Market sentiment remains uncertain after an upbeat day, with full markets seeking more data to decide whether the previous risk-on mood will continue. The U.S. Dollar also weakened, and risk assets saw slight gains but lacked strong momentum due to mixed news on the U.S. government shutdown, the U.S.-China trade tensions, and Federal Reserve discussions. Anxiety over speeches today from Federal Reserve Chairman Jerome Powell and Bank of England Governor Andrew Bailey added to the uncertainty.
The gains in risk assets were partly due to less confrontational remarks from U.S. President Donald Trump towards China over the weekend. Trump stated that the U.S. wants to “help China, not hurt it,” and suggested tariffs “don’t have to happen.” Treasury Secretary Bessent also reiterated that the U.S. remains open to talks.
President Trump, currently in Egypt, made remarks on Iran, calling Egypt's President Sisi a powerful leader and saying he hopes to reach a deal with Iran. He expressed willingness to lift sanctions if Iran engages in talks.
Goldman Sachs warned that the current U.S. government shutdown could become one of the largest and most prolonged on record, potentially shaving 0.11 percentage points off quarterly GDP for every week it continues. On the same line, Republican Congresswoman Marjorie Taylor Greene, a strong ally of Trump, warned that tariffs and deportations could hurt U.S. workers and manufacturers.
In China, the Commerce Ministry confirmed it had notified the U.S. in advance about its new rare earth export controls and held talks under existing trade consultation channels. Beijing criticized the U.S. for imposing new restrictions while seeking dialogue, urging both sides to act with sincerity, as cooperation benefits both countries while confrontation harms both.
China’s export data on Monday indicated that China can still export to countries other than the U.S., potentially circumventing tariffs. On the contrary, China has officially begun imposing port fees on U.S. ships, according to a report from CCTV.
While the hostage exchanges on Monday offered a risk-on mood, comments from Israeli Defense Minister Katz raised doubts about the length of peace. That said, the diplomat warned that any delay in the release of bodies would be a serious violation.
Federal Reserve Philadelphia President Anna Paulson made her first speech since taking office, emphasizing a dovish but balanced approach, focusing on full employment and price stability. She suggested that gradual rate cuts are likely through the remainder of this year and into next year.
Elsewhere, Japan’s finance minister Kato noted that the country is seeing one-sided, rapid market moves recently.
In the UK, retail and consumer spending growth slowed in September. The British Retail Consortium (BRC) reported a 2.3% year-on-year sales increase, the weakest since May, while Barclays reported a 0.7% decline in card spending as consumers tightened their belts ahead of the holidays. Meanwhile, UK monthly employment numbers came in mixed and struggled to defend the British Pound (GBP).
In Australia, business confidence improved, with the National Australia Bank (NAB) index rising to +7 in September from +4 in August. Business conditions remained steady, with stronger sales and profitability offsetting softer employment. Minutes from the Reserve Bank of Australia’s (RBA) September meeting showed that monetary policy remains slightly restrictive, but past rate cuts are supporting housing activity. The RBA noted that the Australian dollar’s modest rise, driven by widening yield differentials, was in line with fundamentals.
The Reserve Bank of New Zealand (RBNZ) plans to ease mortgage loan-to-value ratio (LVR) restrictions starting in December 2025. Further, New Zealand electronic retail card spending fell 0.5% month-on-month in September but rose 1.0% year-on-year. The data, which covers about 68% of core retail sales in the country, is a key indicator of retail activity.
The major U.S. stock indices recovered some of the losses from Friday’s sharp drop. The Dow Jones Industrial Average rose 587.98 points, or 1.29%, to 46,067.58. The S&P 500 gained 102.21 points, or 1.56%, to 6,654.72. The Nasdaq increased 490.18 points, or 2.21%, to 22,694.61. The Russell 2000 added 66.18 points, or 2.79%, to 2,461.41. These gains were partly driven by President Trump’s less aggressive stance on China, as well as optimism from the hostage release and peace hopes in the Middle East. However, the market did not fully recover from last Friday’s sharp losses.
In the currency markets, the U.S. Dollar Index (DXY) retreated, allowing EURUSD and GBPUSD to recover from Monday’s losses. Meanwhile, AUDUSD dropped, NZDUSD hit a fresh six-month low, and USDCAD reached a six-month high. Gold reached a new all-time high, while crude oil remained volatile after bouncing off a five-month low. Bitcoin (BTC) and Ethereum (ETH) ended their two-day winning streak, while Asia-Pacific shares saw modest gains. It should be noted that the U.S. debt market was closed for Columbus Day.
The U.S. Dollar's retreat, combined with easing political tensions in France and cautious optimism ahead of today's EU and German ZEW sentiment data, as well as Fed Chairman Jerome Powell’s speech, helped support the EURUSD rebound. However, the Euro’s gains remain limited due to ongoing concerns over the Ukraine-Russia war and uncertainty around the EU's economic transition in 2025.
USDJPY appears to reflect the Japanese government's hints at intervening to defend the weaker Yen, as Japan’s Finance Minister Kato noted heavy volatility. Still, the pair’s decline lacks momentum, with little market movement from the Asian major even as it returns after a long weekend.
GBPUSD sees slight gains, recovering from Monday's losses due to a weaker U.S. Dollar. However, the recovery is slow, with mixed UK employment data and uncertainty ahead of the UK’s November budget. Geopolitical and trade news also adds pressure on the pair, even as the U.S. Dollar remains weak, with hopes for a rebound when U.S. debt markets reopen after the holiday. Additionally, early data on UK retail sales and spending put further strain on GBPUSD’s upward movement.
Despite a weaker U.S. Dollar, AUDUSD, NZDUSD, and USDCAD all fell early Tuesday due to mixed reports from China and growing concerns over the U.S.-China trade tensions, even with Trump’s more positive remarks. China’s strong stance against U.S. trade actions, ahead of the Trump-Xi meeting in November, adds to the uncertainty. As a result, AUDUSD declines, NZDUSD hits its lowest point since May, and USDCAD rises to a five-month high. The USDCAD’s gains are unaffected by the recent rebound in Crude Oil, Canada’s main export, as market concerns persist.
Amid uncertainty from the ongoing U.S. shutdown, a dovish Fed, a weaker USD, and mixed geopolitical news, Gold reaches a new record high near $4,180. This boost also lifts Silver and Platinum prices.
Meanwhile, Crude Oil rebounds, maintaining its recovery from the lowest levels since early May, though it lacks strong upward momentum. This could be due to hopes for lasting peace in the Middle East and concerns that Trump might ease sanctions on Iran.
Bitcoin (BTC) and Ethereum (ETH) both drop over 2.0% intraday, marking their first loss in three days as market sentiment weakens. This challenges the "Uptober" outlook, which had predicted a strong market for October, even though demand from corporate treasury firms and ETFs remains solid.
Meanwhile, Asia-Pacific equities rise, following Wall Street’s strong performance, boosted by easing U.S.-China tensions, hopes for a dovish Fed, and mixed updates on the U.S. shutdown. Today, earnings reports from top U.S. banks and a speech by Powell are expected to drive equity market activity.
After a busy start to the markets following bank holidays in Japan, the U.S., and Canada, traders are focused on Fed Chair Jerome Powell’s speech, as he didn’t address monetary policy or the economy in his last public appearance. Today’s speech will likely focus on these topics, and any hawkish remarks from Powell could support a U.S. Dollar rebound, challenging major currency pairs like EURUSD, GBPUSD, and USDJPY. AUDUSD, NZDUSD, and USDCAD may feel the biggest impact from a stronger USD, as will cryptocurrencies and crude oil. However, Gold is expected to stay strong, and U.S. equities could see further gains depending on Powell’s speech, upcoming earnings, and overall market sentiment.
May the trading luck be with you!
