Heading into the US Thanksgiving holiday-shortened trading week, the USD faces profit-taking risks. The DXY Index’s rise stalled in a 100-100.4 range despite a better-than-expected reading of 119k for US nonfarm payrolls (NFP) in September. US Labor Secretary Lori Chavez-DeRemer looked past the NFP and urged the Fed to cut rates again. NFP is likely to be weaker again in October due to the government shutdown. More importantly, the unemployment rate increased to a four-year high of 4.4%. The Fed remains divided over a December rate cut, but the debate is no longer as one-sided as it was after Fed Chair Jerome Powell’s late October remark that a December cut was not a forgone conclusion. New York Fed President John Williams, also a permanent voter and vice chair of the rate-setting FOMC, viewed monetary policy as modestly restrictive, with room for a near-term rate cut to bring the policy stance closer to neutral.
On November 25, pay attention to the US Conference Board’s consumer confidence index, which consensus expects to decline to 93.4 in November from 94.6 in October. In the previous survey, all components in the Expectations Index weakened to 71.5 in October, driven by more pessimism about future job availability. US consumers may become less optimistic about income prospects in the next six months. The current survey will likely reflect the AI-related concerns hurting sentiment in tech stocks (the Nasdaq Composite Index fell for three consecutive weeks) and the US labour market. Apart from Bitcoin declining more than 30% to 87k from the year’s high of 126k on October 6, gold prices peaked at USD4382/oz and fell to 4065.
GBPUSD has been trapped in a 1.30-1.32 range in November. The currency pair’s decline to 1.3010 from its 1.3726 peak on September 17 has priced in a Fed pause in December and a difficult UK Autumn Budget on November 26. Last Friday, Moody’s affirmed the UK’s Aa3 rating with a stable outlook, signalling that it did not expect Chancellor Rachel Reeves to trigger a repeat of the 2022 mini-budget crisis. The core issue is about Reeves’ ability to meet her self-imposed fiscal rules amid stagnant economic growth and weaker tax revenues. With markets seeking predictability, GBP is looking for support from an Autumn Budget that reinforces fiscal prudence, avoids unfunded commitments, and combines growth-friendly measures that align with the Bank of England’s mild easing bias.
Markets are on high alert for intervention to arrest the JPY’s weakness. USD/JPY retreated to 156.40 last week after rising to 157.90 last Thursday, above its end-2024 level of 157.20. Finance Minister Satsuki Katayama warned that interventions would be a possible response to the JPY’s rapid one-sided depreciation. Government panel member Takuji Aida said interventions may come before USD/JPY rose to 160. Japan intervened in the currency market in July 2024 when USD/USD hit a 38-year high of around 161.96.
Last Friday, Bank of Japan Governor Kazuo Ueda told lawmakers that the weak JPY could raise import costs and lift inflation. BOJ board member Kazuyuki Masu said that the central bank was close to a decision to raise rates and would not wait until next year’s spring wage negotiations end.
NZD may recover after returning this year’s gains. NZD/USD depreciated to 0.5581 last Thursday, below its end-2024 level of 0.5594. The Reserve Bank of New Zealand will likely deliver its final rate cut at its November 26 meeting. A 25-bps cut would bring the official cash rate below the RBNZ’s estimated neutral range of 2.5-3.5%. CPI inflation increased for the third straight quarter from 2.2% to 3% YoY in 3Q25, hitting the top of its 1-3% inflation target. Anna Breman, who will take over as RBNZ Governor on December 1, intends to focus on achieving low and stable inflation. Her appointment came after the departure of former governor Adrian Orr, who drew government criticism for losing control of inflation, prompting his resignation in March.
Quote of the Day
“It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change.”
Charles Darwin
November 24 in history
English naturalist Charles Darwin published "On the Origin of Species" in 1859.
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