Dollar finds a bid on Trump tariff threats, EUR weakness

* USD rallies on more Trump fear, EUR slides on French political turmoil

* S&P 500 and Nasdaq close at record highs, investors brace for data-driven volatility

* Gold continues to consolidate in narrow range ahead of Friday’s NFP

FX: USD kicked off December on a strong footing. This comes after Donald Trump threatened to sanction BRIC economies with 100% tariffs unless they commit to not trying to move away from the US dollar. US ISM manufacturing index improved in November but remains in contraction territory. It has been above 50 only once on the past 26 months. New orders did break above 50 for the first time since March. Month-end positioning and profit taking may have steadied now as markets refresh long USD positions.

EUR sold off sharply and neared the long-term low from last October at 1.0448. French politics is hounding the euro with the threat of a no-confidence vote and the collapse of the government. The next major low is the November spike trough at 1.0331.

GBP saw similar price action to the euro again, with prices turning lower after a rebound to the 21-day SMA at 1.2731 and a Fib level at 1.2729. Last month’s low sits at 1.2486. The bullish 4-hour inverse head and shoulders doesn’t seem to be playing out. Cable will be driven by USD this week, with no major UK data on the calendar.

USD/JPY found resistance at the 50-day SMA at 150.93 and the 50% retracement level of the summer sell-off at 150.76. The yen outperformed on the day eventually closing very modestly lower. Its haven properties stood out amid rising focus on a rate hike by the BoJ at its meeting in a couple of weeks.

AUD dipped to a low of 0.6442 before paring losses. USD/CAD steadied above the 21-day SMA at 1.3980. The BoC is expected to reduce rates again next week, with around 38bps rate cuts priced in. There is also lingering concerns about Trump’s tariff threats, though his attention seems to have shifted to the BRICs for now.

US stocks: US stocks were generally better bid with tech vastly outperforming. The benchmark S&P500 closed at a 55^th record high during the year at 6,047. The tech-heavy Nasdaq settled 1.12% higher at 21,165, a new all-time closing top. The Dow underperformed, finishing at 44,782, off 0.29%. Tesla and Meta outperformed, gaining over 3% on the day. Nvidia’s Blackwell GB200 architecture is reportedly facing delays due to technical issues. Production is being pushed into March 2025 which will affect the global AI supply chain. Microsoft has reduced orders.

Asian stocks: Futures are mixed. Asian equities were higher reflecting better official China and Caixin PMI data. The positive readings follow the efforts from the government to support growth through the recent round of stimulus, which appears to be starting to take effect. The ASX 200 edged higher with tech leading the gains. The Nikkei 225 fell on yen strength which dampened sentiment. China stocksled gains as the CSI 300 rose 0.5% and the Shanghai Composite added 0.8%. They were buoyed by the stronger-than-expected PMI data.

Gold dipped as it continued to trade in a relatively narrow range over the last five days since its big sell-off last Monday. The 21-day SMA is at $2644. Bugs are waiting for fresh US economic data drivers and guidance on the pace and timing of any additional US rate cuts.

Day Ahead – USD into December

There remains a significant element of doubt about the Fed policy outlook ahead of the FOMC meeting on 18 December. Trump’s postings will keep the markets on their toes and, presumably, underpin support in the greenback. But the last month of the calendar year holds significant risks for the USD broadly. It has fallen in eight of the last ten Decembers. The buck is also down in 17 of the last 25 for an average return in the Dollar Index of -1.03%. A significant calendar Q1 rally in the DXY usually follows. But the next few weeks have typically been a bit of a bumpy ride for the USD.

Ahead of Friday’s NFP report, there are several Fed speakers this week and Wednesday sees the release of its Beige Book. This may have an important say in whether the central bank needs to cut later this month. Additional labour market readings to be released before payrolls may inform the consensus estimate. They will include today’s JOLTS job vacancies for October, Wednesday’s employment subindex to the ISM-services gauge and ADP private payrolls for November. Challenger job losses for November released on Thursday may also sway predictions for the main event of the week on Friday.

Chart of the Day – Nasdaq joins the club

Finally, yesterday saw the Nasdaq jump over 1% to an all-time top. The index had lagged the S&P 500 and Dow in making record highs. Economic news was “Goldilocks”-like as the headline topped expectations while prices paid fell and employment rose. That said, the former is still one of the few soft patches in an otherwise solid economy.

The tech-dominated index climbed 4.9% in November, reflecting optimism over pro-business policies under the incoming Trump administration. The previous intraday high is at 21,182. Prices look to be ripe for more fresh highs as investors focus on “US exceptionalism” and ongoing tech titan demand.

AUTHOR

Jamie Dutta >

Jamie Dutta is a Market Analyst for Vantage. He comes with extensive experience as a full-time trader and financial market commentator, having worked as a trader in top tier investment banks and trading houses.