What’s happening: The US dollar moved higher on Monday, after recording losses in the previous session.
What happened: The greenback logged its biggest single-session decline in almost a month on Friday, after inflation data came in lower than projected.
Meanwhile, the US Congress passed a spending legislation on Saturday that averted a government shutdown.
Why it matters: Data released on Monday showed new orders for key US-manufactured capital goods gained last month, driven by upbeat machinery demand.
However, the Conference Board’s consumer confidence index fell to 104.7 in December, from a reading of 112.8 in the previous month, amid growing concerns over Donald Trump’s economic policy and tariffs raising the cost of living.
New orders for manufactured durable goods also fell 1.1% to $285.1 billion in November, versus a gain of 0.8% in October and worse than market estimates of a 0.4% decline.
Last week, the Federal Reserve had indicated a more measured pace of interest rate cuts next year than markets had expected. This had provided a boost to the US dollar and the US Treasury. Traders are now expecting the Fed to cut rates by 33 basis points next year.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained around 0.4% to 108.04 on Monday, after recording its biggest single-session decline in almost a month on Friday due to a soft reading on inflation.
The Personal Consumption Expenditures price index, the Fed’s preferred gauge of inflation, rose 2.4% year-over-year last month, lower than market expectations of 2.5%. On a monthly basis, the inflation gauge eased to 0.1%, from 0.2% in the previous month.
The EUR/USD forex pair fell around 0.2% to 1.0407 on Monday, while the GBP/USD slipped around 0.3% to 1.2535. The Bank of England had kept its benchmark interest rate unchanged last week.
What to watch: Investors await the release of economic data on the US Richmond Fed Manufacturing Index, due to be released at 1900 UAE Time, today. The composite manufacturing index in the US Fifth District, which came in unchanged at -14 in November, is expected to improve to a reading of -9 in December.
Context: UK’s benchmark FTSE 100 started the week on a positive note on Monday, while the domestically focused index settled lower.
Details: Data released on Monday showed UK’s GDP flatlining during the third quarter, compared to a 0.4% expansion in the second quarter.
The UK’s current account deficit shrank to £18.1 billion in the third quarter, from £24.0 billion in the previous quarter. The figure was also better than market estimates of a deficit of £24.1 billion. Business investment grew by 1.9% in the third quarter, versus a 1.8% gain in the previous period.
Recent data also showed wage growth rising during the three months to October, while inflation accelerated to 2.6% in November.
Shares of AstraZeneca gained around 1.4% on Monday after the European Union approved its lung-cancer drug. Direct Line’s stock rose more than 3% after Aviva announced plans to buy the company in a cash-and-stock deal.
London’s FTSE 100 gained 0.22% to close at 8,102.72 on Monday, after recording its softest week. However, the domestically focused FTSE 250 slipped 0.15% to settle at 20,419.09.
Shares of energy companies gained around 0.6% on Monday after recording losses last week as softer-than-expected inflation data from the US stabilised crude oil prices.
Trading volumes are likely to be thin during the holiday-shortened week, as UK markets will close early on Tuesday and remain closed on Wednesday and Thursday for Christmas and Boxing Day.
What to watch: With no major economic reports scheduled for release this week, investors await economic data on Nationwide Housing Prices next week. The Nationwide House Price Index has risen 3.7% year-over-year in November, the most since November 2022, and is expected to increase by 4% year-over-year in December.
Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.16%, 0.73% and 1.01%, respectively.
North Korea is looking to send more troops and weapons to Russia to assist in its ongoing war against Ukraine. The news sent the RUB/USD pair slightly higher in forex trading this morning.
Colombia’s industrial confidence indicator fell to -2.8 in November, from October’s reading of 0.4, exerting pressure on the COP/USD forex pair.
South Korea’s Composite Consumer Sentiment Index declined to 88.4 in December, from 100.7 in November. However, the KRW/USD pair rose in forex trading this morning.
Canada’s industrial producer prices rose by 0.6% in November, versus a 1.2% rise in the previous month. The latest reading came in higher than market estimates of a 0.3% increase, which exerted pressure on the CAD/USD forex pair.
Mexico reported a trade deficit of $133 million in November, compared to a surplus of $561 million in the year-ago month, sending the MXN/USD pair lower in forex trading this morning.
US Redbook index (1755 UAE Time), 2-year FRN auction (2030 UAE Time) and 5-year note auction (2030 UAE Time).