market saw a massive $150 billion loss in market value, led by sharp declines in Bitcoin and Ethereum.
EURUSD paused after a six-day winning streak, while GBPUSD fluctuated following a three-day losing streak, as traders looked for more signs to confirm the initial pessimism at the start of the month. The U.S. Dollar also stalled after six days of losses, with mixed comments from European Central Bank (ECB) officials and optimism surrounding the US-UK pharmaceutical deal limiting major currency moves. Additionally, a cautious market mood ahead of today’s preliminary Eurozone inflation data and the UK’s Financial Stability Review kept EURUSD and GBPUSD in check.
On Monday, USDJPY caught attention by dropping to a two-week low, continuing a three-day losing streak. This came as Japan’s 30-year Government Bond (JGB) yields surged to a record high, fueled by expectations of a Bank of Japan (BoJ) rate hike and hawkish comments from BoJ Governor Ueda. The decline in USDJPY was also driven by a risk-off market mood, with the Japanese Yen’s safe-haven appeal adding pressure, alongside a broadly weaker U.S. Dollar. However, the recent rebound in USDJPY remains uncertain, as risk sentiment is still lacking and the ongoing policy divergence between the Federal Reserve (Fed) and the BoJ weighs on the pair.
AUDUSD follows the market's consolidation and hawkish Reserve Bank of Australia (RBA) expectations, recovering from the previous day's pullback and reaching a two-week high. Meanwhile, mixed statements from the new Reserve Bank of New Zealand (RBNZ) Governor put pressure on NZDUSD, keeping it near a one-month high but down for the second straight day. USDCAD, on the other hand, continues its rebound, supported by the U.S. Dollar’s corrective bounce and weaker Canadian S&P Global Manufacturing PMI for November. Additionally, USDCAD buyers are also getting support from a pullback in crude oil prices, which had surged the previous day due to OPEC+ inaction and a softer USD.
WTI crude oil posts slight losses, giving back some of the biggest gains in two weeks, while gold pulls back from a six-week high, ending a two-day uptrend. This comes as the market stabilizes after a tough day. Meanwhile, the upcoming weekly U.S. crude oil inventory data from the American Petroleum Institute (API) and other risk updates are key factors to watch. As a result, the cautious market mood ahead of these releases has likely kept both crude and gold prices in check.
Bitcoin (BTC) rebounds from its lowest point in a week, breaking a three-day losing streak, but lacks strong upward momentum. Ethereum (ETH) also remains flat after hitting its lowest level since November 22 on Monday.
In the crypto market, Strategy (formerly MicroStrategy) significantly lowered its financial forecast and sold shares to build a $1.44 billion cash reserve due to falling Bitcoin prices impacting its results. The company now expects earnings between a $5.5 billion loss and a $6.3 billion profit, a big downgrade from its earlier forecast. Bitcoin’s price dropped below $84,000, well below the $150,000 target. Despite holding 650,000 bitcoins worth $54.8 billion, the company is working to manage volatility with the cash reserve to cover its debt and dividends. Critics like Peter Schiff have voiced concerns about the company’s strategy.
On Wall Street, the three major U.S. stock indices ended their five-day winning streak with losses. The Dow Jones fell 0.9% to 47,289.36, the S&P 500 dropped 0.53% to 6,812.65, and the NASDAQ decreased 0.38% to 23,275.92. The Russell 2000, representing small-cap stocks, performed the worst, losing 1.25%.
Tuesday’s economic calendar features the UK Financial Stability Review and Eurozone inflation data, suggesting a likely quiet day. However, expectations of a December Federal Open Market Committee (FOMC) rate cut and rising Japanese yields could pressure the U.S. Dollar, allowing major currencies and commodities to gain slightly.
Equities may drift lower, and cryptocurrencies could also slide. If unexpectedly negative news triggers higher risk-off sentiment, the U.S. Dollar could halt its recent losses.
Overall, Tuesday’s market performance is expected to be modestly positive but may lack momentum unless significant news emerges.
May the trading luck be with you!
