A global rout in risky assets looks set to extend into a third day as investors turn more sceptical on artificial intelligence spending and pull back on expectations for a rate cut at the Federal Reserve’s December meeting. North American equity futures—particularly on technology-focused indices—are pointing to renewed selling pressure at this morning’s open, Treasury yields are modestly higher across the curve, and the dollar is trading higher against most of its counterparts as investors seek liquidity. The Canadian dollar and euro are outperforming on the crosses while the Mexican peso and Australian dollar drop relative to the safe-haven Japanese yen and Swiss franc.

USD: Odds on a December rate cut plunged below the 50 percent threshold yesterday morning as yet another group of Fed officials expressed hawkish views on the near term outlook. St Louis’ Alberto Musalem warned rates are nearing overly accommodative levels, Cleveland’s Beth Hammack highlighted growing inflation risks, and Minneapolis’ Neel Kashkari said he was unconvinced on the need for another move at next month’s meeting. The tone is unlikely to change in the hours ahead when Dallas’ Lorie Logan and Kansas City’s Jeffrey Schmid make appearances.

Consensus forecasts for a yield-driven decline in the dollar over the coming year are moderating in line with a broadly hawkish repricing in the Fed’s expected policy path, but this could prove relatively short-lived if data releases in the early new year are more consistent with a slowdown in labour markets. We believe trade-related “bullwhip” effects are obscuring the fundamentals in most major advanced economies, and expect the fog of war to begin clearing in the coming months, providing a clearer view of underlying conditions.

GBP: The British pound is suffering from whiplash after selling off on reports that Chancellor Rachel Reeves had shelved plans to raise income tax rates in the upcoming budget—raising doubts over how she would make up the lost revenue—only to rebound as it emerged that the shift was driven by an improvement in economic projections. According to Bloomberg, a fiscal gap previously estimated at around 35 billion pounds has been revised down to 20 billion on an upgrade in the budget office’s wage and revenue projections, giving the government room to announce a smaller set of tax increases in the Autumn Budget. After much larger swings earlier in the session, ten-year gilt yields are now trading roughly five points richer than yesterday’s close and the pound is off by 0.2 percent.

Bottom line: Valuations across the American technology sector remain near extremes and inward capital flows are helping prop up the dollar, but confidence is clearly growing shaky and many investors are watching the exits warily. Although official government data may begin flowing next week, markets will be left grappling with major uncertainties over the trajectory of US growth, employment, and inflation for months to come. High-conviction, high-momentum moves in currency markets should remain rare for now, giving hedgers room to pick up longer-term protection at relatively-affordable levels.