The dollar was steady and traders wary on Monday as intervention risks swirled around the yen, with the gilt market on edge ahead of a British budget in a holiday-interrupted week where a New Zealand policy meeting is also expected to deliver a rate cut.

A holiday in Tokyo lightened trade in Asia and left the yendrifting lower at 156.71 per dollar in the early morning.

Japan's currency has been sliding on a combination of its low interest rate and looser fiscal policies, but it bounced from 10-month lows late last week when Finance Minister Satsuki Katayama ramped up verbal warnings of official yen buying.

Traders see intervention looming somewhere between 158 and 162 yen per dollar, with Thanksgiving-thinned trade later in the week a possible window for authorities to step in.

"We do not rule out a move as early as Friday, London/New York hours, ahead of 160 and if it happens the move lower can be sharp especially if liquidity is thin," said OCBC strategists Frances Cheung and Christopher Wong in a note.

Japan can actively intervene in the currency market to mitigate the negative economic impact of a weak yen, Takuji Aida, a private-sector member of a key government panel, said in a television programme on public broadcaster NHK on Sunday.

Elsewhere the eurowas held in check at $1.1506, without much of a boost despite a resurgence in wagers on a U.S. rate cut in December. That followed New York Fed President John Williams saying there is room to lower rates in the near term.

It has made no initial reaction to Ukraine peace plans, with Ukraine and the U.S. saying they had created an updated and refined framework that modifies last week's 28-point plan.

The dollar indexwas steady at 100.25 and other majors were held fairly close to recent lows.

Sterlingtraded at $1.3093 ahead of Wednesday's budget announcement, where finance minister Rachel Reeves seeks to tread a path between spending to support faltering growth, while showing the market Britain can meet its fiscal targets.

The New Zealand dollarwas clinging on at $0.5608, having slid nearly 8% since July on a souring economic outlook.

Markets are all but certain the Reserve Bank of New Zealand will cut rates by 25 basis points on Wednesday, but are on the fence about whether a further reduction will follow next year. (0#NZDIRPR)

The Australian dollarwas at $0.6453, with traders looking ahead to Wednesday's CPI reading, which will be the first full release of monthly price data. A Reuters poll showed weighted annual CPI is expected to be sticky at 3.6%.

"This type of result could, in our opinion, reinforce the view that the RBA may not cut interest rates again this cycle," said Peter Dragicevich, Asia-Pacific currency strategist at payments firm Corpay.

Source: TradingView

Wall Street futures rose on Sunday evening as resurgent bets on a December interest rate cut by the Federal Reserve helped spur a rebound from recent losses, with investors watching for a recovery in battered technology stocks.

Futures rose after a positive Friday session on Wall Street, as investors welcomed comments from some Fed officials calling for an interest rate cut in December. Mixed readings on the labor market also spurred bets on more easing by the Fed.

Focus is now on a slew of key economic readings due this week, as the government releases data for September, which was delayed by a prolonged shutdown.

S&P 500 Futures rose 0.6% to 6,657.0 points by 18:28 ET (23:28 GMT). Nasdaq 100 Futures rose 0.8% to 24,489.75 points, while Dow Jones Futures rose 0.4% to 46,491.0 points.

Dec rate cut bets rebound, more economic data awaited

Bets on a December interest rate cut rebounded sharply in recent sessions, with some dovish-leaning commentary from Fed officials sparking the recovery last week.

New York Fed President John Williams called for a rate cut in December, contrasting more cautious comments from other Fed officials and presenting a split outlook among Fed members on the December decision.

Williams was among the few Fed officials calling for a December cut. But his comments saw bets on a rate cut sharply rebound.

Traders are pricing in a 67.3% chance the Fed will cut rates by 25 basis points during its December 10-11 meeting, up sharply from a 39.8% chance seen last week, CME Fedwatch showed.

A host of long-delayed economic readings due this week are set to offer some cues on the U.S. economy and the Fed decision.

Producer inflation, retail sales, and industrial production prints for September are due on Tuesday, while third-quarter gross domestic product data is due on Wednesday.

Any signs of a cooling labor market and economic growth are likely to further the case for more easing by the Fed.

But the central bank is still seen flying blind into the December meeting, due to a lack of economic readings for October.

Wall St rebounds on rate cut hopes; tech recovery in focus

Wall Street indexes rose sharply on Friday, rebounding from recent losses on hopes of lower interest rates in the near-term. But technology shares lagged, amid losses in major chipmakers, especially NVIDIA Corporation (NASDAQ:NVDA).

The S&P 500 surged nearly 1% to 6,602.99 points on Friday. The NASDAQ Composite jumped 0.9% to 22,273.08 points, while the Dow Jones Industrial Average rose 1.1% to 46,245.41 points.

Wall Street indexes were battered by an extended rout in tech shares over the past two weeks, with positive earnings from Nvidia doing little to support the sector. Questions over rising chip inventory levels and the company's allegedly circular financing in its customers also weighed.

Heightened concerns over an artificial intelligence-fueled valuation bubble in the sector were the biggest driver of tech's losses in recent weeks, as investors locked in profits from a near three-year rally.

Source: Investing

Among the factors driving equity market swings recently and since summer, monetary policy – and very recently, the fear of a misstep in monetary policy – has been particularly powerful.

Last week was particularly bruising, with pronounced swings lower in some corners of financial markets.

U.S. cyclical stocks have erased much of their post-summer rally relative to defensive stocks, and under the hood, technology stocks and consumer discretionary have been especially weak, notwithstanding punchy earnings from Nvidia and a broadly decent sweep of U.S. macro data, respectively.

From the bird's eye view of an asset allocator, cross-asset volatility is also higher, though not alarmingly so. For example, equity, rates and oil volatility (as measured by the VIX, MOVE and OVX indexes, respectively) have retraced half (or just over half) of where they were at the peaks of the 'liberation day' sell-off in early April.

It also has not been 'all risk off': government bonds haven't meaningfully rallied (Japanese bonds have in fact sold off, pushing long-end yields to post-Global Financial Crisis highs), index credit spreads remain generally contained, and areas like emerging markets have outperformed.

Fears Around a (Near-Term) Policy Misstep

In our view, fears around a near-term Federal Reserve 'policy mistake', akin to say late 2018, have been an important factor driving markets recently. Current odds—at less than 40%—of a December rate cut being priced into Fed Funds futures are at the lowest since March. Just four weeks ago, a 25bp rate cut was fully baked-in, at 100%.

As the odds of a December rate cut have been rapidly pared back, so, too, have equity prices, especially those more sensitive to domestic policy rates. The recent sell-off in Home Depot, for example, began around 48 hours after expectations of a Fed rate cut in December peaked in mid-October on a 'Powell pivot', and accelerated more recently on weak earnings—and more hawkish Fed commentary.

While other factors have been at play, including concerns around credit and returns on invested AI capex, policy has been a chief driver of market returns more broadly for much of 2025.

A simple Principal Component Analysis (PCA) model comprised of 20 cross-market variables distilled into growth, inflation and policy demonstrates how expectations around monetary policy both underpinned the post-summer rally in risk assets, and has driven the recent sell-off.

Market-implied growth has softened gradually, consistent with soft labor indicators, but resilient GDP and consumer spending data have precluded a deeper slowdown being priced in. And, despite a notable increase in effective U.S. tariff rates, market-implied inflation has stood broadly pat this year, with only a modest uptick since August.

Playing the Long Game

Notably, what has been taken away for December has been more than given back for 2026. To be sure, as December rate cut expectations have been clipped back, more meaningful monetary easing has been priced for 2026—around 90bps at the time of writing, 20bp more than a fortnight ago. And insofar as we and markets expect the Fed to cut into firm and even rising economic and earnings growth over the course of 2026, a policy-induced sell-off should be short-lived, creating an opportunity to play the long game.

Rates pivoting lower without recession tends to be positive for stocks, and nominal GDP growth above 4% tends to limit bear market risks. Importantly, notwithstanding data gaps from the U.S. government shutdown, current and leading indicators signal recovery, not recession, for the U.S. And the combination of productivity-led gains (and resulting inflation-light growth) with weaker labor allows for easier policy, especially monetary policy.

This in turn sets a constructive backdrop for risk assets, and indeed longer-duration fixed income where negative carry positions turn positive as the Fed eases. We would seek to use periods of market weakness to lean into favored positions in both equities and fixed income.

Cash Flows and Discount Rates

For the most part, expected returns from being long an asset, excluding commodities of the major blocs, tend to be a function of two things: anticipated cash flows and the discount rate applied to those cash flows. Although stock markets are emphatically not the economy, firm nominal growth tends to equal firm nominal corporate earnings.

On cue, the third-quarter corporate earnings season in the U.S. revealed 12% EPS growth for the S&P 493 stocks (ex. the 'Mag 7' mega-cap technology companies), the fastest clip since Q2 2022. Strikingly, and unlike 2022 when earnings for the Mag 7 companies were contracting by mid-double digits, Mag 7 earnings also continue to grow: a healthy 23% was reported for Q3 2025.

A high conviction view held by our Asset Allocation Committee has been an expected broadening out of equity markets as earnings prospects converged. This has evolved from the Mag 7 to the S&P 493 a year ago, to Europe, Japan and emerging markets over the course of 2025. And while we have recently moved Europe back to at-target, we continue to favor index and key equity sector exposure in Japan and select emerging markets.

To be sure, in comparing areas such as IT, communication services or even industrials, performance in markets including Japan, China and Korea (particularly) have dwarfed the U.S. in both equal-weighted and market cap terms by sector. And these remain our favored areas to gain market exposure.

Source: Neuberger Berman

Key points:

China's Premier Li Qiang pitched closer collaboration to German Chancellor Friedrich Merz in new energy, smart manufacturing, biomedicine and intelligent driving during a meeting on Sunday on the sidelines of the G20 summit, Xinhua reported.

Relations between the world's second- and third-largest economies have improved significantly over the past month, after Chinese export curbs on chips and rare earths caused major disruptions for German firms and German Foreign Minister Johann Wadephul to cancel a visit to Beijing last month due to China rejecting all but one of his meetings.

German Finance Minister Lars Klingbeil made the first official visit of Merz's premiership last week, stabilising ties by meeting China's top economic official Vice Premier He Lifeng, as U.S. President Donald Trump's tariffs weigh on the two major exporters.

Merz is also expected to visit China soon.

Li said he "hoped Germany would maintain a rational and pragmatic policy toward China, eliminate interference and pressure, focus on shared interests, and consolidate the foundation for cooperation," a state media readout released late on Sunday quoted China's second-ranking official as saying.

For all the friction over Beijing's support for Russia and its actions in the Indo-Pacific, and Berlin's vocal criticism of China's human rights record and state-subsidised industrial policy, the two countries remain bound by a vast and mutually advantageous commercial relationship.

"China is willing to work with Germany to seize future development opportunities ... in emerging fields such as new energy, smart manufacturing, biomedicine, hydrogen energy technology, and intelligent driving, Li said in Johannesburg, South Africa, which is hosting the first G20 summit on the continent.

China bought $95 billion worth of German goods last year, around 12% of which were cars, Chinese data shows, putting it among the $19 trillion economy's top 10 trading partners. Germany purchased $107 billion of Chinese goods, mostly chips and other electronic components.

But Berlin stands out for China as an investment partner, having injected $6.6 billion in fresh capital in 2024, according to data from the Mercator Institute for China Studies, accounting for 45% of all foreign direct investment into China from the European Union and the United Kingdom.

For Germany, China represents a practically irreplaceable auto market, and is responsible for almost a third of German automakers' sales. German chemicals and pharmaceuticals firms also have a large presence in the country, although they are facing increasing pressure from domestic competitors.

Source: TradingView

Key Points:

USD/JPY hovers in 2024's intervention zone of 155-160 on Monday, November 24, raising risks of government action to bolster the Japanese yen.

Prime Minister Sanae Takaichi's fiscal stimulus announcement leaves the yen in a precarious position. Fading bets on a December Bank of Japan rate hike and a potential pullback in inflationary pressures could weaken the yen, sending USD/JPY higher.

The USD/JPY rally to a 10-month high of 157.893 on Thursday and Friday's sharp pullback underscored market sensitivity to yen intervention warnings and dovish Fed rhetoric. Last week's USD/JPY movements set the stage for a volatile session on Monday, November 24.

USDJPY – Daily Chart – 241125 – Fiscal Stimulus and Dovish Fed

Japan Fiscal Stimulus in Focus

Prime Minister Sanae Takaichi's cabinet approved a ¥21.3 trillion ($136 billion) stimulus package on Friday, November 21. The package comprises ¥900 billion in special account spending, ¥2.7 trillion in tax cuts, and ¥17.7 trillion in spending. The fiscal package aligns with Prime Minister Takaichi's support for fiscal policy and ultra-loose monetary policy.

Unlike fiscal stimulus packages in other countries that typically fuel inflation, Japan's package aims to combat higher prices. Notably, the ¥2.7 trillion in tax breaks includes abolishing a gasoline sales tax surcharge and raising the income threshold for income tax. Economists view these measures as having a low impact on near-term demand.

However, economists have raised concerns about the ¥20,000 per child under 18 cash handout, which may boost demand and inflationary pressures. While the package seeks to provide near-term relief, structural components such as tax cuts may lift demand and fuel inflation later.

Crucially, the package has raised criticism over fiscal sustainability, sending Japanese Government Bond (JGBs) yields soaring, reflecting waning confidence in the yen. 10-year yields hit their highest since 2008, while 40-year yields reached historic highs above 3.6%.

Economists Raise the Alarm Over the Package and the Yen

Robin Brooks, Senior Fellow at the Brookings Institution, commented on the fiscal stimulus package and yen weakness, stating,

"Japan's Yen in real effective terms is almost as weak as Turkish Lira, which is the world's weakest currency after Erdogan eviscerated his central bank. Japan is in denial on debt. Sanae Takaichi's fiscal stimulus makes this worse…"

"Sanae Takaichi, the "Iron Lady of Japan," has revived Abenomics-style stimulus that will expand global liquidity through fiscal easing and ultra-loose credit. Her policies strengthen the yen carry trade and the U.S. dollar, gold's pullback should not be a surprise. Contrary to popular belief, the "death of the dollar" is greatly exaggerated. King Dollar is alive and well."

On Monday, November 24, debates over the fiscal stimulus package and BoJ commentary will influence USD/JPY trends. Traders should also monitor yen intervention warnings from the Japanese government if USD/JPY climbs toward 160.

Meanwhile, US economic data will also play a crucial role in driving USD/JPY trends through its impact on Fed rate expectations.

US Economy and Fed Speakers in Focus

Economists forecast the Chicago Fed National Activity Index (CFNAI) to drop from -0.12 in August to -0.2 in October. Furthermore, economists expect the Dallas Fed Manufacturing Index to rise from -5.0 in October to -1.0 in November.

CFNAI will likely face greater scrutiny given that the index captures the entire US economy, including manufacturing and services. Economists view the CFNAI as a broader economic barometer since it considers production, employment, personal income, and sales. By contrast, the manufacturing sector contributes around 10% to the US GDP.

A sharper-than-expected fall in the CFNAI could signal a loss of economic momentum midway through Q4, supporting a more dovish Fed policy stance. USD/JPY may drop toward 155 on a lower CFNAI reading.

Beyond the data, traders should closely monitor FOMC members' speeches after last week's shift in sentiment toward Fed rate cuts. According to the CME FedWatch Tool, the chances of a December Fed rate cut jumped from 44.4% on November 14 to 71.0% on November 21.

Growing support for a December cut could weaken demand for the US dollar and push USD/JPY toward 150.

USD/JPY Scenarios: Diverging Monetary Policies

USDJPY – Daily Chart – 241125

Key Market Drivers to Watch Today:

Source: FX Empire

Indian Prime Minister Narendra Modi and Canadian Prime Minister Mark Carney agreed to resume discussions on a bilateral free trade deal, the latest sign of warming relations between the two countries.

The talks were announced after Modi and Carney met on the sidelines of the Group of 20 (G20) Summit in South Africa. The leaders decided to "begin negotiations on a high-ambition Comprehensive Economic Partnership Agreement," according to a statement from India's Ministry of External Affairs.

Carney also accepted Modi's invitation to visit India early next year.

The goal is for bilateral trade to reach US$50 billion (RM207.61 billion) by 2030, the Indian government said. The two countries exchanged about C$31 billion (US$22 billion) in goods and services last year, according to Canadian official data.

Canada and India have sought a trade deal before, but diplomatic relations ruptured in 2023 after then-Canadian prime minister Justin Trudeau and other officials said there was evidence that the Indian government orchestrated the killing of a Sikh activist in the Vancouver region. Canadian police have laid criminal charges in the case, with a trial pending.

Indian officials have long complained that Canada doesn't do enough to crack down on active Sikh separatist groups that want to disrupt Indian politics.

Since taking over from Trudeau in March, Carney has sought to restore normal relations. Both governments named new ambassadors this summer.

Speaking to reporters just ahead of his meeting with Modi, Carney said it was important to get better trade access to "one of the world's largest and fastest-growing economies".

The two countries' law enforcement and national security agencies are also continuing to have conversations, he said.

Canada, which sells the vast majority of its exports to the US, is trying to diversify markets because of protectionism from Washington. Carney has set an ambitious goal of doubling non-US exports by 2035.

Source: Theedgemarkets