The New Zealand Business NZ Performance of Manufacturing Index (PMI) reached 51.4 in November. This figure suggests a slight expansion in the manufacturing sector.
Other market movements include WTI crude rebounding above $57.50 due to the US seizing a Venezuelan tanker. Also, the PBOC set the USD/CNY reference rate at 7.0638, down from 7.0686 previously, affecting currency valuations.
Currency Movements
The USD/CAD remains close to its lowest level since 17 September, around 1.3770. Meanwhile, NZD/USD is gaining above 0.5800, thanks to weak US jobless claims data.
Gold prices have risen above $4,250 due to a Fed rate cut, weakening the US Dollar. This rise was supported by strong demand from India and a rally in silver.
Zcash saw a 12% rise, bringing its weekly gain to around 25%. Solana’s price dipped below $130 after market sentiment soured following the Fed’s hawkish rate cut.
In the forex market, EUR/USD has advanced as the US Dollar declines, trading at 1.1742. GBP/USD has stabilized near recent highs but faced resistance at 1.3400 after a Fed rate cut.
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Fed Rate Cut Impact
The Federal Reserve’s decision to cut interest rates to a 3.50-3.75% range has established a clear path for the US Dollar. We are seeing the dollar weaken significantly as a result, a trend that will likely dominate trading into the new year. This move provides a strong signal for positioning in assets priced against the dollar.
This action was supported by recent economic data that we have been watching closely. The November jobs report, released last week, showed hiring had slowed more than anticipated, while the latest Consumer Price Index (CPI) reading confirmed that inflation fell to 2.9% year-over-year. These figures strengthen the case that the Fed may deliver further cuts in early 2026.
In foreign exchange markets, this environment favors continued strength in currencies like the Euro and the Australian Dollar, which are already pushing three-month highs against the dollar. We should consider using call options on pairs like EUR/USD and AUD/USD to gain exposure to further upside while managing risk. The positive Business NZ PMI reading of 51.4 also reinforces the outlook for commodity-linked currencies.
Gold has reacted very positively, breaking above the $4,250 level as the weaker dollar and lower interest rates increase its appeal. Historically, Fed easing cycles, such as the one we saw in 2019, have provided a strong tailwind for precious metals. We anticipate traders will use futures contracts to target a move toward the $4,300 level.
However, we must recognize that the Fed’s rate cut was a “split” decision, indicating a cautious and uncertain outlook among policymakers. The CBOE Volatility Index (VIX) is currently hovering around 18, which suggests the market is pricing in more movement in the weeks ahead. This makes strategies that profit from volatility, such as options straddles on major indices, worth considering.
Looking forward, derivative markets are already pricing in future Fed action. Data from CME Fed funds futures now shows a greater than 60% probability of another rate cut by the March 2026 meeting. As long as economic data continues to soften, we expect the dollar to remain under pressure.
