The dollar slipped on Monday as shifting Fed interest rate expectations weighed on the currency, while safe-haven flows into gold and oil picked up amid escalating Russia-Ukraine tensions.

Despite the geopolitical jitters, risk sentiment held up surprisingly well, with U.S. stocks climbing as investors stayed focused on key tech earnings coming later this week.

Here’s what moved the major assets at the start of the week:

Headlines:

• New Zealand BusinessNZ Services Index improved from 45.7 to 46.0 in October
• New Zealand Q3 2024 PPI input jumped from 1.4% q/q to 1.9% q/q (1.0% expected); PPI output accelerated from 1.1% to 1.5% (0.9% expected)
• Japan core machinery orders fell by another 0.7% y/y in September after a 1.9% decline in August
• Rightmove: U.K.’s new house seller prices fell by 1.4% in November after a 0.3% uptick in October, likely due to post-Budget jitters
• BOJ Gov. Ueda signaled wages are now driving inflation, hinting at possible near-term rate hikes
• Euro Area trade surplus jumped from €10.8B to €13.6B (€7.9B expected) as exports (0.6%) outpaced imports (-0.6%)in September
• Canada housing starts rose from 223K to 241K (239K expected) in October
• U.S. NAHB housing market index improved from 43 to 46 (42 expected) in November
• U.S. authorized Ukraine to launch limited strikes into Russia using US-made long-range missiles
• President Zelensky said a “massive” Russian missile and drone attack has targeted power infrastructure across Ukraine

Broad Market Price Action:

Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView

The major assets were all over the charts yesterday, with gold snapping a six-day losing streak and rallying to $2,610. The surge came as escalating Russia-Ukraine tensions grabbed headlines, following a massive Russian missile strike on Ukrainian infrastructure and the U.S. giving Ukraine the green light to use long-range missiles against Russian targets.

The U.S. dollar took a hit as traders dialed back their hawkish rate expectations, stepping away from recent aggressive bets on rate cuts. Meanwhile, WTI crude oil jumped above $69.00, riding the weaker dollar and geopolitical jitters, with an extra boost from a production halt at Norway’s Johan Sverdrup oilfield.

Meanwhile, U.S. 10-year Treasury yields saw some intraday drama, hitting 4.49% before slipping to 4.41%, likely as investors sought safe havens. Bitcoin had a wild day too, but is struggling to hold its ground above $90,000.

Global equities were a mixed bag, but U.S. indices generally edged higher, with Tesla soaring 5.6% on buzz that Trump’s transition team might relax rules for self-driving cars. Market sentiment was largely shaped by anticipation around Nvidia’s earnings and ongoing speculation over how Trump administration policies could play out.

FX Market Behavior: U.S. Dollar vs. Majors:

Overlay of USD vs. Major Currencies Chart by TradingView

The U.S. dollar struggled across the board on Monday, showing mixed but contained price action during the Asian session. BOJ Governor Ueda’s comments on wage-driven inflation and China’s property market support measures may have influenced these moves.

The dollar’s decline gained momentum in the European session as traders waited on ECB speeches, including Christine Lagarde’s. Selling pressure accelerated into the U.S. session, with the Greenback weakening against all major currencies except the yen. AUD led the drop, with EUR, GBP, and CAD pairs following suit.

The dollar’s slide likely came from traders unwinding hawkish Fed rate bets after recent swings in projections. Improved risk sentiment, driven by equity gains—especially Tesla’s rally—and safe-haven flows into gold and bonds amid escalating Russia-Ukraine tensions also possibly contributed to the dollar’s weaknesses.

Upcoming Potential Catalysts on the Economic Calendar:

• Switzerland trade balance at 7:00 am GMT
• Euro Area current account balance at 9:00 am GMT
• Euro Area final CPI reports at 10:00 am GMT
• BOE monetary policy report hearings
• Canada CPI reports at 1:30 pm GMT
• U.S. building permits at 1:30 pm GMT
• U.S. housing starts at 1:30 pm GMT
• FOMC member Schmid to speak at 6:10 pm GMT
• Australia MI leading index at 10:30 pm GMT
• Japan trade balance at 11:50 pm GMT

The European session kicks off with Switzerland’s trade balance and Euro Area final inflation data, setting the tone for euro and franc traders early on.

As the U.S. session approaches, focus shifts to Canada’s inflation reports and U.S. housing data, with additional volatility possible from FOMC member Schmid’s speech later in the day.

Don’t forget to check out our Currency Correlation tool when taking any trades!