Here’s what to consider on Tuesday, December 2nd.
The recent selling by Bank of Japan Governor Kazuo Ueda has created a cautious atmosphere early on in Europe, even as global bond markets remain stable.
Ueda’s comments from Monday hinted at a potential rate increase this December, which caused a spike in global yields, particularly impacting Japanese government bonds.
In the U.S., Treasury yields are also rising, influenced by speculation about the Federal Reserve’s next steps before their monetary policy meeting next week.
According to CME Group’s FedWatch tool, there’s currently an 87% probability that the Fed will lower interest rates by 25 basis points later this month.
Recent data from the Institute for Supply Management (ISM) supports this dovish sentiment in the markets.
Specifically, the U.S. manufacturing sector contracted for the ninth straight month in November, with the ISM PMI dropping to 48.2 from 48.7 the previous month, falling short of the market expectation of 48.6.
Despite some weak indicators, the U.S. dollar has gained strength due to rising Treasury yields. As it stands, the dollar is maintaining its upward trend against major currencies, pushing the U.S. dollar index (DXY) to around 99.50.
In the Asian trading session, data from the Australian Bureau of Statistics showed that the country’s current account balance decreased by $500 million in the September quarter. Interestingly, this didn’t seem to harm market sentiment, as the Australian dollar increased by 0.15% to 0.6555.
As for USD/JPY, it has rebounded toward 156.00, recovering from earlier losses.
The EUR/USD pair is fluctuating in a narrow range above 1.1600, with traders being cautious ahead of the harmonized consumer price index (HICP) inflation data for November, which will be released by Eurostat.
Meanwhile, GBP/USD is trading without much movement, managing to hold the 1.3200 level amid a lack of significant macroeconomic releases from either side of the Atlantic.
Gold was quoted at $4,200 during European trading and experienced some volatility earlier in the Asian session. XAU/USD is facing pressure from the rising U.S. Treasury yields and a robust rebound in the dollar.
