Dollar Holds Steady, Precious Metals Strengthen (10-14 November)

Financial markets reflected mixed signals as policy expectations shifted across major economies.

The US dollar steadied while weaker consumer sentiment and elevated layoff data supported the case for another Fed rate cut, contrasted by the ECB’s cautious stance and the BoE’s narrow hold at current levels. The yen softened on expectations of fiscal support in Japan, while the pound stayed pressured by slowing demand conditions in the UK.

Key Notes

USD: The dollar index stayed near 99.6 as budget talks pointed to a possible end of the record shutdown. Sentiment weakened after the University of Michigan index hit a 3-year low, and markets now price a 67% chance of a 25 bps Fed cut in December.
EUR/USD: The euro moved above $1.15 from a three-month low. Markets assign a 45% chance of an ECB cut by September 2026, with officials stressing caution. US layoffs at a 20-year high supported expectations of Fed easing.
USD/JPY: The yen slipped toward 154 per dollar as Japan prepared a large fiscal stimulus package. BoJ minutes signaled a possible rate hike in December or January, depending on wage trends.
GBP/USD: The pound hovered near $1.305 after the BoE kept rates at 4% in a close 5–4 vote. Four members favored a 25 bps cut. The Bank noted peaked inflation and rising demand risks, pointing to gradual easing if disinflation continues.
Gold (XAU/USD): Gold rose over 1% to $4,050 per ounce, reaching a two-week high with weak consumer confidence and a softer dollar.
Brent Crude: Brent traded around $64-64.5 per barrel. Sanctions on Rosneft and Lukoil raised supply risks, though tanker inventories at 1.4 billion barrels signal ample supply. OPEC+ plans a 137,000 bpd output increase in December, while US and North Sea production remains strong. Markets await new outlooks from OPEC and the IEA this week.

Fixed Income

US 10-year Treasury: Held around 4.1% on Friday after a three-session rally supported by a hawkish Fed tone. While the Fed cut rates by 25bps earlier, Chair Powell said a December cut is not guaranteed, with market odds slipping to 63% from 90%. Several officials opposed the cut due to inflation concerns. The Fed also confirmed its balance sheet runoff will end in December, with maturing Treasuries rolled over and MBS reinvested into Treasury bills to help ease funding pressures.
UK 10-year Gilt: Yield fell below 4.4%, the lowest since December 2024, driven by rising expectations of BoE rate cuts. The OBR is set to lower productivity growth forecasts by 0.3 points, widening the fiscal gap by roughly £20B ahead of Chancellor Reeves’s November budget. Softening inflation, weaker food prices, and a cooling CPI strengthened expectations of a 25bps cut in December, with traders pricing about a 68% probability.
Japan 10-year JGB: Stayed near 1.65% after the BoJ kept rates at 0.5% in a 7–2 vote, as two members again pushed for a 0.75% hike. Governor Ueda noted a moderate economic recovery but highlighted global trade risks. Tokyo core inflation in October rose more than expected. Newly elected PM Takaichi’s support for loose monetary policy and pro-growth stimulus complicates further tightening.
Germany 10-year Bund: Rose to 2.65%, the highest since October 9, following hawkish signals from both the ECB and Fed, alongside stronger German inflation. The ECB kept rates unchanged for the third straight meeting, maintaining a data-dependent stance. German inflation eased to 2.3% in October, while the broader economy stagnated due to weak exports. Bund yields are poised for a modest weekly increase.

S&P Global Manufacturing PMI (October 2025)

The index rose to 52.5 from 52.2, above expectations of 52.0, indicating continued expansion. New orders and output picked up as supply chain pressures eased, and employment stabilized, though sentiment remained cautious due to the prolonged shutdown and high borrowing costs.

U.S. ISM Manufacturing PMI (October 2025)

The PMI declined to 48.7 from 49.1, below the forecast of 49.4, signaling a deeper contraction. Softer demand, especially from export markets, reduced production and backlogs, while firms stayed cautious on hiring and inventories amid policy uncertainty and tight credit conditions.

U.S. ADP Nonfarm Employment Change (October 2025)

Private payrolls rose 42,000, beating expectations of 32,000 and recovering from September’s 29,000 decline. Gains came mainly from healthcare and professional services, while manufacturing jobs slipped slightly. Hiring shows signs of stabilization but remains below 2024 levels.

U.S. S&P Global Services PMI (October 2025)

The services PMI eased to 54.8 from 55.2, just under the consensus of 55.2, but still in solid expansion. Strong demand and better sentiment supported activity, though firms continued to face margin pressure from wage growth and elevated costs.

U.K. Bank of England Interest Rate Decision (November 2025)

The Bank of England kept the policy rate at 4.00% for a fourth straight meeting, as expected. The decision reflected signs that inflation has peaked while growth remains weak. Policymakers repeated that future adjustments will depend on data, with markets looking toward a possible early-2026 rate cut if disinflation continues.

Currencies

US Dollar: The dollar index held near 99.6 after a three-day decline as hopes rose for a deal to end the record-long shutdown. A budget compromise may reopen government operations through January. Last week’s dollar softness followed a sharp drop in consumer sentiment to a 3-year low. Markets price about a 67% chance of a 25 bps Fed cut in December.
Euro (EUR/USD): The euro traded above $1.15, rebounding from a three-month low. The ECB is seen keeping rates steady for longer, with only a 45% probability of a cut by September 2026. Officials stressed caution and warned against easing simply due to temporary sub-2% inflation. In the US, layoffs reached a 20-year high, reinforcing expectations of Fed easing.
British Pound (GBP/USD): The pound hovered near $1.305, just above the $1.301 seven-month low, after the BoE voted 5-4 to hold rates at 4%, with four members supporting a 25 bps cut. The Bank cited easing inflation and weakening demand, signaling that rates could decline gradually if disinflation continues.
Japanese Yen (USD/JPY): The yen weakened toward 154 per dollar, near a nine-month low, as markets anticipated a large fiscal stimulus under PM Sanae Takaichi, including tax cuts and investment incentives across 17 sectors. BoJ’s October views indicated a possible rate hike in December or January, dependent on wage and earnings trends.

Commodities

Gold rose over 1% to around $4,050 per ounce, a two-week high, supported by economic concerns, weak consumer sentiment, and a softer dollar. Expectations of another Fed rate cut in December and uncertainty surrounding the shutdown strengthened safe-haven demand.

Silver climbed to roughly $48.4 per ounce. Private estimates showed the US lost 153,000 jobs in October, the largest decline for that month in 22 years, increasing the probability of a 25 bps Fed cut in December to around 70%.

Brent futures moved above $64 per barrel after two weeks of declines. Markets await reports from OPEC and the IEA for clarity on supply-demand trends. Expectations of global supply exceeding demand, rising US production, and easing OPEC+ output curbs weighed on sentiment. US sanctions on Rosneft and Lukoil continued to influence trade flows, prompting China and India to diversify import sources.

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