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U.S. equities extended their gains to close the week, supported by strong consumer sentiment data and continued reaction to Trump’s election victory. On Friday, S&P 500 closed 0.4% higher after briefly surpassing 6000 mark for the first time in the earlier session, a year ago this was trading sub-4500. In Europe, the Euro Stoxx 50 and FTSE 100 ended down 1.0% and 0.8%, respectively, as markets reacted to disappointment over China’s stimulus package. The yield on the U.S. 10-year Treasury fell 2.1 bps to 4.30%.
The University of Michigan’s consumer sentiment index increased from 70.5 to 73.0 in November, surpassing the expected 71.0 and reaching its highest level since April. Within the survey, inflation expectations were mixed: the one-year outlook decreased slightly from 2.7% to 2.6%, while the five-year outlook edged up from 3.0% to 3.1%.
On Friday, China’s announcement on fiscal easing fell short of market expectations. While China provided a 10 trillion yuan ($1.4 trillion) relief package to support heavily indebted local governments, it did not unveil any new stimulus measures. This led to a weaker yuan, which in turn affected the NZD and AUD, as well as Chinese equities. Industrial prices dropped as well, impacting most metals on the LME and lowering iron ore prices. Million Dollar question – Will there be a Trade War post Donald Trump’s inauguration?
The USD remains in focus after the Fed adjusted its statement, removing language that suggested increased confidence in reaching its inflation target. During his press conference, Chair Jerome Powell avoided specifying a timeline for potential rate cuts. Looking further ahead, inflation expectations are rising as investors speculate that Trump’s tariff stance could increase price pressures. While it’s unclear if and how these tariffs will be enforced, the anticipation alone could keep the USD strong in the months ahead.
- The AUD/USD pair remains under selling pressure around 0.6580 during the early Asian session on Monday. The weaker-than-expected Chinese economic data and Trump tariff weigh on the China-proxy Australian Dollar (AUD) against the Greenback. The US October Consumer Price Index (CPI) and Australian employment data will be the highlights for this week.
- China: China’s CPI inflation rose at the slowest pace in four months in October, while Producer Price deflation deepened, the National Bureau of Statistics of China showed on Saturday. The slowdown comes as Chinese authorities seek to boost domestic activity as a property crisis weighs on confidence. Furthermore, Donald Trump’s proposals to raise tariffs on Chinese goods might exert some selling pressure on the Aussie as China is a major trading partner to Australia.
- USD: The USD continued to make gains over the NY afternoon. The University of Michigan Sentiment Survey for November printed at 73.0, up from 70.5 and higher than expectations of 71.0. Within the details, Current Conditions was weaker than expected though Expectations was a significant beat while inflation data was mixed with 1 year inflation 0.1% weaker at 2.6% while 5-10 year inflation was 0.1% higher at 3.1%.
Mid-market rates.
| Currency Pair | Mid-market rate |
| AUD/USD | 0.6593 |
| AUD/NZD | 1.1048 |
| AUD/JPY | 100.95 |
| AUD/CNH | 4.7416 |
| AUD/EUR | 0.6149 |
| AUD/GBP | 0.5103 |
| AUD/HKD | 5.1265 |
Chart of the day
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