The United States dollar index (DXY) began the week marginally lower, easing 0.1% to 99.556, extending last week’s declines as investors retreated from risk following a renewed sell-off on Wall Street as persistent concerns over an “AI bubble” continued to dampen sentiment.
The Greenback found some support on Friday amid risk aversion in Asia, where markets mirrored Wall Street’s losses, led by technology stocks.
Investors are now focused on upcoming data for further insight into the health of the U.S. economy after worrisome labour market figures and tech-driven market turbulence derailed earlier optimism.
Concerns intensified after the University of Michigan’s consumer sentiment index fell to 50.3 in November, near record lows and below expectations of 53.2.
With the government shutdown - now in its sixth week - limiting official data releases, investors have increasingly relied on private sector indicators to gauge economic performance.
Recent reports from Challenger, Gray & Christmas showed layoff announcements in October surged to a 22-year high for the month, reinforcing fears of an economic slowdown and fuelling expectations of a Federal Reserve rate cut in December.
Euro steady as weak sentiment, data weigh on DXY
The EUR/USD currency pair held steady at 1.1558 on Monday, as the extended U.S. shutdown and soft sentiment readings kept investors cautious, with many opting to diversify out of the Greenback.
The lack of U.S. data contributed to market uncertainty, with Wall Street’s sell-off further undermining risk appetite.
Despite the usual safe-haven demand for the Dollar, traders favoured the Euro as the DXY index slipped 0.16% to 99.53.
“The University of Michigan consumer sentiment survey highlights softness in the US economy lurking beneath the surface of elevated equity valuations and the AI investment boom,” ANZ analysts noted.
Meanwhile, the German trade surplus narrowed to €15.3 billion in September, below expectations of €16.8 billion, adding a mildly cautious tone for the Eurozone outlook.
Aussie holds ground despite weak US data, Fed uncertainty
The Australian Dollar traded sideways around 0.6493 on Monday, supported by expectations of a U.S. rate cut in December.
The CME Group FedWatch Tool now prices a 66.8% probability of a 25bp cut, up from 63% a week earlier, following a sharp drop in U.S. consumer sentiment.
The University of Michigan survey highlighted deepening pessimism, while October’s Challenger report revealed over 153,000 job cuts.
Fed Chair Jerome Powell reiterated that policymakers remain data-dependent, warning that “more evidence” is needed before committing to policy changes.
In Australia, the Reserve Bank of Australia kept rates steady at 3.6% in November.
Governor Michele Bullock said that inflation “remains too high” and confirmed that no rate cuts were discussed, signalling continued caution.
Pound rebounds slightly from 7mth lows; BoE flags weak demand
The Pound Sterling started the week near 1.3160 after falling to seven-month lows last week.
The Bank of England’s decision to hold rates at 4% came with a narrow 5-4 split vote, surprising markets expecting a stronger consensus.
Deputy Governor Sarah Breeden joined three dovish members in voting for a 25bp cut, highlighting divisions within the Monetary Policy Committee.
The BoE’s statement warned that “weak demand could weigh on inflation in the medium term” while noting that inflation persistence risks “have become less pronounced”.
Governor Andrew Bailey said the bank remains cautious, noting that policymakers must see a “downward path of inflation become more established before we cut rates again.”
Markets now expect one more reduction before year-end.
Yen remains weak; DXY demand steadies
The USD/JPY currency pair opened the week around 153.69, near nine-month highs, up 0.2% as Treasury yields stabilised and U.S. dollar demand persisted.
The pair recovered from a 100-pip loss on Thursday as buyers defended the 153.00 level, closely tracking the 10-year Treasury yield, which remained near 4.1%.
Technically, the pair remains supported by the 20-day simple moving average (SMA) at 152.52, with the October 29 low at 151.53 acting as the next key support if momentum falters.
The RSI points to a potential bullish continuation if the pair clears resistance near recent highs.
Economic Calendar for the Week Ahead
On Monday, Japan will release the Bank of Japan’s Summary of Opinions alongside the Reuters Tankan Index and Coincident Index. BOJ board member Nakagawa is also scheduled to speak.
In Australia, final Building Approvals data will be published.
Tuesday will see Canada remaining closed for the Remembrance Day public holiday, though the Bank of Canada Market Participants Survey will still be released.
In Australia, attention turns to the Westpac Consumer Confidence Index and NAB Business Confidence survey.
The United States observes Veterans Day, with the NFIB Business Optimism Index the only data scheduled.
Japan reports Bank Lending and the Current Account Balance.
In the United Kingdom, traders will watch Average Earnings and the Unemployment Rate.
Across the eurozone, ECB President Christine Lagarde delivers remarks, while Germany’s ZEW Economic Sentiment Index is also due.
On Wednesday, in the United States, the ADP Employment Change is expected to offer insight into labour market conditions.
Australia will see a speech from RBA’s Jones alongside data on Quarterly Home Loans and Investment Lending for Homes.
South Korea reports its Unemployment Rate.
Thursday sees Canada releasing its Building Permits data. In the United States, investors will monitor the Redbook Index and several Federal Reserve speeches from Williams, Paulson, Waller, Bostic, and Miran.
Japan also posts its Producer Price Index (PPI), while Australia’s Employment Change and Unemployment Rate will provide key domestic insights.
The United Kingdom issues data on Business Investment, GDP Growth Rate, Goods Trade Balance, and Industrial and Manufacturing Production.
The eurozone releases its ECB Economic Bulletin and Industrial Production.
On Friday, in the United States, speeches from Fed’s Hammack are due, along with the Monthly Budget Statement and Federal Reserve Balance Sheet.
South Korea will publish Import and Export Prices.
China delivers a heavy data slate including the House Price Index, Fixed Asset Investment, Industrial Production, Retail Sales, and Unemployment Rate.
The eurozone releases Balance of Trade, Employment Change, and GDP Growth Rate.
Over the weekend, speeches from U.S. Federal Reserve officials Schmid, Logan, and Bostic are expected.
