This past week in the financial markets was characterized by a multitude of conflicting signals and key decisions from central banks, resulting in notable volatility across major currency pairs. Market participants kept a close eye on monitored budget developments in the United Kingdom, movements in the European currency, and anti-inflationary measures in Australia and New Zealand, alongside the continued weakening of the US dollar. Amid this broader environment of uncertainty, both precious metals and cryptocurrencies continued to exhibit distinct, independent trajectories.
🔑Key factors:
Fiscal optimism: The British pound advanced midweek, supported by a favorable market response to the UK’s newly released budget. The government’s decision to implement a series of tax increases was interpreted as a prudent move aimed at enhancing financial system stability and averting fiscal imbalance.
“Tax trick”: Despite pre-election assurances from the Labour Party regarding tax stability, fiscal realities compelled the government to adopt alternative measures. Rather than directly increasing income tax rates, the government opted to freeze tax threshold levels. As wage growth remains around 5% annually, this mechanism will progressively push earners into higher tax brackets, thereby boosting government revenue without explicit tax hikes.
Global growth factors: In addition to domestic budgetary maneuvering, analysts cite broader macroeconomic forces as supportive of the GBP/USD exchange rate. Should the euro initiate a new global uptrend, the British pound is well-positioned to follow, particularly amid continued pressure on the US dollar.
Bottom line: The pound wrapped up the week with a firm positive trajectory, primarily driven by internal fiscal resolutions. However, the broader outlook suggests that the currency remains poised to benefit from a global risk-on environment and USD weakness, should these trends continue.
🔑Key factors:
Modest but steady growth: Despite an absence of robust macroeconomic data, the EUR/USD pair posted a sustained, albeit limited, rise over the week. Euro bulls managed to elevate the pair by several dozen pips, indicating persistent underlying demand.
Flat as expectation: The euro has traded in a protracted sideways range for five months—often interpreted as a consolidation phase—during which the market appears largely indifferent to short-term fundamentals. This behavior is typical in periods of position accumulation.
Dollar outlook: Looking ahead, the US Federal Reserve is expected to begin monetary easing in 2026, while the European Central Bank has already concluded its easing cycle. Simultaneously, the Bank of England is unlikely to enact major rate reductions due to inflationary constraints. These divergences set the stage for a potential broad-based weakening of the US dollar versus the euro.
Fed leadership change: A shift in Federal Reserve leadership—specifically, the anticipated replacement of Jerome Powell under the Trump administration—could further expedite the dovish pivot, intensifying downward pressure on the dollar.
Bottom line: The euro is demonstrating incremental growth as it overcomes the existing market resistance. Although the prolonged rangebound pattern remains intact, global monetary policy dynamics suggest the foundation is being laid for a longer-term EUR/USD uptrend.
🔑Key factors:
Inflation rising: The Australian dollar benefited from stronger-than-expected inflation data. In Q3, inflation rose to 3.2%, followed by an October figure of 3.8%. These developments have disrupted prior market forecasts, significantly reducing the likelihood of additional interest rate cuts by the Reserve Bank of Australia (RBA).
Rate cut pause: The RBA’s decision to hold the policy rate steady at 3.6% in early November was interpreted as a temporary pause. Given the current inflation trajectory and rising wage pressures, markets are increasingly of the view that the rate cut cycle may be over, and that a rate hike cannot be ruled out.
Strong economy: Australia’s wage index continues to outpace inflation, and economic activity is rebounding faster than previously projected. The current RBA rate doesn’t stand in the way of economic growth, reinforcing a bullish bias toward the Australian dollar.
Contradictions in the US: While US macroeconomic data can affect AUD/USD performance, recent releases have painted a mixed picture. Durable goods orders have improved, suggesting recovery, but regional industrial indices and declining 5-year TIPS yields signal underlying weaknesses. This inconsistency leaves the dollar without a firm growth narrative.
Bottom line: The Australian dollar is presenting a clear bullish profile. Elevated inflation and strong economic indicators have curtailed expectations for further RBA policy easing and may have signaled the end of the current cycle. In the absence of compelling reasons for dollar appreciation, the AUD is well-positioned to resume its upward trajectory.
🔑Key factors:
Expected rate cut: The Reserve Bank of New Zealand (RBNZ) reduced its rate by 25 basis points to 2.25%, a decision fully aligned with market expectations.
Hawkish rhetoric: Following the rate adjustment, RBNZ Governor Hawkesby delivered a hawkish message, indicating that any further easing would require a substantial revision of the economic outlook. He emphasized that additional rate cuts face a "high barrier," effectively signaling the end of the current easing cycle. The implication is that the policy rate is expected to remain unchanged through the end of 2026.
Rising business confidence: The latest ANZ Business Confidence Index rose sharply in November, reaching 67 points, a 11-year high. This points to a swift economic recovery which, despite still-elevated inflation, shows that the current rate is not holding growth back.
Pressure on the USD: The probability of a Fed rate cut has climbed to 85% in the past 24 hours, putting additional pressure on the US dollar. This is now becoming a key element in projecting the NZD/USD pair, especially as domestic conditions for the NZD continue to improve.
Bottom line: The New Zealand dollar has largely shaken off previous downside pressures. Despite the recent rate reduction, the RBNZ's hawkish post-cut rhetoric signals that the easing cycle is now complete. With attention turning toward a potentially weaker US dollar, the NZD is entering a more supportive environment for further appreciation.
🔑Key factors:
Weakening USD: Mounting signals suggest the Federal Reserve may be forced to begin cutting rates unilaterally, while other major central banks—including the ECB, RBA, and RBNZ—have either concluded their easing cycles or are leaning toward policy tightening. This divergence creates a particularly unfavorable scenario for the US dollar and may lead to continued depreciation.
US inflation expectations: Although durable goods orders posted optimistic figures, other economic indicators—such as regional industrial activity indices and falling 5-year TIPS yields—imply subdued business sentiment and declining inflation expectations. This reduces the justification for maintaining elevated interest rates and adds to pressure for policy easing from the Fed.
Cryptocurrencies (BTC, ETH): Bitcoin and Ethereum remained resilient through the weekend despite low trading volumes. Notably, Bitcoin broke through a major supply zone between $93,000 and $96,000, opening technical potential for a move toward $100,000–$108,000. That being said, without increased buying momentum from institutional investors, the risk of a pullback and renewed bearish pressure persists.
Precious metals: Silver continues to trade just below its all-time highs, while gold is on track to mark its fourth consecutive month of gains. These upward trends are largely supported by expectations of a forthcoming Fed rate cut, which traditionally benefits non-yielding assets like precious metals.
Oil (Brent): Brent crude prices are holding steady above $63 per barrel, although November marks the fourth consecutive month of decline. OPEC+ nations are anticipated to maintain a pause on production growth through early 2026. This decision could support prices.
Bottom line: The global market is preparing for a potential shift in trends. Pressure on the US dollar is increasing, while other currencies are gaining support for further strengthening. Inflation expectations and central bank policies remain key market catalysts, and both precious metals and cryptocurrencies continue to show distinct dynamics amid these broader changes.
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