Geopolitical and political events dominated the agenda last week. President-elect Donald Trump announced a 25% tariff on imports from Canada and Mexico, and a 10% tariff on China. This could spiral into a tit-for-tat escalation.

The main data released last week were inflation reports from the eurozone and the United States. In the eurozone, inflation accelerated in November, but less than expected. The headline inflation rate rose to 2.3% from 2.0% in October, in line with expectations. In the United States, the headline inflation rate for personal consumption expenditures rose from 2.1% in September to 2.3% in October, in line with expectations. Overall, the market concluded that the anti-inflation process on both sides of the EU/US is still well underway.

During last week's trading session, global markets continued to digest the liquidity impact brought about by the Thanksgiving holiday, while paying attention to macroeconomic data and geopolitical developments. The US dollar index fell sharply last week, the yen performed strongly, precious metals prices retreated, and the crude oil market continued to be under pressure due to the adjustment of the supply and demand outlook, falling more than 3.5% for the week. US stocks closed November at a new high. Wall Street is having one of its best months of the year, with stocks rising steadily. Bitcoin rose 2.66% midweek to $97,376.77, having earlier touched $98,722. Global bond markets also saw significant volatility due to changes in policy expectations.

U.S. stocks closed November at a new high last week. Wall Street is having one of its best months of the year, with stocks rising steadily. The Nasdaq Composite rose 0.83% to 19,218.17; both the Dow and S&P 500 hit new intraday highs. The Dow Jones Industrial Average rose 1.4% this week to 44,910.65. The gains in November reached 7.5%. The S&P 500 and Nasdaq Composite both rose 1.1% this week to 6,032.38, up more than 5% and 6% respectively at the end of the penultimate month of 2024.

Spot gold fell 1.88% to $2,655.00 per ounce, but fell nearly 3% overall in November, recording its worst monthly performance since September 2023. Silver, platinum and palladium prices also showed a similar downward trend. This trend is mainly attributed to the strengthening of the US dollar this month due to Trump's victory and policy expectations, which has put pressure on precious metals. In the short term, gold prices may be subject to the volatility of the US dollar and changes in market risk sentiment, but the medium- and long-term trends still need to pay attention to global policy prospects and changes in real interest rates.

Last week, silver prices showed indecision around $30,500, forming fluctuations and consolidation around this position. Before the weekend, the rise in silver prices was largely driven by escalating geopolitical tensions.

The US dollar is experiencing its biggest weekly drop in a year, after the rally triggered by market expectations that Trump's policies would push up the dollar began to retreat. The US dollar index widened its cumulative decline to 1.67% last week and fell below the key support level of 106. The yen was the biggest beneficiary of the dollar's weakness, gaining 3.35% against the greenback this week as expectations grew that the Bank of Japan could raise interest rates in December. Month-end flows also weighed on the dollar as traders cut bets on further gains.

Brent and WTI crude oil closed lower at $72.35 and $68.48 per barrel, respectively, down 2.97% and 3.61% on the week. Despite a slight easing in the Middle East, a reassessment of the supply and demand outlook and the postponement of the OPEC+ meeting to December 5 weighed on oil prices.

Bitcoin rebounded to $97,000 after a 7% correction earlier in the week. Bitcoin has been strong throughout November, hitting new records, boosted by President Trump's victory in the election. The flagship cryptocurrency is on track to post one of its best monthly gains this year. Bitcoin is up about 38% in November, its best performance since February.

The yield on the 10-year U.S. Treasury bond fell by about 7 basis points, hitting a low of 4.1936% on the day of the refresh. The yield on the two-year U.S. Treasury bond fell by 5 basis points, hitting a low of 4.1757% on the day of the refresh. It is worth noting that the U.S. Treasury market will end trading early over the weekend, and the market will be closed on November 28 for Thanksgiving.

The aftermath of the Thanksgiving holiday is expected to cause trading volume to remain sluggish. Volatility in the foreign exchange and bond markets may increase, especially in the context of asset reconfiguration at the end of the month. The crude oil market needs to pay attention to changes in supply and demand expectations and related dynamics before the OPEC+ meeting, while precious metals may be affected by both the U.S. dollar and safe-haven demand.

Outlook for this week:

This week, the highly anticipated U.S. employment report will be released, which will provide investors with a new perspective on the health of the U.S. economy and may determine the direction of interest rates in the coming months.

U.S. NFP; ISM; PMI will affect the Fed's expectations

Last week, the U.S. dollar took a breather, even after the U.S. President-elect Donald Trump's tariff threats against Canada, Mexico and China temporarily boosted the U.S. dollar. Perhaps traders decided to leverage their previous Trump-related long positions ahead of the Thanksgiving holiday and the release of important data this week. Market pricing is far from indicating that investor concerns about the Trump-led administration are fading.

This can be seen from the fact that Fed Funds futures still indicate a high probability that the Fed will pause its rate hikes at the beginning of this year. With this in mind, market participants may pay extra attention to the November ISM manufacturing and non-manufacturing PMI data released on Monday and Wednesday, but the highlight of the week may be the non-farm payrolls data for the month on Friday.

The US dollar may be expected to receive more support this week as discussions on Trump's intentions to impose tariffs on US imports will be restarted. On the monetary level, further comments from Fed policymakers on the possible slowdown in the pace of rate cuts may support the US dollar. However, the main determinant of the US dollar's direction may be the October employment report released this Friday.

Back-to-back 50 basis points cut for the Bank of Canada?

At its latest meeting on October 23, the Bank of Canada cut interest rates by 50 basis points to support economic growth and keep inflation around 2%, adding that further rate cuts will be needed if the economy develops roughly in line with their forecasts.

Investors have been quick to predict that two consecutive rate cuts are likely, and with that in mind, a strong report on Friday could further impact the odds of another rate cut from the Bank of Canada, supporting the Canadian dollar. Still, an upbeat jobs report may not be enough for the currency to change track and start a bullish trend. More threats from US President-elect Trump to impose tariffs on Canadian goods could do more harm to the Canadian dollar.

It may be seen how risk-averse market sentiment actually is, with oil price movements and dovish market expectations of the Bank of Canada's intentions also likely to have an impact on direction.

Strong GDP could keep the Reserve Bank of Australia on hold longer

Q3 GDP data from Australia will be released early Wednesday in Asia. The Reserve Bank of Australia is the only major central bank that has yet to hit the rate cut button in this easing cycle. It may take some time for the RBA to start thinking about rate cuts, and a strong GDP report for the quarter could prompt investors to further delay the timing of the first rate cut. This could be positive for the Australian dollar, but similar to the Canadian dollar, it may be destined to feel the heat of Trump's tariffs, as the president-elect has promised to impose higher tariffs on China than the US dollar.

This week, AUD traders are expected to focus on the release of the Q3 GDP rate, and some concerns about China's economic recovery may affect the attention of AUD traders. Additionally, a more positive, risk-oriented market sentiment could provide some support for the AUD.

Does ECB President Lagarde agree that a 50bp rate cut may not be needed?

In the Eurozone, preliminary German inflation data for November showed some stickiness despite coming in below expectations. Headline interest rates in the Eurozone also rose, from 2.0% to 2.3%. This, coupled with hawkish comments from ECB member Isabel Schnabel, who said rate cuts should be gradual, weighs on the odds of a 50bp rate cut at the ECB’s upcoming meeting. The odds of another ECB rate cut on December 12 are currently around 20%.

With this in mind, this week Euro traders are likely to focus on a speech by ECB President Lagarde on Wednesday, who will give an introductory speech to the European Parliament’s Committee on Economic and Monetary Policy Affairs (ECON). They may be eager for more information on the ECB’s plans

Overall, despite the gains in EUR/USD over the last week, it’s hard to make a case for euro bulls at this point. The case for the Euro currency to remain weak for now is reasonable as bears seem to be more favored from a fundamental, monetary and macroeconomic perspective.

BoJ’s intention to continue to hike rates leads the yen

At the end of last week, it can be noted that the Japanese government’s borrowing costs are about to rise as the BoJ intends to continue to hike rates due to the large size of Japanese government bonds. The yen will be stronger than the euro, pound and dollar. From a fundamental perspective, the safe-haven nature of the yen is noted, so if market uncertainty increases, the yen may see some support and vice versa. There seems to be some uncertainty at the political level, which may put pressure on the yen. On a deeper fundamental level,

In general, the BoJ’s intentions are the main factor in the direction of the yen. Any further signs of strengthening market expectations for a rate hike by the BoJ at the December meeting may provide more support to the yen this week.

BoE expected to remain unchanged at the December meeting

On a monetary level, the market expects the bank to remain unchanged at the December meeting and resume rate cuts in February. Despite the sharp easing of inflation over the past two years, wage inflation is cooling at a slower pace, suggesting that it may be “premature” to expect inflationary pressures to be under control. Overall, the Bank's reluctance to cut rates tends to contradict market expectations of the intentions of some other central banks, and therefore may be more supportive of the pound.

On a monetary level, as mentioned above, the Bank of England's hesitation to cut rates may be positive for the pound, but the market has largely digested this, so without major surprises, no major market reaction to the pound's moves is expected.

On balance, the dollar is expected to maintain its dominance this week, but at some point, specific currencies may find opportunities to form their own independent courses. As for the US stock market, it can be noted that the earnings season is actually over, but investors' interest remains because after Thanksgiving and Black Friday, the holiday season is about to begin, which may bring a significant increase in revenue, especially for retail companies, both physical stores and electronic companies. As for gold, it can be noted that the price of the precious metal seems to be on track for its biggest monthly drop since September last year. Considering that both the dollar and gold will end this week in the red, the negative correlation between gold and the dollar seems to have been interrupted in the past few days. Before the end of the year, the market may be dominated by technical corrections and liquidity changes, with significant short-term fluctuations. Investors need to pay careful attention to the latest developments of major asset classes.

Important events and economic data overview this week: (Beijing time)

Important events:

Tuesday (December 03): Fed Governor Waller delivered a speech

Thursday (December 05): Fed released the Beige Book on economic conditions; the 38th OPEC and non-OPEC ministerial meeting was held.

Economic data overview:

Monday (December 02): Australia's November SPGI manufacturing PMI final value; Eurozone November SPGI manufacturing PMI final value; UK November SPGI manufacturing PMI final value; Eurozone October unemployment rate (%); US November SPGI manufacturing PMI final value; US November ISM manufacturing PMI

Tuesday (December 03): Australia's ANZ consumer confidence index for the week ending December 1; Australia's third quarter current account (billion Australian dollars); Switzerland's November CPI annual rate (%); US JOLTs job vacancies in October (million)

Wednesday (December 4): Australia's November AIG Manufacturing Performance Index; Australia's third quarter seasonally adjusted GDP quarterly rate (%); UK's November SPGI service industry PMI final value; US November ADP employment change (million); US October durable goods orders monthly rate revised value (%); US October factory orders monthly rate (%); US November ISM non-manufacturing PMI

Thursday (December 5): Australia's October import/export monthly rate (%); Eurozone October retail sales monthly/annual rate (%); US October trade account (billion US dollars); US unemployment benefits continued to apply for unemployment benefits in the week ending November 23 (million)

Friday (December 6): Eurozone third quarter seasonally adjusted GDP quarterly rate final value (%); US November non-farm payroll population change seasonally adjusted (million); U.S. November average hourly wage annual rate (%); U.S. November unemployment rate (%); U.S. November Chicago PMI; U.S. December University of Michigan Consumer Confidence Index preliminary value

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