Market sentiment is slightly positive early Thursday, driven by a few key developments like the dovish FOMC Minutes, news of a potential peace deal between Israel and Hamas, talks on reopening the U.S. government, and political news from France. It’s worth noting, however, that ongoing Ukraine-Russia jitters and cautious mood ahead of today’s speech from Federal Reserve (Fed) Chairman Jerome Powell, as well as no concrete plan to overcome the U.S. government shutdown, challenge the optimists.
The FOMC Minutes showed most Fed officials expect to cut rates further in 2025. While inflation risks are easing, concerns about employment risks have increased. The FOMC also raised its GDP growth projections for 2025–2028, though risks to the economy remain balanced, per the Minutes. Further, the Minutes also mentioned that a few Fed members also noted that the standing repo facility will help keep the federal funds rate within its target range.
Bloomberg also reported that hedge funds are betting on a stronger U.S. dollar toward the end of the year, with euro put option volumes rising sharply in December.
In U.S. politics, Senate Republicans are considering a piecemeal approach to reopen the government. Senate Majority Leader John Thune is thinking about bringing individual appropriations bills—like those funding the Pentagon and military pay—to a vote. This comes as bipartisan talks for a short-term funding measure are still stuck.
A major development during Wednesday’s U.S. session was the Phase 1 agreement between Israel and Hamas, which could help ease the war in Gaza. The deal involves a hostage exchange and a partial Israeli military pullback from Gaza. If all goes to plan, hostages could start being freed as soon as Monday.
Gold prices dropped ahead of the deal’s announcement but recovered to around $4,024 after it was revealed. Oil prices also eased on hopes the truce could hold, while the U.S. dollar weakened broadly.
Chinese markets reopened after the Golden Week holidays, and China’s Ministry of Commerce announced new export controls on rare-earth materials, requiring foreign approval for exports to protect national security.
In France, President Macron said he would name a new Prime Minister within 48 hours and is optimistic about passing a government budget by December 31. However, most lawmakers are against holding snap elections, which is putting some pressure on the euro. While there’s some hope, the situation could drag on for months.
In Japan, there’s increasing concern about possible intervention in the yen as USDJPY approaches the 155 level. Former Bank of Japan (BoJ) deputy governor Masazumi Wakatabe also said a rate hike this year is unlikely due to weak economic growth.
The Bank of England (BoE) warned that high valuations in AI-related tech stocks and the concentration of markets could lead to a sudden correction, which might hurt the economy. The central bank also raised concerns about rising public debt, geopolitical tensions, and potential threats to the Fed’s independence.
In the UK, housing and business sentiment dropped further in September, with worries about the upcoming budget. The Royal Institution of Chartered Surveyors (RICS) showed a slight improvement in house prices, but demand stayed weak. Business confidence hit a three-year low amid expectations of higher taxes in the November budget.
In Australia, the Melbourne Institute’s survey showed that consumer inflation expectations for October rose slightly to 4.8%.
Canada’s Prime Minister Justin Trudeau mentioned that some bilateral deals are coming alongside the USMCA and discussed future talks with former President Trump on the steel and auto sectors.
U.S. crude oil inventories increased by 3.715 million barrels, much higher than the expected 1.830 million barrels. This joined the easing geopolitical tensions surrounding Gaza to challenge the oil buyers.
U.S. stock markets saw new highs, with the S&P 500 and Nasdaq hitting record levels. AMD led the charge with a huge gain of 11.34%, bringing its price up 43.58% over the past week. Other major gainers included Dell (+9.04%) and SMCI (+6.56%).
In other news, the U.S. government approved billions in Nvidia AI chip exports to the UAE under a new deal. This is the first major tech deal with the UAE since Trump was in office and signals a push to strengthen ties with Gulf countries. Also on the positive side was news that the Trump administration also ruled out tariffs on generic drugs, easing fears of broad levies on U.S. medicines. This marks a shift from previous plans to onshore all essential drug production.
Cryptocurrencies recovered amid upbeat sentiment and news that global payment giant Square announced new tools that allow merchants to accept Bitcoin payments and convert sales into Bitcoin without any fees, starting November 10. The company also called for a tax exemption on small crypto purchases to help make Bitcoin more practical for daily transactions.
On Thursday, the U.S. Dollar Index (DXY) broke its three-day winning streak and retreated from a two-month high. This allowed EURUSD to bounce off a six-week low, marking its first gain in four days. GBPUSD also saw a corrective bounce after two days of losses. USDJPY eased from its recent high, while AUDUSD posted a two-day winning streak. NZDUSD rebounded from a six-month low, while USDCAD dropped after two consecutive days of losses. Crude oil had its first loss in five days, and cryptocurrencies reversed the gains from the previous day.
EURUSD rebounds from its lowest point since mid-August, breaking a three-day losing streak, as easing political concerns in France, overall positive sentiment, and a pullback in the U.S. dollar help lift the pair. However, caution ahead of the European Central Bank's (ECB) upcoming meeting and Fed Chair Powell's speech sparks a corrective bounce in EURUSD.
GBPUSD rebounds from a one-week low, ending a two-day losing streak, as mixed UK data and political discussions compete with a pullback in the U.S. dollar, giving buyers a chance to test the pair. Meanwhile, USDJPY holds near an eight-month high as fears grow over potential Bank of Japan (BoJ) intervention to support the yen. The pair also faces consolidation ahead of key upcoming data and events.
Despite the U.S. dollar's retreat and improved market sentiment, AUDUSD posts a two-day winning streak, while NZDUSD breaks its two-day losing streak, bouncing off a six-month low. Meanwhile, USDCAD ends its two-day uptrend as expectations for a U.S.-Canada trade deal compete with a pullback in crude oil prices, easing geopolitical tensions, and market positioning ahead of today’s key data and events.
Gold halts a four-day losing streak after reaching a fresh all-time high, while crude oil posts its first daily loss in five days, despite improved market sentiment. WTI crude also faces pressure from a surprisingly large weekly inventory build. However, the pullback lacks strong downside momentum, keeping buyers optimistic.
Cryptocurrencies struggle to maintain the previous day's rebound, despite a softer U.S. dollar, as market participants await key data and events. The digital assets are overlooking positive industry news in the meantime.
Meanwhile, Asia-Pacific equities edge higher as China returns from its Golden Week holidays, with news of more stimulus and other risk-positive developments boosting sentiment.
In conclusion, while U.S. data remains awaited, the market’s direction in the near term will hinge on key speeches from central bank officials, including Fed Chairman Jerome Powell, and the ECB’s Monetary Policy Meeting Minutes. Additionally, developments around the U.S. government shutdown, Trump’s political moves, and ongoing geopolitical tensions in Gaza and Ukraine will be crucial to monitor.
If risk-off factors fade, the U.S. Dollar Index could continue its retreat, which may support gold, cryptocurrencies, and equities in maintaining their recent gains. However, a pullback in EURUSD and USDJPY remains likely, while other major currencies may sustain their corrective bounce. With all these factors in play, the market outlook remains dynamic and volatile, making it a crucial period for traders to watch closely.
May the trading luck be with you!
