US Stocks Rally as Dollar Surges – Euro Hits Fresh Annual Low
US stock markets pushed higher in holiday-thinned trading yesterday as investors piled back into the AI trade, driving solid gains across all three major indices. The Nasdaq led the charge, jumping 1.60% to close at 25,466, while the broader S&P 500 gained 1.31% to finish at 7,619. The Dow Jones also enjoyed a positive session, rising 0.49% to close at 52,486, as renewed appetite for technology stocks helped boost market sentiment.
US Treasury markets were closed for the holiday, leaving the benchmark 2-year yield unchanged at 4.738% and the 10-year yield at 4.990%. However, the dollar drove higher against the major currencies, with the Dollar Index jumping 0.66% to close at 102.90. The strength of the greenback continues to reflect growing expectations of further Federal Reserve rate hikes following stronger US economic data and increasingly hawkish commentary from Fed officials.
Dollar Pushes Higher as Euro Hits Fresh Lows and USDJPY Breaks 159.00
Oil prices pushed higher as traders continued to assess developments in the Middle East and the prospects of a potential peace agreement between the US and Iran. Brent crude gained 1.24% to close at $92.62 a barrel, while WTI rose 0.57% to finish at $86.53. Despite recent optimism surrounding negotiations, significant differences remain between the parties involved, keeping uncertainty high and traders cautious. Gold moved in the opposite direction, falling 1.12% to close at $3,985.62 as the stronger dollar continued to weigh on the precious metal.The US dollar powered higher against the major currencies overnight as traders continued to price in a more hawkish Federal Reserve following last week’s strong employment numbers and this week’s hotter-than-expected inflation data.
The Euro was one of the biggest casualties, dropping to a fresh annual low as the greenback strengthened across the board. USDJPY also made a significant move, breaking cleanly through the 159.00 level for the first time since early September.
The Dollar Index (DXY) is now closing in on its annual high, and traders will be watching that level closely in the sessions ahead. A clean break higher could open the door for another substantial move north, particularly with markets increasingly convinced that the Fed will hike rates again in December and potentially follow up with another move in January.
Traders will be keeping a close eye on FX markets today, especially USDJPY, where the threat of Japanese intervention could add another layer of volatility to what is shaping up to be an interesting end to the trading week.
Geopolitics and News Likely to Dominate Markets Today
Looking ahead, it is a relatively quiet day on the economic calendar, with UK GDP data early in the London session the main event of the day. The US session will see Weekly Unemployment Claims (194k) released shortly after the open, followed by Weekly Crude Oil Inventories (-0.6 mio) later in the day.
Despite the lighter calendar, traders are expecting another busy day across global markets. The dollar’s renewed strength and growing expectations of further Fed tightening will remain key drivers for FX and equity markets, while geopolitical developments are likely to dominate sentiment in commodities. With Middle East peace negotiations still facing significant hurdles, fresh headlines could quickly shift market direction and keep volatility elevated into the end of the trading week.
Explore all upcoming market events in the Economic Calendar.
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