Dollar Weakens as Precious Metals and Euro Gain (04 - 08 November)

This week saw mixed movements across major markets, with the dollar pulling back after four consecutive weeks of gains as US economic data delivered a mixed outlook.

This week saw mixed movements across major markets, with the dollar pulling back after four consecutive weeks of gains as US economic data delivered a mixed outlook. Gold held steady with modest gains while silver declined, pressured by resilient Fed rate expectations. In forex, the euro gained on strong eurozone inflation data, while the pound softened amid UK budget updates. Stock markets faced selling pressure from political uncertainties and solid US data, reinforcing expectations of a patient Fed.

Gold and Silver

It was a mixed week for metals. Gold started the week with gains but gave back some of those gains toward the end. Silver finished the week with a loss. As expectations for interest rate cuts from the Fed diminished and the perception grew that the Fed was in no hurry to lower rates, non-yielding metals pulled back. However, factors such as the upcoming elections in the US, rising geopolitical risks, and last week's positive manufacturing PMI data from China could still provide support for precious metals.

Instrument	PRICE	WEEKLY CHANGE
XAUUSD	2754.58	0.25%
XAGUSD	32.81	-2.64%

The Dollar Index

This week, US data presented a mixed picture. Weaker growth figures and non-farm payroll data increased appetite for interest rate cuts, while better unemployment figures and a PCE Price Index that exceeded forecasts created the perception that the Fed may not need to rush into rate reductions. Additionally, the upcoming presidential elections are viewed as a source of uncertainty in the markets. Despite this, the four-week streak of gains ended with a modest pullback this week.

Instrument	PRICE	WEEKLY CHANGE
DXY	103.739	-0.56%

Forex Market

In Europe, expectations for interest rate cuts have slightly eased this week. Stronger growth and inflation data from Germany, along with eurozone inflation surpassing forecasts, led the money markets to adjust the anticipated rate cut from 42 basis points to 34 basis points. As a result, the euro closed the week with a gain against the dollar.

In the UK, the Autumn Forecast Statement was released this week. The budget, which includes significant tax increases to address the previous budget deficit, was perceived negatively by the market. Additionally, expectations of a 25 basis point rate cut from the Bank of England next week contributed to the weakening of the pound, which closed the week down against the dollar.

In Japan, the central bank decided to keep interest rates unchanged this week, as expected. However, Governor Ueda's subsequent comments were perceived as hawkish. He noted that economic risks in the US have diminished, signaling potential future rate cuts. While the market anticipates a 50 basis point rate increase as early as January, this decision is expected to be influenced by fluctuations in the currency pair and the overall economic context. Despite the yen gaining value this week, it remains at its lowest levels in three months.

The Australian dollar closed the week lower against the US dollar, hovering near its lowest levels since early August as the US dollar gained strength from signs of economic resilience and expectations of a Trump victory in the upcoming elections. However, the unexpected expansion in China's manufacturing PMI provided some support for the Australian dollar, which acts as a liquid proxy for the yuan. Mixed economic indicators from Australia have complicated the outlook for the Reserve Bank of Australia (RBA). While producer prices increased more than anticipated in the third quarter, retail sales saw a notable slowdown in September. Additionally, previous data indicated that the annual trimmed mean CPI, the RBA's favored inflation measure, slightly decreased to 3.5% in the third quarter but remained above the target range of 2-3%. Markets largely predict that the RBA will maintain interest rates at 4.35% in the upcoming meeting.

The Chinese yuan finished the week flat agains the US dollar. The manufacturing PMI data for October exceeded expectations, indicating a return to expansion. This aligns with official figures released on Thursday, which showed that manufacturing activity expanded for the first time since April, slightly surpassing forecasts and reflecting an improved sentiment following recent challenges. However, the survey also highlighted underlying weaknesses, including a continued decline in export orders and a drop in employment. Traders are now closely monitoring the National People's Congress meeting scheduled for November 4-8 for potential fiscal support measures that could impact the economy.

The Canadian dollar closed the week near a two-year low against the US dollar as market participants absorbed recent economic data from Canada and the US, looking for clues about future interest rate decisions from the respective central banks. Preliminary data indicated that Canada's GDP grew by 0.3% in September, supported by strength in finance, insurance, construction, and retail trade, resulting in a 0.2% increase for the third quarter. This aligns with recent comments from Bank of Canada Governor Tiff Macklem, who noted early signs of economic response to recent rate cuts and anticipated further impacts from upcoming data. Since June, the BoC has implemented four rate cuts, including a 50 basis point reduction at its most recent meeting, contrasting with the more hawkish stance of the US Fed. These actions aim to support growth amid a backdrop of slowing inflation, which fell to 1.6% in September—its first drop below the 2% target in three years—and a softening labor market with an unemployment rate of 6.5%.

INSTRUMENT	PRICE	WEEKLY CHANGE
EURUSD	1.08971	0.94%
GBPUSD	1.29577	-0.02%
AUDUSD	0.65848	-0.29%
NZDUSD	0.59908	0.24%
USDJPY	151.94	-0.20%
USDCAD	1.39078	0.12%

Stock Market

Last week, the indices faced significant selling pressure. Political uncertainty ahead of the upcoming elections, along with stronger PCE data and better unemployment figures, contributed to the perception that the Fed would not rush into interest rate cuts, which weighed on the indices. The S&P 500 finished the week down approximately 1.5%, with similar declines seen in the Nasdaq and Dow Jones.

Despite these pullbacks, some stocks performed positively over the week. Google, which reported its earnings on Tuesday, saw a rise of about 5%. Additionally, Amazon, which released its earnings on Thursday, also closed the week positively.

Apple, another major company that reported earnings, had results that were generally in line with expectations, but this was insufficient for the stock to finish the week in positive territory. Meanwhile, Tesla, which ended the previous week with a strong rally, was unable to maintain that momentum this week.

Among the stocks that lost value this week, Nvidia and Microsoft stood out. Microsoft experienced a decline of around 5%, while Nvidia faced a nearly 6% drop.

Instruments	PRICE	WEEKLY CHANGE
S&P 500	5732.16	-1.31%
DOW JONES	41939	-0.42%
NASDAQ	19993	-1.76%
DAX	19178	-1.47%

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