On November 3, the US financial markets displayed a classic pattern of divergence across stocks, bonds, currencies and gold, with the 10-year Treasury yield and the US Dollar Index (DXY) rising together while international gold prices came under pressure.
The key drivers behind this market dynamic were not a single factor but a combination of better-than-expected macroeconomic data, political uncertainty stemming from the midterm elections, and unclear prospects for geopolitical negotiations.
Although the pullback in international oil prices temporarily eased some inflation concerns, anxiety over the Federal Reserve's monetary policy path did not dissipate. Instead, it intensified as economic resilience became more evident, causing capital to swing sharply between safe-haven and risk assets and creating a unique market structure in which rising rate pressure coexists with a stronger dollar.
Strong data reshape rate expectations
From a macroeconomic fundamentals perspective, the strong data performance directly reshaped market expectations for a Fed policy pivot. JOLTS job openings data released by the US Labor Department showed that new job vacancies reached 7.523 million, an increase of 333,000 from the previous month, significantly above the market forecast of 7.1 million and pointing to continued heat in the labor market. At the same time, factory orders rose 1.8% in September, also beating the 1.2% market expectation. These key indicators surpassing expectations sent a signal to the market that the US economy has not cooled as quickly as some pessimistic forecasts suggested, reinforcing the view that the Fed may need to keep tight policy in place for longer.
Based on monitoring results from the CME FedWatch tool, the market currently expects about a 79% probability that the Fed will raise rates in December, and this high-probability expectation directly pushed bond yields higher. Within the bond market, the US 10-year Treasury yield rose 0.054 percentage points from the previous day to close at 4.966%. It is worth noting that the yield briefly fell back to around 4.90% during the session but rebounded again in the afternoon as economic data was digested, showing the strength of bullish forces. In addition, the US Treasury announced it would reduce fourth-quarter borrowing by $10 billion to $618 billion, and this supply-side adjustment also affected the supply-demand balance in the short-term bond market to some extent.
Dollar strengthens as non-US currencies come under pressure
In the foreign exchange market, the stronger US Dollar Index (DXY) reflected global capital's preference for dollar-denominated assets. The DXY rose 0.033 points from the previous day to 101.527. Although the gauge measuring the dollar's value against six major currencies fluctuated during the session, it re-established a strong position after the US economic data was released. In bilateral exchange rates, the euro rose 0.07% against the dollar to $1.1193, while the yen fell 0.47% to 158.66 yen per dollar. Even though the Reserve Bank of Australia raised its benchmark interest rate, the Australian dollar still fell 0.4% to $0.6968 per Australian dollar, showing broad pressure on non-US currencies. The dollar fell 1.08 won from the previous day to 1,344.82 won per dollar, with the intraday rate once dropping to around 1,338 won before recovering somewhat. The complexity of the won's movement lies in the fact that falling international oil prices supported its performance to some extent, with Brent crude dropping to around $105 per barrel, easing pressure from energy imports. However, foreign capital outflows from the stock market and uncertainty over AI investment returns limited the won's further appreciation potential. MonexUSA's chief trading director Juan Perez noted that policy expectation divisions within the Fed and potential political conflict mean the dollar could face depreciation pressure over the longer term. The impact of political factors on bond and foreign exchange markets cannot be ignored. Some argue that if Democrats take control of Congress in the midterm elections, Trump's expansionary fiscal policy could be constrained, and this shift in policy expectations is quietly influencing market pricing.
Precious metals bear the brunt of macro volatility
The precious metals market became the main casualty of this round of macroeconomic volatility. International gold prices fell $22.30 from the previous day to $3,924.13 per ounce, with an intraday low of around $3,893 before rebounding to around $3,960, though the upward momentum was not sustained. Gold futures expiring in December on the New York Commodity Exchange also fell 0.7% to close at $3,940.40 per ounce. BlueLineFutures chief market strategist Phillip Streible analyzed that rising dollar and Treasury yields are pressuring gold prices, because gold is a non-interest-bearing asset, and when bond yields rise, its relative investment appeal declines. Forex.com market analyst Fawad Razaqzada argued that if Democrats control both the Senate and the House, the likelihood of policy gridlock would increase, leading to a weaker dollar, which could become a factor supporting gold prices. The market widely believes that the outcome of the midterm elections and US employment data will be key factors determining future rate and dollar trends. In particular, the US employment report expected to be released on the 6th could affect the Fed's December monetary policy decision, which in turn would keep volatility in the bond, foreign exchange and precious metals markets ongoing.
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