Support
Dollar strengthens as global central banks diverge
Safe-haven demand for bonds underlines investor caution amid mixed macroeconomic signals and persistent geopolitical risks
The EUR/USD pair dropped 0.2% as the U.S. dollar strengthened
The Reserve Bank of New Zealand hinted at potential rate cuts early next year
Crude oil prices dipped slightly
Asia-Pacific
Asian markets delivered mixed performances today. Chinese markets lagged behind, reflecting investor uncertainty ahead of next month’s Central Economic Work Conference. In contrast, Japan’s economy received a boost, as reports indicated that the United States may adopt a softer stance on export restrictions for AI-related semiconductor equipment to China, benefiting key Japanese manufacturers.
Australian and New Zealand bond yields followed U.S. Treasury trends, with Australian 10-year yields declining by 4 basis points to 4.26%. This movement reflects increased demand for safe-haven assets amid ongoing global uncertainties.
Europe
The EUR/USD fell by 0.2% today, reflecting a strengthening U.S. dollar during thin holiday trading. European Central Bank President Christine Lagarde reiterated that rising tariffs pose long-term risks to the global economy, potentially elevating inflation in the short term.
Commodities:
- Oil and Natural Gas: Crude oil prices edged slightly lower, while natural gas saw a mild recovery following yesterday’s sell-off. Market sentiment remains cautious, with supply concerns tempered by geopolitical uncertainties.
- Gold: Gold prices rebounded from earlier losses, climbing towards $2,620 during European trading. Support came from persistent geopolitical tensions, including the Russia-Ukraine conflict, and speculation over a potential Federal Reserve rate cut in December. However, gains in U.S. Treasury yields and resilient U.S. macroeconomic data could limit further upside.
Central Bank Actions:
- South Korea: The Bank of Korea surprised markets with a 25-basis-point rate cut, lowering its benchmark rate to 3%. Analysts had expected rates to remain unchanged at 3.25%, highlighting concerns over domestic economic growth.
- New Zealand: Reserve Bank of New Zealand (RBNZ) Deputy Governor Karen Silk indicated the possibility of a 25 or 50 basis point rate cut in February. However, the central bank signaled a potential pause in its easing cycle as it targets a "slightly restrictive" policy stance by 2025.
- Australia: The country's private capital expenditure rose by 1.1% in Q3, exceeding forecasts and marking a recovery from the previous quarter’s 2.2% decline.
Outlook
As markets process central bank policy shifts and geopolitical developments, attention turns to upcoming macroeconomic data and policy meetings, which will shape the outlook for inflation and growth heading into 2024.
