Weekly Analysis

Global financial markets closed the first week of December with renewed confidence in an imminent Federal Reserve rate cut, as soft U.S. data and dovish Fed commentary lifted risk assets and precious metals. The dollar remained steady, Treasury yields eased, and commodities diverged on geopolitical headlines. European inflation surprised slightly higher, while Japan’s economic strength added pressure on bond yields amid aggressive fiscal stimulus.

Markets rebounded this week with rising expectations of a Fed rate cut in December, following dovish remarks from New York Fed President Williams and mixed labor data.

The global financial markets kicked off the week on a cautious yet anticipatory note, with investors bracing for a wave of delayed US economic data following the end of the 43-day government shutdown.

The U.S. dollar index stabilized near 99.6, ending a three-day decline as signs of a deal to end the record-long government shutdown emerged. While the dollar weakened earlier in the week on soft consumer sentiment and rising job cuts, support returned as Senate leaders signaled progress toward a temporary budget. The market remains split on the Fed’s December decision, with 67% odds for a 25bps cut.

The dollar index climbed for a third consecutive session on Friday to near 99.8, its highest since early August, closing October with a 1.8% monthly gain. Despite delivering a 25bps rate cut, the Federal Reserve struck a cautious tone, with Chair Powell signaling that a December cut isn’t guaranteed, cutting market odds to 63% from 90%.

The dollar index slipped to 98.8 on Friday after all major U.S. inflation readings came in below expectations, reinforcing bets on Federal Reserve rate cuts next week and again in December. The delayed CPI report, released after the government shutdown, showed headline inflation at 3.0%, slightly under forecasts, while core inflation eased.

The dollar index pulled back toward 99.6 last week, extending its decline from three-week highs as markets absorbed the Federal Reserve’s dovish tone, softer U.S. data, and persistent geopolitical caution. Meanwhile, the euro climbed to its highest since early October, supported by easing French political tensions and improved investor confidence across the Eurozone.

The dollar index fell below 99 on Friday, pressured by rising geopolitical tensions and trade war fears after US President Trump canceled plans to meet China’s Xi Jinping and threatened steep new tariffs. Sentiment remained fragile, despite a slight improvement in US consumer morale.