Week in review
US jobs data for September was finally released but came with a caveat, the October and November data will not be released until after the Fed's December meeting. This is one of the main contributing factors to the decline in rate cut probabilities which dropped to a low of around 25%.
However, Friday saw a significant change once more with markets once again favoring a rate cut at the December meeting and this may continue to change as the Fed meeting in December draws closer.
Source: CME FedWatch Tool
Risk assets faced a difficult week with the three major US indices trading 5.5-8.5% below their recent peaks at one point. The concern for markets came as a surprise given the positive earnings report by chip giant NVIDIA as valuation concerns linger.
Investors are beginning to doubt the rising stock prices of leading AI companies. They are worried that these companies are announcing big plans that they don't actually have the money or the factory capacity to handle right now. If these worries continue, it will be very hard for the stock market to go up significantly. Interesting times ahead indeed especially after the positive end to the week.
All major US stock indexes rose on Friday as investors became more confident that the Federal Reserve will cut interest rates next month. This optimism grew after John Williams, a key central bank official, stated that rates could be lowered soon without causing inflation to rise again. Despite this positive end to the week, the main market indexes are still expected to finish with a total loss of about 2% for the week.
Technology stocks also stabilized after suffering a sharp drop the previous day. Most large companies saw their values go up, led by Google’s parent company, Alphabet, which rose by 3%. Meanwhile, shares of AI chipmaker Nvidia remained flat; this follows a very unstable day on Thursday where the stock price swung wildly after the company released its quarterly financial results.
How has the US Dollar and FX Performed?
The US dollar weakened against the Japanese yen on Friday after Japanese officials warned they might take action to stop the yen from losing too much value. The Finance Minister stated that the government is ready to step in if currency prices swing too wildly, which alerted traders that Japan might start buying yen soon to support it.
Despite this specific drop against the yen, the dollar had a very strong week overall. It reached its highest level since May against other major currencies and is on track for its best weekly performance in six weeks.
Meanwhile, other major currencies and assets struggled. The Euro dropped slightly and is set to lose roughly 1% for the week. The British Pound also fell, trading around $1.31, as investors wait for the UK government's new budget plan while facing signs of a weak economy.
In the cryptocurrency market, Bitcoin had a difficult day, falling nearly 5% to around $82,900, its lowest price in seven months.
In the week ahead,keep an eye on the Japanese Yen as the case for FX intervention continues to grow.
The Week Ahead
The week ahead will not be as busy for the US given that it is Thanksgiving, which means data will be packed in the first three days of the week.
There are still some high impact data releases from Asia and of course the highly anticipated UK budget, where Chancellor Rachel Reeves faces an unenviable task.
Asia Pacific Markets
China is set to release its industrial profit figures on Thursday, which will complete the economic data for the month. Profits have been improving recently, showing a 3.2% increase for the year so far, driven largely by very strong growth of over 20% in both August and September. Part of this jump is because last year's numbers were low, and while that statistical advantage will fade in the fourth quarter, profits for October are still expected to look healthy.
The strongest industries this year have been those that sell goods abroad, specifically trains, ships, aerospace equipment, and electronics and this positive trend is likely to continue.
In Japan, inflation in Tokyo is expected to rise to 2.7% in November, fueled by higher worker wages and a weaker Yen, which pushes prices up. Factory output remains steady following a trade agreement with the US.
Although the economy shrank in the third quarter, recent signs of recovery support the Bank of Japan's plan to return to standard economic policies. While fewer investors now expect interest rates to rise in December, based on innuendo and comments, it appears at least three central bank members support the move. I still lean toward a rate hike next month, though there is a growing chance it could be delayed until January.
Thanksgiving Week in the US as the UK Budget Comes Into Focus
Because of Thanksgiving, economic reports are coming out early this week, but they may be unreliable due to the government shutdown. Key jobs and inflation data have been delayed until after the Federal Reserve's December meeting.
Since officials were already planning to keep interest rates steady, the lack of new data means they likely won't cut rates unless the economy faces a sudden crisis. However, we still predict interest rates will eventually drop by 0.75% by the middle of 2026.
The main event to watch in the week ahead is the "Beige Book," a general survey of the economy.
On Wednesday, the UK Chancellor faces a £30 billion gap in the budget. Markets are watching to see if she raises taxes to fix this, as her decision will affect future interest rates and government borrowing. Regardless of what happens, the country's deficit is expected to shrink next year.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar.
Chart of the Week - US Dollar Index
This week's Chart of the week is the US Dollar Index (DXY)
From a technical perspective, the DXY has broken above the 100.00 psychological level.
This is the third time since the end of July that this has happened and each time thus far a selloff has taken place. Will we see similar price action again or will the DXY finally gain acceptance above this key psychological level?
This will be the major test in the days ahead.
US Dollar Index (DXY) Daily Chart - November 21, 2025
Source:TradingView.Com
