Markets Eye US Data After Shutdown Deal (17 - 21 November)

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 dollar regained some ground, while safe-haven demand persisted amid macro uncertainty. Key asset classes, including sovereign bonds, commodities, and currencies, responded to evolving policy expectations, delayed data releases, and geopolitical developments.

Market Drivers & Catalysts

• US Government Reopened: President Trump signed a bill late last week ending the prolonged shutdown, enabling the release of postponed economic indicators. However, October’s employment and inflation data may remain unavailable.
• Fed Policy Repricing: Several Fed officials cast doubt on a December rate cut, pulling market-implied odds down to 46%, from nearly 90% a month ago.
• Global Macro Shifts: Japan posted better-than-expected GDP despite a contraction, the UK shelved income tax hikes ahead of the budget, and the ECB remains firmly cautious.
• Oil Supply Concerns Eased: Russia’s Novorossiysk port resumed operations after a drone strike disrupted activity, softening crude prices.

Fixed Income

• United States: The 10-year Treasury yield hovered around 4.1% following a recent rally and hawkish Fed signals. Powell downplayed the certainty of further easing, while recent auctions showed modest improvements in long-duration demand (10-year at 4.074%, 30-year at 4.694%).
• United Kingdom: UK 10-year gilt yields fell below 4.4%, their lowest since December 2024, amid soft Q3 GDP (+0.1%) and speculation of BoE rate cuts. The upcoming budget is challenged by a £30 billion fiscal gap and lower productivity forecasts.
• Japan: The 10-year JGB yield remained steady near 1.65% after the BoJ held rates at 0.5%. Governor Ueda acknowledged moderate recovery but warned of global risks. Political backing for an easy policy, led by PM Takaichi, adds dovish pressure.
• Germany: The 10-year Bund yield climbed to 2.65%, its highest in nearly a month, following firmer-than-expected inflation data (Oct. CPI +0.3% MoM) and caution from the ECB. Despite weak GDP performance, inflation stabilization is driving policy patience.

Commodities

Gold rebounded toward $4,080/oz after a brief pullback, supported by risk aversion and uncertainty over the US data calendar. Market attention turns to Thursday’s jobs report for clues on the rate path.

Silver surged near $54/oz, building on its 10% weekly gain. Safe-haven flows, Indian seasonal demand, and possible US trade restrictions have intensified bullish sentiment.

Currencies

• US Dollar: The DXY rose above 99.3 as markets recalibrated Fed expectations amid a backlog of critical data. Private-sector figures like S&P PMIs and ADP jobs data will offer interim guidance.
• Euro: The euro strengthened past $1.16, hitting a multi-week high as risk appetite improved post-shutdown. The ECB remains firmly cautious, with De Guindos reiterating a prudent stance and markets pricing limited easing in 2026.
• British Pound: GBP dipped toward $1.31, nearing seven-month lows as the government abandoned planned tax hikes and budget concerns deepened. Weak Q3 growth and a negative September GDP print added downside pressure.
• Japanese Yen: The yen softened to ~154.6 per dollar, even after GDP beat expectations. Contraction of 0.4% QoQ was better than feared, but dovish guidance and policy support from PM Takaichi weighed on the currency.

Macro Calendar Highlights

• U.S. ISM Services PMI
• Eurozone Retail Sales
• U.S. Weekly Jobless Claims
• U.S. Non-Farm Payrolls (Nov)
• U.S. Unemployment Rate
• Canada Employment Change