* Dollar firmer on higher yields ahead of US CPI

* Gold jumps over 1.2% to three-week highs on safe haven buying

* Wall Street lower as indices fall off their record highs

* November CPI forecasts show stalled progress on inflation

* BoC poised for 50bps rate cut amid economic crosswinds

FX: USD ticked up for a third straight day. It narrowly breached the April top at 106.51. If it can hold above here, then the next long-term high at 107.34 comes into view. Markets will move sharply on a 0.4% core m/m reading. All else will likely lead to an “as we were” stance. Seasonals point to a softer dollar around this time of year, but near term risks are pointing towards more dollar strength. A 0.2% print would help that seasonal theme.

EUR was softer, slipping back to the low 1.05s after failing to hold gains through the low 1.06s late last week. A 25bps rate cut is fully priced in for Thursday’s ECB policy decision so markets will be checking the statement and Lagarde for guidance.

GBP also was a moderate outperformer on the session. The BoE’s stance of patience on rate cuts is driving spreads between the UK and eurozone wider. That saw EUR/GBP break down through a support zone to its lowest point since 2022. Bears are looking at long-term levels around the low 0.82’s.

USD/JPY moved higher for a second day in a row. The major went above the 152 area of previous interventions and the 50-day SMA at 151.63. The 10-year US Treasury yield ticked higher, potentially moving above its 200-day SMA at 4.23%.

AUD stumbled after the RBA meeting. Policymakers left rates unchanged at 4.35% as expected. But they indicated that they are gaining confidence in the inflation outlook which prompted markets to boost expectations that a rate cut could finally emerge in February. The August spike low is a key point of reference at 0.6347. USD/CAD made a fresh cycle high at 1.4194 early in the European session before paring gains. PM Trudeau said Canada would retaliate in the event of new tariffs being imposed on Canadian exports under President-elect Trump’s administration.

US stocks: US stocks were lower as the indices sold off for a second consecutive day. The S&P500 closed down 0.30% at 6,034. The tech-heavy Nasdaq settled 0.38% lower at 21,359. The Dow finished at 44,247, off 0.35%. Alphabet led the tech titans, up over 5% while Tesla topped $400. Its all-time high from November 2021 is $414.50. The Elon Musk run EV maker is up over 60% since the US election day.

Asian stocks: Futures are mixed. Asian equities traded firmer as the easing stance in China trumped the negative session Stateside. The ASX 200 was the regional underperformer as tech led the index lower. The net dovish RBA didn’t help. The Nikkei 225 edged higher with yen weakness benefitting. China stocksoutperformed after the Politburo said China’s fiscal policy is set to be more proactive in 2025. Monetary policy is to moderately loose which marks the first shift in that stance since 2011.

Gold surged up over 1.2%, as prices look to have broken out of the previous couple of weeks of range trading. Prices moved above 50-day SMA at $2668. The next upside target is $2721, with US CPI up next.

Day Ahead – US CPI and BoC rate decision

Fed officials have generally been highlighting that despite some bumps on the road, US inflation is on path to get to 2%. Softer November inflation data would further reinforce that theme. Consensus sees the headline rising +0.2% m/m in November, matching October’s print, and 2.7% y/y. The core rate is seen rising +0.3% m/m, again, matching October’s print and 3.3% y/y. But further slowing in shelter and more modest increases in categories like used car prices and airfares that were strong in October could see a down tick to a more comforting print.

The BoC is widely expected to cut rates later today, with around a 70% chance of another 50bps move. Markets were pricing in the decision to be a coin toss between a 25bps or 50bps reduction. Recent data has been mixed, as the latest inflation report came in hotter than forecast, while growth data disappointed. However, Friday’s November jobs report was dovish with a notable rise in the unemployment rate and a larger-than-expected drop in wage growth.

Chart of the Day – Dow falls for fourth session in a row

We’ve seen cyclicals outperform defensives by a total of almost 4% last week. This is extraordinary, especially considering that 7 out of 10 sectors were lower last week. That means the breadth of leaders is very narrow again and the Dow has subsequently struggled.

After breaking the previous record in November at 44,486, prices consolidated above here making marginal new highs. But four straight down days have seen the index fall through the November mark. Prices currently sit on the first Fib level of the November bull move and 21-day SMA around 44,260.  Below is the major retracement (38.2%) at 43,764.