A cautious atmosphere is settling over European markets on Tuesday as global bond markets start to stabilize, following a significant sell-off prompted by comments from Bank of Japan (BoJ) Governor Kazuo Ueda. During his address on Monday, Ueda set the stage for a potential interest rate hike in December, which led to a spike in global yields, notably impacting Japanese bond rates.
Investors are now closely monitoring the U.S. Federal Reserve’s next moves in light of the upcoming monetary policy meeting scheduled for next week. Current market sentiment reflects an 87% probability that the Fed will implement a rate cut of 25 basis points later this month, according to data from the CME Group’s FedWatch Tool. This expectation is supported by recent figures from the Institute for Supply Management (ISM), which reported ongoing contraction in the U.S. manufacturing sector for the ninth consecutive month. The ISM PMI dipped to 48.2 in November from 48.7 in October, underperforming market expectations of 48.6.
Despite the disappointing manufacturing data, the U.S. Dollar (USD) has gained traction, buoyed by rising U.S. Treasury bond yields. As of now, the Greenback is showing signs of resilience against major currencies, with the U.S. Dollar Index (DXY) hovering around 99.50.
In terms of currency performance, the U.S. Dollar demonstrates strength against several major currencies, particularly against the Japanese Yen, which has faced downward pressure. The percentage changes reflect a mixed trading day across currencies, with the dollar showing varied movements against the Euro and Pound, while maintaining its position against the Yen.
In the Asian trading session, data from the Australian Bureau of Statistics revealed a drop of $500 million in the country’s Current Account balance for the September quarter. However, this news did not negatively affect the AUD/USD pair, which saw a slight increase of 0.15%, trading at 0.6555. The USD/JPY pair is trending upward towards 156.00, recovering from previous declines.
Meanwhile, the EUR/USD pair is trading within a restricted range above the 1.1600 mark as traders await upcoming inflation data from Eurostat. The GBP/USD pair is holding steady around 1.3200 with minimal activity, reflecting a lack of significant macroeconomic releases affecting the U.S. or U.K. markets.
In commodities, gold has stabilized around $4,200 amid volatility earlier in the Asian session. XAU/USD is facing resistance from increasing U.S. Treasury yields and a broader rebound in the USD. The market remains on edge as participants anticipate more economic indicators that may impact future currency valuations and monetary policy decisions.
