Key Market Moves This Week
• Global stocks push toward all time highs as traders bet on an 87% chance of a US rate cut and the dollar slides 1.5%
• Japan flips the script with rising rate expectations as USDJPY sinks 2% and eyes deeper support levels
• AUD and NZD surge on risk-on flow while gold holds steady and Bitcoin rebounds 10% after last week’s shakeout
Stocks: Risk Appetite Returns
It has been another strong week for global stocks with the optimism in the US doing most of the heavy lifting. The Nasdaq, Dow, SP 500, the UK FTSE and the German DAX are all on track to finish the week in the green and are now sitting only 1% away from fresh all time highs. Traders clearly like the growing likelihood of a US interest rate cut and they are positioning accordingly.
US Rates + Dollar: PCE in Focus, Guidance Matters Most
The obvious consequence of a near certain chance of a US rate cut is a weaker dollar. The Greenback has now dropped 1.5% over the last couple of weeks. All eyes will be on today’s Personal Consumption Expenditure (PCE) release which is the main inflation measure the Fed cares about. A soft number will be taken as unofficial confirmation that the Fed will move ahead with a cut. The futures market is already pricing in an 87% probability of a 25 basis point cut next week. With the outcome mostly priced in the real story will be the forward guidance. Traders want clues about where US rates are heading in 2025.
Japan: Divergence Back in Play as USDJPY Breaks Lower
It is a very different picture in Japan. Interest rate divergence is alive and well. While US rates look set to fall, Japan is edging closer to its first rate increase in just under a year. There is growing expectation that the BoJ could move before Christmas. Markets will be listening closely to Governor Ueda for any hints on whether a hike would be a one and done or the start of something more meaningful.
The trade is obvious: sell the US dollar and buy the Japanese Yen. But traders are already ahead of it. USDJPY has fallen 2% in the last two weeks from 157.84 down to 154.70. Further weakness remains on the cards with support at 153.00 as the next level to watch and major support down at 150.70 — about 2.5% from current prices.
FX + Macro Crosscurrents: AUD/NZD Lead, Gold Steady, Bitcoin Bounces
With stock markets flirting with fresh highs the ‘risk on’ theme is spilling straight into the commodity currencies. The AUD and the NZD remain the strongest performers in the G8 basket, helped not only by the feel good tone in equities but by the broader weakness in the US dollar.
Elsewhere gold held a tight range despite the softer greenback while Bitcoin staged a respectable rebound, recovering 10% over the week after the recent shakeout.
What to Watch Next Week: Central Banks Everywhere
Next week is packed with central bank policy decisions. The Reserve Bank of Australia kicks things off and is widely expected to keep rates unchanged. On Tuesday all eyes turn back to Japan where Governor Ueda is scheduled to speak which should be a major event for currency traders searching for clues on the rate path.
Wednesday brings the Bank of Canada alongside the FOMC decision. The BOC is not expected to move since they have already signalled that the cutting cycle is on pause. The Fed however looks almost certain to cut by 25 basis points. Again the focus is forward guidance.
Then on Thursday the Swiss National Bank takes the stage with rates expected to hold at 0% for the foreseeable future. We also hear from Bank of England Governor Bailey who remains in the spotlight as softer UK data has fuelled calls for a cut although the MPC still appears split.
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Disclaimer
This market commentary is provided for educational and informational purposes only. It reflects the opinions of the author at the time of writing and should not be taken as financial or investment advice.
Funded Trading Plus operates evaluation and simulated funded challenges, not live trading accounts. All references to trading, strategies, or market opportunities relate to simulated trading environments. Past market performance or individual trader results are not indicative of future outcomes.
About Andrew Lockwood
Andrew Lockwood is a seasoned professional trader with over 40 years of experience in financial markets. Starting his career on the floor of the London International Financial Futures Exchange (LIFFE) in the 1980s, Andrew has traded through multiple market cycles and volatility regimes. Today, he specialises in prop trading strategies, focusing on technical setups, risk management, and trader psychology. As the founder of PropIQ and a leading mentor, Andrew is dedicated to training the next generation of prop traders with proven, real-world trading methods.