- Currency futures remain positive on Monday as risk appetite improves.
- Dollar stays under pressure as Fed rate cut speculations reemerge.
- Markets now focus on key data releases from the US to find directional bias.
Currency futures started the week on a firm footing as global risk appetite improved and traders reassessed the expectation of the Fed’s December rate cut decision. With a rising probability of a rate cut, the US dollar lost traction across the futures markets, allowing high-beta currencies like the GBP and AUD to stabilize. In contrast, yen futures remained under pressure amid Japan’s policy uncertainty.
The CME FedWatch tool now shows a 70% probability of a 25-bps rate cut in December, up from last week’s 30%. The shift followed dovish commentary from New York Fed President John Williams, who showed greater concerns about the labor market, suggesting policymakers act in the near term. The Dollar Index reflected the shift, pulling back from a 5-day rally to 100.10.
In Australia, the AUD futures (6A) gained modestly as traders positioned themselves ahead of the monthly CPI reading. Despite inflation uncertainty, the November RBA minutes signaled a willingness to keep rates steady for an extended period. The probability of the RBA easing is now only 6%. RBA Governor Sarah Hunter’s cautious remarks could keep price pressures elevated.
Meanwhile, Japanese yen futures (6J) continued to lag due to deepening fiscal concerns in Japan. A recently introduced massive stimulus package of 21.3 trillion yen by PM Sanae Takaichi increased concerns about rising debt issuance and delayed prospects of BoJ tightening. Although inflation remains above the 2% target, political resistance and a weakening GDP have put investors in doubt about a policy shift. Futures markets reflect this unease, keeping yen futures struggling despite warnings of FX intervention.
Across Europe, EUR futures (6E) remained firm as the US dollar softened and investors looked ahead to Germany’s IFO business sentiment survey. The ECB is expected to keep rates unchanged in December, providing a cushion for Euro futures against broader volatility.
Meanwhile, GBP futures (6B) saw slight buying, recovering from an earlier dip. However, UK budget uncertainty and rising bets on the Bank of England’s rate cut next month kept gains limited. GBP traders remain cautious, with no apparent bias at the moment.
Moving ahead, the week is loaded with several high-impact events, including US PPI, Core PCE, and Retail Sales data. These events could reshape the market trends and provide more clarity.
