Financial journalists were not short of material this week. US inflation came in hotter than expected, Fed officials turned far more hawkish, and the Trump administration signalled it would double down on its policy playbook. Risk appetite took a hit when Jensen Huang, Nvidia’s chief executive, overclocked his personal life and left the world’s biggest artificial intelligence company temporarily rudderless. An outage in Microsoft’s products silenced communications – and raised productivity – across the corporate world. Then, last night, a failed software update forced a ground stop of all air traffic in America, cancelling thousands of flights and stranding passengers across the country.
Dollar bulls, too, had plenty to chew on. Treasury markets recorded some of their biggest moves in years after Federal Reserve governor Christopher Waller warned he would support a 50-basis-point hike at next month’s meeting if core prices climbed 0.3% or more in October – hours before data showed exactly that – and Donald Trump followed up by directing Vice-President JD Vance to cancel planned talks with Iran and threatening to double tariffs on Mexico. After a months-long decline, yield differentials suddenly tilted in the dollar’s favour as investors began to price in a small chance of a jumbo hike in December while adding to bets on further tightening in 2027, and the greenback notched its strongest weekly gain in more than a month.
The coming days could bring more material. The yen is approaching levels that have repeatedly triggered official intervention, while UK employment numbers, minutes from the latest Fed and Banxico meetings, and Nvidia’s earnings and Anthropic’s initial public offering on Thursday all have the potential to overturn prevailing market narratives.
Whether the dollar’s rally lasts could depend on the American consumer. Tuesday’s October retail sales report will show whether a long-awaited slowdown in household spending has arrived. That seems doubtful: lower- and middle-income families, squeezed by inflation and higher interest costs, are devoting more to essentials such as housing, healthcare, food, and gas, but are also saving less – suggesting little concern about their employment prospects – while wealthier households with larger investment portfolios appear to be spending freely on discretionary categories such as travel. Another robust print, with “control group” sales rising by more than 0.3% on the month, could anchor Fed pricing and the dollar higher, while a softer-than-expected reading might take the edge off the “US exceptionalism” trade.
Canadian inflation data will help calibrate expectations for the Bank of Canada’s meeting next month. The last consumer and producer price reports before the decision on December 9, due on Monday and Thursday, are unlikely to show obvious signs of energy-related spillovers into core measures on a year-over-year basis, as economic momentum has faltered, the labour market has shed almost 115,000 jobs in the last three months, and consumers have turned more cautious. But an uptick in month-over-month price growth could nonetheless lay the foundation for a bigger upgrade in policymakers’ projections and push market-implied odds on a second consecutive rate hike above the current 60%.
Geopolitical headlines might move currencies. Leaders from the US, China, Russia, Australia, Mexico, Indonesia, Canada, and the Philippines, among others, will gather for the Asia-Pacific Economic Cooperation summit in Shenzhen on Wednesday and Thursday, with economic issues firmly on the agenda. Trump will meet jointly with China’s Xi Jinping and Russia’s Vladimir Putin on the sidelines in an encounter sure to draw uncomfortable comparisons with the 1945 Yalta conference, at which Roosevelt, Churchill, and Stalin carved the world into spheres of influence, setting the stage for the cold war. The euro will be especially sensitive to any perceived shift in strategic posture on the conflicts in the Middle East and Ukraine.
Quarrels within the Trump administration could also carry implications for markets. Scott Bessent, the Treasury secretary, yesterday joined a number of others on both sides of the aisle in blaming Howard Lutnick, the commerce secretary, for failing to ban exports of Nvidia chips to Megaspeed, the Singapore-based company believed to have acted as a front for buyers in mainland China. Lutnick faces serious conflict of interest allegations and is widely understood to have derailed trade negotiations with Ottawa and Mexico City in recent months, so if he is sidelined, investors could turn more optimistic on the Canadian dollar and the peso.
Against this backdrop, we think anyone managing currency exposure should be considering whether the dollar is nearing a high-water mark – things could look very different by Friday.