Dollar Soars Amid Global Central Bank Rate Cuts

The US dollar surged against major currencies, gaining 1% on the euro, 1.6% on the Swiss franc, and 1.8% on the yen after significant rate cuts in Europe, Switzerland, and Canada. Long-term US Treasury yields climbed sharply, with the 10-year yield up 17 basis points and 30-year yields rising 22 basis points, marking their biggest weekly rise in over a year. Asian stocks declined, led by China, as hopes for concrete policy announcements at China's Central Economic Work Conference fell flat.

Equities

The FTSE 100 rose slightly by 0.1% on Thursday, with Diageo leading the gains after UBS upgraded the spirits maker’s rating to ‘buy’ from ‘sell’. This pushed Diageo’s shares up 2.8%, contributing to a 2.4% rise in the beverages sector.

Severn Trent also gained 1.8% following Barclays’ decision to raise its target price for the water supplier. On the other hand, precious metal miners fell 2.9% as gold prices edged down after a recent peak, awaiting further signals from US economic data.

The midcap FTSE 250 fell 0.1%, dragged down by SThree, which plunged 26.5% after the recruiter issued a profit warning for its 2025 fiscal year due to tough market conditions in Europe.

Currys surged 17.3% to the top of the index after reporting a return to first-half profit and maintaining its annual growth forecast despite caution over price hikes. Auction Technology gained 3.4% as private equity firm TA Associates sold shares in the company at £5.50 each.

In the US, Wall Street indices pulled back. The Dow Jones Industrial Average dropped 0.53%, the S&P 500 fell 0.54%, and the Nasdaq lost 0.66% following key economic data. Adobe’s shares plummeted 13.7% after the company forecast lower-than-expected revenue for fiscal 2025, putting pressure on the broader technology sector. Nvidia declined 1.4%, though Microsoft edged up 0.1%.

Warner Bros. Discovery jumped 15.4% after announcing plans to separate its cable-TV business from its streaming and studio operations. Health insurer Centene rose 1.9% after issuing a 2025 profit forecast that exceeded estimates. Nordson fell 8.2% as it projected revenue below expectations for 2025.

Forex & Commodities

The US dollar strengthened to a 2 1/2-week high against major currencies this week, buoyed by expectations of a Federal Reserve interest rate cut on 18 December. The dollar index rose to 107.15, up over 1.1% for the week, its best performance in a month. The greenback gained 2% against the Japanese yen, reaching 153.09 yen, amid speculation that the Bank of Japan will hold off on raising rates next week. Meanwhile, the Swiss franc fell sharply after a surprise half-point rate cut by the Swiss National Bank, leaving the dollar steady at 0.8930 francs, marking a 1.6% weekly rise.

The euro dropped to $1.0457, its lowest since late November, following the European Central Bank’s 25-basis-point rate cut on Thursday. The British pound slipped to $1.2658, a one-week low, as central banks globally weighed further monetary easing.

Gold prices edged higher, with spot gold trading at $2,684.87 per ounce, up nearly 2% for the week. Traders are focused on the Fed’s impending decision, with a 25-basis-point cut widely expected. The European Central Bank’s rate cut, its fourth this year, and the Swiss National Bank’s actions further influenced precious metals, which often benefit in low-rate environments. Platinum and palladium also posted gains.

In the energy market, oil prices saw their first weekly rise in three weeks. Brent crude reached $73.46 a barrel, while West Texas Intermediate hit $70.10, both gaining over 3% this week.