The DXY Index ended overnight barely changed at 100.2 following a volatile session driven by a mixed US jobs report for September. Nonfarm payrolls (NFP) improved to 1196k in September, beating the 53k consensus, but August was revised to minus 4k while the unemployment rate increased to a four-year high of 4.4% from 4.3%. Moreover, the October jobs report, which will likely capture the negative impact of the government shutdown, has been delayed to December 16, after the FOMC meeting on December 10. The FOMC Minutes for the October 28-29 meeting amplified the deep division within the Fed, a primary reason the futures market axed the probability for a December cut to 35% from 92% since the last FOMC.
Looking ahead, the greenback faces profit-taking risks ahead of next week’s Thanksgiving holiday-shortened trading week. The S&P 500 and Nasdaq Composite Index fell by 1.6% and 2.2% overnight, unable to shake off persistent AI stock overvaluation worries, amid signs that investors are seeking safety in Treasuries. US President Donald Trump may renew pressure on monetary policy. Apart from wanting to fire Fed Chair Jerome Powell, he joked about removing Treasury Secretary Scott Bessent if interest rates were not lowered quickly enough. The Fed is ending quantitative tightening (QT) on December 1, removing the liquidity scarcity premium that underpinned the USD over the past few years.
Markets remain on high alert for JPY interventions. USD/JPY is currently above 157.20, above its end-2024 close. Japanese Finance Minister Satsuki Katayama broke her silence this morning, warning that currency interventions would be a possible response to the JPY’s rapid one-sided depreciation. Her comments followed those of government panel member Takuji Aida, who said interventions may come before the JPY depreciates to 160 per USD. The weak JPY accounted for most of the DXY’s appreciation this month – JPY (-2.2%), GBP (-0.6%), CAD (-0.6%), CHF (-0.2%), and EUR (-0.1%). Meanwhile, Bank of Japan Governor Kazuo Ueda is scheduled to appear before parliament this morning. National CPI ex fresh food rose to 3% YoY in October from 2.9% in September. Prime Minister Sanae Takaichi is preparing an economic package to address the cost of living, which led voters to strip the LDP-led coalition of its majority in both houses. Japan’s policymakers have explicitly recognised the link between the JPY’s weakness and inflation, not helped by negative real interest rates.
South Africa will host the G20 Leaders’ Summit in Johannesburg on November 22-23. It remains unclear if the US will boycott the meeting. The Trump administration has formally warned South Africa from issuing any communique in the US’s absence, arguing that the host’s agenda ran counter to America’s policy views. Japan-China tensions are also likely to surface at the G20, adding another layer of geopolitical friction. China has ruled out a meeting between Premier Li Qiang and Prime Minister Sanae Takaichi after Beijing sharply rebuffed Tokyo over recent comments on Taiwan.
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“The only source of knowledge is experience.”
Albert Einstein
November 21 in history
Albert Einstein introduced the equation E = mc2 in 1905.
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