The greenback continues its relentless climb, marking the fifth consecutive day of gains. The US Dollar Index (DXY), a widely-watched gauge tracking the Greenback against a basket of six major currencies, surged to a fresh 10-week high near 103.75. Several factors underpin this strength, most notably the repricing of Federal Reserve rate expectations, a resilient US labor market, and mounting expectations for a Trump administration, which markets anticipate could bring looser fiscal policy and higher tariffs:

Today's economic data reinforced the view that the US economy remains solid, despite global headwinds. Initial jobless claims fell to 241K, improving from 260K and signaling continued strength in the labor market. This resilience, combined with retail sales growth of 0.4% (beating the 0.3% estimate), suggests that consumer spending remains healthy, particularly in key sectors like retail and food stores. However, it's worth noting that the housing and durable goods sectors, reflected in weaker foot traffic at furniture stores, may be feeling the pinch of higher interest rates and softer demand.

The labor market’s continued resilience complicates the outlook for the Fed monetary policy. Recent labor market data, combined with today's jobless claims, have tempered expectations for aggressive rate cuts. While derivatives markets are pricing in a modest 25 bps rate cut in both November and December, the absence of economic softening keeps the Fed cautious about acting too soon. Inflation data continues to be a wild card, forcing the markets to reprice the odds that the Fed will tread carefully.

In China, news emerged that the government is scaling back its housing market support plan from the initially touted 6 trillion yuan to 4 trillion yuan. This is likely to weigh on investor sentiment in the broader Asia-Pacific region, which is highly sensitive to China's economic health. While the reduced stimulus figure may be viewed as a pragmatic approach to controlling debt, it still leaves a gap in investor expectations. China's housing market remains a key risk to global economic stability, and with the housing sector being a large driver of domestic growth, any perceived weakness could spill over into broader macroeconomic trends.

Talking about the Eurozone, the ECB delivered a widely-anticipated 25 bps rate cut, following the consensus that inflationary pressures are moderating in the Eurozone. The Euro, however, remains under pressure, weighed down by a dovish outlook as policymakers face slowing growth and subdued inflation. The ECB’s accommodative stance contrasts sharply with the more data-dependent Fed, acting as a key upside factor for the US Dollar.

The British Pound is struggling to regain ground after an intense sell-off triggered by weaker-than-expected UK inflation data. Headline CPI slowed to 1.7%, well below the Bank of England’s 2% target. Core inflation also decelerated to 3.2%, down from prior readings. This has emboldened market participants to price in more aggressive BoE rate cuts, with traders now anticipating two 25 bps cuts by the end of the year: