The euro rose in European trading on Friday against a basket of global currencies, attempting to recover from a two-week low against the US dollar as bargain-hunting emerged at lower levels. The move comes ahead of key economic releases in Europe covering activity in major sectors during November.

Despite the uptick, the single European currency is still heading for a weekly loss, as investors continue to favor the US dollar as the most attractive asset—especially after the likelihood of a Federal Reserve rate cut in December declined.

Price overview

•EUR/USD today: the euro rose more than 0.1% to 1.1542 dollars, up from the opening level of 1.1528 dollars, after touching a low of 1.1521 dollars.

•The euro ended Thursday down 0.1% against the dollar—its fifth straight daily loss—and hit a two-week low of 1.1502 dollars following stronger-than-expected US labor-market data.

Weekly performance

So far this week—ending with today’s settlement—the euro is down roughly 0.75% against the US dollar, on track for its first weekly loss in three weeks.

US dollar

The dollar index fell 0.1% on Friday, backing away from a two-week high of 100.36 and heading toward its first loss in six sessions, reflecting a pause in the US currency’s recent upward momentum against major and minor peers.

Beyond profit-taking, the dollar eased as investors refrained from building additional long positions ahead of key US sector data and further commentary from Federal Reserve officials.

More hawkish remarks from Fed policymakers, coupled with stronger-than-expected US job-creation figures for September, pushed down the odds of a December rate cut.

According to CME’s FedWatch tool, the market-implied probability of a 25-basis-point rate cut in December fell this week from 48% to 30%, while the probability of no change rose from 52% to 70%.

European rates

•Money-market pricing places the probability of a 25-basis-point ECB rate cut in December at roughly 25%.

•To reassess these expectations, investors are awaiting a series of key European sector data releases today, which will offer stronger evidence on the eurozone’s growth momentum heading into the fourth quarter.

Euro outlook

•At Economies.com, we expect that if incoming European data disappoints, the likelihood of an ECB rate cut in December will rise—placing additional downside pressure on the euro against a basket of currencies.

The Japanese yen rose in Asian trading on Friday against a basket of major and minor currencies, attempting to recover from its lowest level in ten months against the US dollar. The rebound was driven by bargain buying at lower levels and by data showing that Japan’s core inflation rose in October to its highest level in three months.

The figures signaled that underlying inflationary pressures remain firmly in place for the Bank of Japan, keeping alive the possibility of a rate hike in December.

The yen also received support from comments by Finance Minister Satsuki Katayama, who said that intervention in the foreign-exchange market remains an option in response to excessively volatile and speculative moves.

Despite Friday’s gains, the Japanese currency remains on track for a second straight weekly loss — and its worst week since July — as markets expect the new government led by Sanae Takaichi to unveil a large, low-rate stimulus package to support Japan’s weak economic activity.

Shortly afterward, the Japanese government announced a major economic stimulus package worth 135 billion dollars aimed at addressing rising prices, strengthening economic growth, and boosting defense and diplomatic capabilities.

Price overview

•USD/JPY today: the dollar fell about 0.25% to 157.08 yen, down from the opening level of 157.44 yen, after touching a high of 157.54 yen.

•The yen ended Thursday down 0.2% against the dollar — its fifth consecutive daily loss — and hit a ten-month low at 157.89 per dollar, weighed down by Takaichi’s stimulus plans.

Core inflation

Data released Friday in Tokyo showed Japan’s core consumer price index rising 3.0% in October, the fastest pace in three months and in line with market expectations. The index had risen 2.9% in September.

The figures highlight persistent inflationary pressure on BOJ policymakers, strengthening expectations for a rate hike in December.

Finance Minister Katayama

Finance Minister Satsuki Katayama said Friday that intervention in the FX market is possible to counter sharp and speculative moves, prompting traders to stay alert for potential yen-buying action from the authorities.

Weekly performance

So far this week — which ends with today’s settlement — the yen is down about 1.7% against the US dollar, on course for a second consecutive weekly loss and its worst weekly performance since July.

Large stimulus package

Japan’s Cabinet, led by Sanae Takaichi, approved an economic stimulus package worth 21 trillion yen (135 billion dollars) on Friday in the new leader’s first major policy initiative. Takaichi has pledged to pursue expansionary fiscal measures to support the country’s weak economy.

The package includes 17.7 trillion yen in general-account spending, far exceeding last year’s 13.9 trillion yen and marking the biggest stimulus since the COVID-19 pandemic. It also includes tax cuts totaling 2.7 trillion yen.

The government plans to approve a supplementary budget to fund the new stimulus on November 28, with the goal of securing parliamentary approval by year-end.

Kazuo Ueda

Bank of Japan Governor Kazuo Ueda told parliament on Friday that the BOJ must recognize that a weak yen can influence core inflation — a key gauge for timing rate hikes — by lifting import costs and pushing prices higher.

Ueda said the impact of currency moves on inflation may now be larger than in the past because companies have become more willing to raise prices and wages.

He added that the BOJ kept rates unchanged last month to allow “more time” to assess whether companies will continue raising wages in next year’s negotiations with labor unions.

The US dollar slipped slightly against most major currencies on Thursday as expectations grew that the Federal Reserve will keep interest rates unchanged.

The move came after the release of the September nonfarm payrolls report, which showed the US economy added 119,000 jobs — well above expectations of 50,000 and compared with a loss of 4,000 jobs in August.

Several Federal Reserve officials expressed a cautious tone regarding the central bank’s upcoming decision, saying they see the need to hold rates steady rather than cut them at the December meeting.

In trading, the dollar index fell by less than 0.1% to 100.1 points as of 19:48 GMT, after hitting a high of 100.3 and a low of 100.03.

Australian dollar

The Australian dollar fell 0.4% against its US counterpart to 0.6455 as of 19:59 GMT.

Canadian dollar

The Canadian dollar declined 0.3% against the US dollar to 0.7096 as of 19:59 GMT.

The artificial intelligence boom may seem unstoppable, but a growing number of investors and observers are increasingly worried that this surge resembles a bubble on the verge of bursting.

After the Nasdaq technology index rose more than 50% from its April lows, it has fallen nearly 5% this month. Investors fear it may take longer than expected to generate the major profits they had hoped for after pouring trillions of dollars into the next wave of technology.

Those who witnessed the dot-com bubble and its collapse in the early 2000s say parts of today’s enthusiasm feel familiar. Optimists, however, believe the situation is different this time.

Nvidia, the AI-focused chipmaker, has led the stock-market rally, becoming the world’s most valuable company on the back of investor excitement surrounding artificial intelligence. The Santa Clara–based firm produces advanced chips used by tech companies to train AI models, power data centers, robotics, and more.

Both bullish and bearish investors were waiting to see what Nvidia would reveal about the state of its business in Wednesday’s earnings report. The company kept optimism alive after reporting quarterly earnings and guidance that exceeded analyst forecasts. Its shares jumped more than 4% in early after-hours trading.

Nvidia’s chief executive, Jensen Huang, said during a call after the results: “There has been a lot of talk about an AI bubble. From our point of view, we are seeing something entirely different… and just to remind you, Nvidia is not like any other accelerator. We outperform at every stage of AI.”

From social media to self-driving cars, Huang stressed that AI capable of generating content and performing tasks without human intervention will affect every industry.

Nvidia’s results may help revive AI-linked market momentum. Still, investors and analysts remain concerned about whether current stock valuations are justified for all companies entering the AI race. After the dot-com bubble, many companies disappeared, but those that survived are now among the world’s largest and most profitable firms.

The extremely high valuations of Silicon Valley’s tech giants and other major AI players have pushed investors to question when and how their bets on the future of technology will pay off. Tech firms have become more interconnected as they invest hundreds of billions of dollars into one another, as well as into data centers, AI research, and generous employee compensation packages.

In September, Nvidia said it plans to invest up to 100 billion dollars in OpenAI — the maker of ChatGPT — to fund extensive construction of data centers hosting equipment used to store and process the enormous volumes of information required to run AI systems. OpenAI has also committed to purchasing at least ten gigawatts of Nvidia’s AI chips for its data centers.

According to an October research note from New Street Research, the capital expenditure needed to meet OpenAI’s computing requirements could reach 130 billion dollars by 2027, meaning OpenAI alone could spend 52 billion dollars on Nvidia technology.

Despite its massive valuation of around 500 billion dollars, OpenAI continues to lose billions as it spends heavily on infrastructure, computing capacity, and other expenses.

OpenAI chief executive Sam Altman said in a talk at Stanford University last year: “Whether we lose 500 million dollars a year or 5 billion or 50 billion, it doesn’t matter. I truly don’t care. It’s going to be expensive… but it’s absolutely worth it.”

But as the losses pile up, investor concerns have grown.

Around 45% of global fund managers surveyed by Bank of America said there is an “AI bubble” that could negatively affect the economy and markets.

Debate will continue over whether a bubble truly exists.

Samuel Hammond, chief economist at the American Innovation Foundation, said he does not believe AI investments are in a bubble, though he expects winners and losers: “Companies getting massive valuations only because they added the word ‘AI’ to their pitch but fail to execute could see their value collapse to zero. But most stock-market gains are being driven by large-cap tech companies like Nvidia and Google.”

Hammond noted that tech firms are financing these huge data-center projects through equity rather than debt, reducing the likelihood of a bubble ready to burst.

Strategists at Goldman Sachs wrote in an October research paper that although there are risks of overinvestment, technology companies have delivered earnings growth and maintain strong balance sheets: “While the success of dominant tech firms is evident, this does not necessarily imply a market bubble about to burst.”

However, Gary Smith, an economics professor at Pomona College and author, warned of an AI bubble, pointing to OpenAI’s losses, circular funding among tech firms, and limits to AI capabilities.

In an opinion piece for MarketWatch co-written with Jeffrey Funk, he wrote: “OpenAI is in a very fragile position… and when the AI bubble bursts, it will be among the first casualties.”

Some analysts have compared the current data-center boom to the 1990s telecom boom, when companies invested 500 billion dollars to lay fiber-optic cables to meet the rapid growth of internet usage, resulting in a massive surplus of unused “dark fiber” that sat idle for years.

Google CEO Sundar Pichai told the BBC that the tech sector has gone through periods of excess: “We can look back at the internet. Clearly, there was a lot of overinvestment… but nobody doubts now that the internet was a profound transformation.”