Snapshot

• DXY: President Trump may announce next Fed Chair before Christmas, naming a successor this early signals political pressure
• EUR/USD: The ECB slightly lowered the capital requirements for banks signalling confidence in the resilience of European banks
• USD/JPY: Japan September Core machine orders, a leading indicator of business investment rose 4.2% MoM / 11.6% YoY
• AUD/USD & NZD/USD: Westpac Leading Index for October rises from -0.03% to +0.11% / Whole milk powder average price continues to fall while NZ Q3 PPI data reveals a stabilizing wholesale price environment

US Dollar

Dxy initial attempt on the 200 DMA was rejected off 100.360 (5 Nov high). Nevertheless, the sequence of higher lows and highs since hitting the YTD low at 96.218 (17 Sep low) remains intact. Recent breach below former minor reaction high 99.139 (22 Oct high) dampens near term momentum but a lapse under 98.565 (28 Oct reaction low) is needed to put bears back in play

The Bureau of Labour Statistics (BLS) continue to work through a backlog of data unavailable during the six-week shutdown, with the September jobs report to be released on Thursday one of the more keenly awaited data for clues on labour market outlook. Consensus estimates see an uptick to 55k jobs from August’s 22k. The October reports are now likely a blank in spreadsheet models due to inability to collect data during the shutdown. The November payrolls should be on time for December 5

BLS release the backlog Initial Jobless claims data for the week through Oct 18. It showed 232k Americans filing unemployment claims. This is broadly in line with weekly levels seen over past 12 months and is a tad reassuring as it indicates no large surge in layoffs. Continuing claims at 1957k was on the high end of recent levels but below the early August figure. Still, a significant slowdown in job creation has fuelled fears that the labour market is cooling.

Recent data like the private weekly ADP data showed lingering job losses as it showed private payrolls fell by an average of 2,500 a week in the four weeks through November 1. It is a shallower drop from the previous update of a decline of 11,250 though

More hints of a weak labour market came in the November New York Fed Services Sector Survey. It remains negative but came in slightly better at -21.7 compared to prior -23.6. However, the -8.6 reading in the Employment component was the lowest since February 2021

November’s NAHB Housing Market Index indicated America’s home builders’ confidence inched up slightly this month, with the index up 38 from prior 37. However, a reading below 50 still indicates sentiment remains in negative territory, driven by recent government shutdown and economic uncertainty from tariffs and increasing construction costs

Federal Reserve officials appear split on whether inflation or labour market weakness poses the greater risk, but several Fed officials in recent days have questioned whether a third consecutive rate cut for the year is justified citing ongoing economic durability and sticky inflation. OIS markets now pricing in a slightly higher 50% chance for a rate cut, from recent sub-50% odds. Still, this was from a near certainty just a month back, to above 65% just two weeks ago, to currently flip a coin 50:50 odds. With a possible upcoming flood of delayed and scheduled economic releases though, each release of a major data can sharply reprice expectations

Recent Fedspeak from Richmond Fed President Thomas Barkin suggests assessing inflation is especially challenging in the absence of official statistics. He indicated that coming data on how inflation and employment have evolved in recent months will guide the December meeting

Newswires reporting that Treasury Secretary Bessent said President Trump may announce the next Fed Chair before Christmas. Naming a successor this early signals political pressure and will bring back narrative of a "shadow Fed chair"-where two voices (Powell and the nominee) may offer potentially divergent guidance, which could heighten market volatility

ING’s Francesco Pesole at ING sees risks for the U.S. dollar shift to the downside as the new data cycle begins, and he anticipates that expectations for a rate cut in December will become the prevailing market view once again

Meantime, with the S&P 500 falling for a fourth straight day, markets are closely watching Nvidia's upcoming earnings report due to its pivotal role in the ongoing artificial intelligence (AI) boom. It is now seen as a barometer for investor sentiment about both tech valuations and future AI spending trends. A much stronger (or weaker) than expected result from Nvidia could shift risk appetite

If Nvidia delivers a “beat-and-raise” quarter, this could help stabilize equities and possibly support risk currencies against the US dollar, as global growth optimism re-emerges. Conversely, a miss or cautious forward guidance could spark a selloff in tech, raising equity volatility, supporting safe-haven flows into Treasuries (boosting bond prices), and potentially strengthening the US dollar in the short term as risk aversion increases

Euro

EurUsd recovery off 1.1469 (5 Nov low) extended to probe near the 50 DMA~1.1652 but have yet to make a decisive break above there. A decisive daily close above the 50 DMA should put the 17 Oct 1.1728 and 1 October 1.1779 lower highs in play. Bears need to track back below 1.1530 (7 Nov low) to wrest back near-term control

The ECB slightly lowered the capital requirements (common equity Tier 1, CET1) for banks, from 11.3% in 2025 to 11.2% in 2026.

The European banking sector is well capitalized, with a weighted average CET1 ratio of 16.1% as of June, well above the minimum requirement. The ECB’s move signals confidence in the financial health and resilience of European banks, as seen by their strong stress test results and excess capital buffers

Lower capital requirements and reduced capital buffers free up bank capital, allowing more funds for lending, dividends, and share buybacks, which can be positive for the banking sector’s stock prices and for broader economic activity. This signal of stability and stronger bank profitability (via payouts/buybacks) is positive for the euro

According to Francesco Pesole at ING, the euro has potential for further appreciation against the dollar ahead of upcoming U.S. economic data releases. He notes that the exchange rate is currently undervalued by approximately 0.8%, which indicates there is more room for the euro to strengthen rather than weaken

A significant amount of official U.S. economic data is scheduled for release prior to the Federal Reserve’s December meeting, following the conclusion of the recent government shutdown. This includes the postponed September nonfarm payrolls report, which will be published on Thursday. Pesole highlights that the risks for the U.S. dollar shift to the downside as the new data cycle begins, and he anticipates that expectations for a rate cut in December will become the prevailing market view. ING forecasts that the euro will climb to $1.18 by year-end

Japanese Yen

UsdJpy pushed above prior 155.04 (12 Nov high) high to resume the uptrend. Bears need to drive markets back below 153.62 (14 Nov minor reaction low) to dampen near term bullish momentum or upside seen towards 155.89 (3 Feb reaction high) next. Above which opens 23 Jan 156.75 lower high

Japan Finance Minister Katayama’s jawboning on recent FX moves did little to prevent traders from continuing to prod where lines in the sand are as UsdJpy hit 9-month highs

Japan’s economy contracted for the first time in six quarters, with GDP shrinking 1.8% annually from July to September. The results support PM Sanae Takaichi’s plan to introduce a major fiscal stimulus package but risk of a larger than expected fiscal package could in turn lead to further yen weakness. Takaichi’s upcoming economic stimulus package is set to be finalized around 21 November. The core size of the packages is expected to be Jpy$17 trillion with some lawmakers pushing for amounts as large as Jpy$25 trillion, mostly funded by extra bond issuance. Markets will be scrutinizing this package for its impact on the yen

Escalating China-Japan diplomatic feud over Japan PM’s recent comments on Taiwan is also weighing on the yen. China hinted at imposing sanctions and restricting trade. While risk adverse situations usually benefit the yen, if Chinese retaliation leads to a drop in Japanese exports, investments or inbound travel income, it could weaken Japan’s growth outlook and put downwards pressure on the yen in the medium term

Meantime, Governor Ueda in his recent meeting with PM Takaichi, told her the BOJ is gradually reducing its monetary easing, signalling a cautious approach to raising interest rates as the link between wage growth and inflation strengthens. Ueda emphasized that the BOJ would base its decisions on economic data and monitor exchange rate effects closely, coordinating with the government to maintain stability

Prime Minister Takaichi, known for historically opposing rate hikes, refrained from commenting publicly to avoid market speculation that she’s pressuring the BOJ to delay tightening—a move that could further weaken the yen and worsen inflation. A Bloomberg survey found that half of economists expect a rate hike in December, and nearly all foresee one by January

In any case, even If BOJ raise rates either in December or January, it is hard to see them doing more beyond that given Takaichi’s administration Abenomics bend. If markets view any potential BOJ rate hike as likely a “one and done” move with no clear follow up, then a sustained decline in UsdJpy would hinge on the US side – specifically whether the Fed starts cutting rates more aggressively. Otherwise, it will be hard to dispel the upwards pressure on UsdJpy

Japan recently released data:

• September Core machine orders MoM 4.2% vs fc 2.0% vs prior -0.9%
• September Core machine orders YoY 11.6% vs fc 4.7% vs prior 1.6%

Japan's September core machine orders data shows monthly growth of 4.2% (vs 2.0% forecast) and annual growth surging to 11.6% (vs 4.7% forecast), representing a dramatic turnaround from prior weakness and signalling the strongest business investment momentum in recent quarters

This data supports the BOJ's gradual normalization path, as robust business investment indicates the economy can handle higher interest rates. It also suggests Japan's corporate sector is finally emerging from decades of investment restraint

Australian and New Zealand Dollar

AudUsd inability to sustain with follow through gains on recent brief blip above the 50 DMA, concerns. A decisive daily close above the 50 DMA could set up for renewed attempts on .6618-.6629 (29 Oct – 30 Sep reaction highs), above which puts the YTD high at .6707 (17 Sep high) back within sights. However, brief foray above there now suggests further consolidation over the 200 DMA may still be needed

China escalating its confrontation with Japan over PM Takaichi’s comments on Taiwan may exert negative spillovers on risk currencies like Aussie and kiwi. Further risk off sentiments overnight as S&P 500 suffered a fourth straight day of declines could weigh on the antipodeans

Some longer term positive news though as US President Donald Trump remove tariffs on imported food products, including Australian beef, coffee, and bananas. This marked a reversal of his earlier protectionist trade policies. Australian beef exports to the US, worth around Aud 4 billion annually, will benefit directly from the removal of the 10% tariff. Lifting the tariffs boosts confidence in Australia’s export-oriented sectors, particularly agriculture

Meantime, for the Reserve Bank of Australia, recent data tilts towards maintaining current status quo after a series of rate cuts earlier in the year. Policymakers remain cautious about rekindling inflation, particularly amid lingering capacity constraints and steady wage growth. Broader economic indicators, including improved consumer confidence, record home lending, and recovering retail activity, point to resilient domestic momentum. Taken together, these conditions suggest that monetary easing is unlikely in the near term as the RBA prioritizes price stability over growth stimulus

Based on the recent deluge of positive data, TD Securities suggest that the RBA easing cycle is over. They see RBA keeping its official rate on hold at 3.60% throughout the next year

Bloomberg November Australia Economic Survey saw the following forecasts from economists:

• Q3 2025 GDP forecast at 0.5% QoQ vs prior survey 0.5%
• Q4 2025 GDP forecast at 0.5% QoQ vs prior survey +0.6%
• 2025 CPI forecast at 2.8% YoY vs prior survey 2.5%
• 2026 CPI forecast 3% YoY vs prior survey 2.7%
• RBA central bank rate seen at 3.60% by end 4Q25

RBA's chief economist Sarah Hunter will speak on Thursday, and given recent data which seems to suggest demand recovery has strengthened, we are expecting a message that tilts hawkish

Australia recently released data:

• October Westpac Leading Index MoM 0.11% vs prior -0.03%

The Westpac Leading Index's shift from -0.03% to +0.11% MoM signals a meaningful improvement in Australia's economic momentum heading into 2026. Westpac's own analysis indicates this supports their forecast for GDP growth to accelerate from the current 1.8% annually to 2.4% over 2026. The index components likely reflect improvements in business confidence, employment expectations, and consumer spending patterns

This data supports the RBA's current cautious stance, as it suggests the economy is responding to earlier monetary easing without requiring immediate additional stimulus

NzdUsd stemmed recent downside at .5606 (7 Nov low) thus far and recent breach above former .5683 (14 October low) low could now firm near term outlook. We still need a decisive daily close above .5683 to set up for further advance towards the 50 DMA~.5771. Lapse back under .5606 resumes slide for a full retrace back towards .5486

RBNZ cut rates by 50 bps in October, lowering the OCR to 2.5%, and markets are pricing in a further 25 bp cut at the upcoming 26 November meeting. NZ’s domestic growth remains soft, Q2 GDP was weaker than expected, unemployment rose to 5.3%, and inflation is running at 3-3.5%, with core measures sticky above 4%, reflecting persistent price pressures but falling headline growth. In any case, RBNZ have said it will look through any temporary pickup in inflation and the elevated inflation is unlikely to persist given the deteriorating labour market, weak demand and subdued confidence

There have been some improving data though with Manufacturing PMI climbing out of contractionary reading and retail card spending posting positive MoM growth. Recent services index for October though, while improving, continues to show persistent contraction aligning with RBNZ's assessment that the economy has "subdued" growth and rising excess capacity

ANZ sees signs of a “spring thaw” though, suggesting the New Zealand economy is beginning to recover, though progress is uneven and patchy. They pointed that the data has been mixed, typical around economic turning points. High-frequency data have not yet fully captured the Reserve Bank’s recent dovish stance. There are upside risks for the currency at this juncture as domestic data may start to improve on a more frequent and consistent basis with recent and upcoming RBNZ rate cuts

ANZ summarized in their November economic outlook for NZ: “Conditions appear to be in place for a recovery back to full employment, but there’s still a patch of soft momentum to navigate in the near term, and things will remain patchy for some time”.

Nzd is particularly sensitive to China’s demand outlook. Recent data indicating a rebound in China’s inflation and trade has supported short-term Nzd stability, but the upside remains limited by local soft data and dovish RBNZ cues. One of NZ’s major exports with a reliable correlation with the Nzd -Whole milk powder, saw its average price fell to $3,452 per ton from $3,503 at the previous auction according to GlobalDairyTrade website. The GDT index decrease 3%. Recent doubts on whether the Fed will cut rates at their December meeting may also prevent aggressive bets on any Nzd recovery

On the positive side, recent US announcement to remove additional reciprocal tariffs on a range of agricultural products including beef, offal, kiwifruit, berries and avocadoes will benefit NZ exports, providing a lift to NZ growth

Markets will be looking out for RBNZ guidance after their 26 November policy meeting to see if they signal the bulk of the rate cuts are complete

NZ recently released data:

• 3Q PPI Output QoQ 0.6% vs prior 0.6%
• 3Q PPI Input QoQ 0.2% vs prior 0.6%

New Zealand's Q3 PPI data reveals a stabilizing wholesale price environment with output prices holding steady at 0.6% QoQ while input costs decelerated to 0.2% from 0.6% previously. This divergence suggests easing supply-side inflation pressures and potential margin improvement for producers, supporting the RBNZ's accommodative monetary policy stance as underlying price pressures moderate without creating deflationary concerns