Markets Gain Momentum on Softer Yields (24-28 November)

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.

Treasury yields dropped to multi-week lows, the dollar strengthened modestly, and precious metals consolidated. Optimism surrounding potential Ukraine peace negotiations and fiscal policy shifts in Japan and the UK also influenced sentiment.

Market Drivers & Catalysts

• Fed Repricing: Traders raised odds of a December rate cut to 71% after NY Fed President Williams noted progress in cooling the labor market and Dallas Fed’s Logan advised caution on inflation signals.
• U.S. Labor Data: September payrolls rose by 119,000, while unemployment edged up to 4.4%, the highest since 2021. This mixed picture added to expectations of policy easing.
• Japanese Verbal Intervention: BOJ Governor Ueda and Finance Minister Katayama warned of yen weakness and possible intervention, temporarily strengthening the currency.
• Geopolitical Shifts: Reports emerged that Ukraine may consider peace negotiations, impacting oil markets and broader risk appetite.
• Slowing Inflation in UK and Eurozone: Weaker CPI figures eased pressure on the BoE and ECB, with markets leaning toward policy stability or cuts.

Fixed Income

• U.S. 10-Year Treasury: The yield dropped to 4.06%, its lowest since late October, posting its steepest weekly decline since early October. The shift followed growing expectations of a December rate cut and Fed officials’ dovish rhetoric.
• UK 10-Year Gilt: Gilt yields rose to 4.6%, hitting a five-week high. Uncertainty around the upcoming UK budget overshadowed easing inflation, even as markets priced in an 84% chance of a December rate cut.
• Japan 10-Year Government Bond: The yield fell to 1.78% from a 17-month high after the cabinet approved a ¥21.3 trillion stimulus. While the stimulus raised fiscal concerns, BOJ’s commitment to stability and improving exports helped ease pressure.
• Germany 10-Year Bund: The Bund yield declined to 2.69% following weaker PMI data and dovish Fed commentary. While growth slowed in November, the ECB is expected to hold rates steady amid stabilizing inflation.

Commodities

Gold steadied near $4,080/oz but logged a weekly loss as Treasury yields fell and rate cut hopes grew. Despite initial pressure from strong payrolls, dovish Fed tones pushed yields down, lending support to bullion.

Silver fell below $50/oz, its second consecutive weekly decline. While the labor market showed resilience, rising unemployment and Fed caution on further easing weighed on the outlook. Weekly losses exceeded 1%.

Currencies

• U.S. Dollar: The DXY climbed to 100.3, its highest since mid-May, gaining nearly 1% for the week. Risk-off sentiment in tech and crypto helped lift the dollar, alongside rising Fed cut expectations.
• Euro: The euro dropped to $1.15, its lowest in over a month, pressured by Fed rate expectations and dovish tones. Eurozone PMIs remained strong, and the European Commission raised its 2025 growth forecast to 1.3%.
• British Pound: The pound fell to $1.305, nearing a seven-month low. UK CPI slowed to 3.6% in October, easing pressure on the BoE. Political momentum favored Finance Minister Reeves ahead of the November 26 budget.
• Japanese Yen: The yen rebounded past 157 per dollar after BOJ officials warned about import-cost pressures from a weak yen. Despite this, the yen ended the week 2% lower, weighed by stimulus spending and higher core inflation.

Economic Data Highlights

• U.S. Unemployment (Sep 2025): The unemployment rate rose to 4.4%, a four-year high. Job gains totaled 119K, while the labor force grew by 470K. Participation hit 62.4%, and the broader U-6 rate slightly eased to 8.0%.
• U.S. Consumer Sentiment (Nov 2025): The University of Michigan index rose marginally to 51.0, still near record lows. One-year inflation expectations fell to 4.5%, and long-term expectations declined to 3.4%.
• Eurozone CPI (Oct 2025): Inflation held at 2.1%, with service prices at 3.4% and core inflation steady at 2.4%. Energy costs declined further, while food and non-energy goods rose modestly.
• U.S. Existing Home Sales (Oct 2025): Home sales rose 1.2% to 4.10 million, the highest in eight months. Lower mortgage rates and weak labor data supported the rebound, while housing inventory fell to 1.52 million units (4.4 months’ supply).

Macro Calendar Highlights

• U.S. Core PCE Inflation
• UK Budget Release
• Eurozone Consumer Confidence
• Japan CPI (October)
• U.S. Durable Goods Orders
• Fed Meeting Minutes