Global Market Snapshot 2nd December 2024

This week, the forex market experienced significant volatility due to the interplay of geopolitical events and macroeconomic data. The Japanese yen surged significantly against the backdrop of higher-than-expected inflation in Tokyo, while the US Dollar Index retreated amid subdued liquidity during the holiday season, though it remained broadly strong. This month, the US dollar was notably boosted by policy expectations following Trump’s election victory, while the euro came under pressure due to weak economic data and policy divergence.

The US Dollar Index rose 0.31% to 106.274, the Dollar Index gained 1.78% in November, continuing the upward momentum following Trump’s election victory. The market anticipates that the new administration will implement business deregulation and fiscal stimulus policies, benefiting the dollar. However, the dollar’s strength has also partially limited the gains of the yen and the euro. Despite the recent impressive rally, the dollar may face some short-term pressure.

USDJPY The Japanese yen briefly touched 149.47 against the US dollar, its lowest level since October 21, with an intraday decline of 1.27%. On a weekly basis, the yen is down 3.38%, marking its largest weekly drop since July. This week, the core CPI growth rate in the Tokyo area reached 2.2% year-over-year, exceeding the expected 2.1% and significantly above October’s 1.8%. This data has strengthened market bets on the Bank of Japan raising interest rates next month. However, it remains uncertain whether Tokyo’s inflation will lead to improved nationwide data. The upcoming Bank of Japan policy statements will be crucial in determining the next steps.

EURUSD The euro fell 0.24% against the US dollar, closing at 1.0522, fell 2.8% overall in November, marking its largest monthly decline since May 2023. While France’s November consumer price growth met expectations and Germany’s inflation rate remained flat, the lack of significant growth signs, coupled with policy divisions within the European Central Bank (ECB), further weighed on the euro’s performance. This week, ECB officials expressed diverging views, with some advocating for steep rate cuts in December and others urging cautious adjustments. This policy uncertainty has undermined market confidence, putting additional short-term downward pressure on the euro. However, if U.S. employment data unexpectedly weakens or the dollar’s rally stalls, the euro could find a temporary respite.

GBPUSD The British pound experienced notable fluctuations against the US dollar this week. The pound rose 0.15% higher at 1.27, but still, it posted a weekly decline of 0.85%. Concerns over the UK’s economic outlook intensified, particularly following unexpectedly weak retail sales data and the manufacturing Purchasing Managers’ Index (PMI) remaining in contraction territory for the fourth consecutive month. Uncertainty surrounding the Bank of England’s (BoE) policy trajectory further weighed on the pound. Meanwhile, the pound showed relative weakness in cross-currency pairs due to the US dollar’s strong performance this week. In the short term, if the dollar continues to strengthen, the pound may face additional pressure. However, the market is closely watching next UK employment and inflation data. Should the data exceed expectations, the pound could see a temporary rebound.

USDCAD This week, the Canadian dollar experienced a choppy performance against the US dollar, with a slight increase of 0.12%, closing at 1.400. Canada’s economic data provided little support for the CAD, as the latest retail sales growth came in below expectations, and core inflation indicators showed signs of slowing. Analysts believe that if economic data continues to weaken, the Bank of Canada (BoC) may delay further rate hikes, which would put additional pressure on the CAD. In the short term, if oil prices and the US dollar maintain their current trends, the CAD may face further downward pressure. However, this week’s upcoming release of Canada’s GDP and employment data could provide critical guidance for the currency. Analysts note that the CAD’s future movements will continue to be influenced by fluctuations in oil prices and expectations regarding BoC policy. Investors are advised to monitor key data for further developments.

BTC Bitcoin has fallen back to around $96,800.