U.S. futures rise as dollar breaks eight-week winning streak

U.S. equity futures rose on Friday, driven by speculation that president-elect Donald Trump will moderate some of his more extreme trade policies. This shift in sentiment led to the dollar experiencing its largest weekly decline in three months.

The Bloomberg Dollar Spot Index fell more than 1% over the week, breaking an eight-week streak of gains. Traders reacted to Trump’s nomination of Scott Bessent as Treasury secretary, which indicated he may adopt a more pragmatic approach to tariffs. This news has weakened the dollar while boosting U.S. stocks and bonds, as optimism grows for more measured tariff strategies.

Contracts for the S&P 500 increased by 0.3%, suggesting modest gains in Friday’s shortened post-holiday trading session on Wall Street. The S&P 500 has already risen by 5% in November, positioning it for its strongest month since February. A few major technology companies have contributed to a 26% year-to-date gain, making this one of the strongest years for U.S. stocks this century.

Treasury yields fell as trading resumed after the Thanksgiving holiday. European stocks remained mostly unchanged, although mining companies, including Anglo American Plc, saw better performance due to optimism that China may implement additional measures to stimulate its economy.

Yen rising more than 1%

The yen reached its highest level in over a month against the dollar, briefly surpassing 150. Meanwhile, the dollar weakened against major currencies, with the index tracking its strength on track for its first weekly decline in two months.

The rise in Japan’s currency was supported by inflation data from Tokyo, which showed that prices increased more than expected on a headline basis. However, when fresh food and energy were excluded, the figures were broadly in line with estimates. Market swaps indicate a more than 60% chance that the Bank of Japan will raise interest rates when it meets next month.

As the likelihood of a 25-basis-point hike by the BOJ on December 25 rises, we anticipate that USD/JPY might consistently drop below the crucial 150.00 support level, potentially reaching the 142.00 level, which it struggled to stay under in September.

Euro zone inflation accelerates

Euro-area inflation has exceeded the European Central Bank’s 2% target, but officials are likely to continue lowering interest rates. In November, consumer prices rose by 2.3% year-over-year, up from 2% in October, matching analyst estimates. While service costs slightly dipped, they remained high, and prices for non-energy industrial goods increased for a second month.

Core inflation, which excludes the more volatile food and energy sectors, surprisingly remained steady at 2.7%, contrary to expectations that it would rise.

Officials from the ECB have indicated that they will likely implement a fourth rate cut of a quarter percentage point during their last policy meeting of the year in less than two weeks. Although additional adjustments are anticipated, the timeline remains uncertain due to persistent areas of inflation and considerations such as the Federal Reserve’s monetary easing strategies in light of Donald Trump’s re-election.

EURUSD has maintained its position above the key support area of 1.05 since the start of the week and recently broke above the resistance level of 1.0525. It is now approaching the 1.06 resistance level. For further gains to occur, a break above this resistance is necessary, potentially targeting 1.0660 for the time being.

Eyes on OPEC+

OPEC+ ministers are scheduled to meet on December 5 to review their output policy, as concerns about a potential oversupply in the global oil market loom large over their discussions. The coalition, primarily led by Saudi Arabia and Russia, has been attempting to gradually restore supply cuts made since 2022, but has hesitated due to unstable oil prices. According to delegates, major countries have talked about postponing the small increase originally planned for January, possibly for several months.

Brent crude has been trading within a narrow range after the recent decline from $75 to $72 following the announcement of a ceasefire deal in Lebanon. As long as $72 holds, the potential for another upward move remains high.

AUD gearing up

The AUDUSD has managed to hold above 0.6460 since mid-November, which coincides with a strong support area that has been in place since May of this year. Technical indicators are gradually improving, increasing the likelihood of a bounce in the coming days.

As long as the pair continues to trade above 0.6460 and 0.6500, another upward move is more likely. It’s important to closely monitor the 0.6550 level; if this resistance is broken, it could open the door for further gains towards 0.66 once again.

Prepared by Nour Hammoury, Chief Market Analyst at SquaredFinancial
Nour is an investor, independent market strategist, and financial advisor. He holds a BA in Finance and Banking Science from Al-Ahliyya Amman University and a CFTe in Economics from the International Federation of Technical Analysts. He has more than 15 years of experience in forex, stocks, and global economic developments, as well as central bank policies and intermarket analysis. He appears regularly on major international TV networks, such as BBC, Al-Jazeera, Al Hurra, CNBC, and Bloomberg, holding open discussions and sharing insights and readings of the markets and trends.

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