An AI-driven equity sell-off, sparked by investor fears after Democrats swept Congress, sent the Nasdaq down more than 5% and rippled through Asian markets overnight. Safe-haven demand lifted the yen and franc while the Australian dollar hit an 18-week low. The pound briefly rallied on a Bank of England rate hike before risk-off flows pared the gain.
AI Equity Rout Pushes Yen Higher, Australian Dollar to 18-Week Low
The Nasdaq composite fell around 5.5% on Thursday, its steepest single-day decline since April 2025, as investors sold AI-related stocks on fears that the Democrats' midterm sweep would bring tighter technology regulation. Nvidia shed more than 9%. Microsoft separately disclosed it was stepping back from certain data-centre commitments, deepening the sell-off.
Signals health of Europe's largest manufacturer; weak data would pressure the euro.
Consumer demand indicator; softer spending would reinforce ECB pause expectations.
First major BoE guidance since Thursday's hike; could move sterling sharply.
Defines the Fed's December rate decision; highest-impact release of the week.
Companion release to US payrolls; influences Bank of Canada rate expectations.
Any signal of further policy normalization would strengthen the yen.
Bank of England Raises Rates to 4%, Flags More Hikes
The Bank of England voted 8-1 to lift its policy rate from 3.75% to 4.0%, the first hike since 2023. Governor Bailey said at least one more increase was likely unless the US-Iran conflict eases; one dissenter backed a larger 50bp hike.
Oil Slides on Iran Deal Hopes, Pressures Commodity Currencies
Energy prices have fallen sharply over the past week amid growing optimism that a US-Iran deal could follow the midterm elections. Lower oil and gas prices add an independent headwind for commodity-linked currencies, compounding risk-off pressure on the Australian and Canadian dollars.
Fed December Hike Odds Soften as AI Rout Bites
The AI equity rout has materially tightened US financial conditions, with Fed Chair Kevin Warsh having acknowledged the development at the last FOMC meeting. Markets are pricing around 16 basis points of Fed tightening for December, down from roughly 21 basis points earlier this week.