Market sentiment held firm early Thursday after early reports from the much-anticipated trade talks between U.S. President Donald Trump and Chinese President Xi Jinping signaled progress. Optimism was further supported by positive comments from China’s Premier Li Qiang, who emphasized new stimulus measures to stabilize growth.
However, geopolitical uncertainty and the Federal Open Market Committee’s (FOMC) hawkish rate cut, driven by remarks from Federal Reserve (Fed) Chairman Jerome Powell, limited overall optimism. Investors also stayed cautious ahead of the European Central Bank (ECB) monetary policy decision and key U.S. economic data.
The Trump–Xi meeting marked their first in-person talks since 2019 and followed lower-level negotiations in Malaysia. U.S. Treasury Secretary Scott Bessent confirmed that both sides reached a preliminary trade framework, setting the stage for a possible truce and deadline extensions. Still, given the short-term nature of past agreements, any deal may prove temporary.
As the meeting concluded, Trump announced several outcomes. China will immediately resume soybean purchases, step up efforts to combat the fentanyl crisis, and reduce fentanyl-related tariffs. Both sides also discussed semiconductor cooperation, with China set to engage with Nvidia and other U.S. chipmakers, though Nvidia’s Blackwell chips were not included. The rare earths dispute was resolved, and a U.S. official confirmed China will maintain steady rare earth exports.
While the tone was generally positive, Trump noted that “not everything was discussed,” signaling that further talks are likely.
Following the news, U.S. futures rebounded, with S&P 500 futures rising 0.1%.
Premier Li Qiang separately stressed the need to balance development with security, strengthen risk-prevention systems, and safeguard long-term growth through policy stability.
The Federal Reserve cut interest rates by 0.25 percentage points, as widely expected. The decision revealed divisions within the committee, as Fed Governor Miran supported a deeper 50-basis-point cut, while Kansas City Fed President Schmid preferred no change. Powell said another rate cut in December is “far from assured” and will depend on upcoming data. He described the overall outlook as mixed but stable, with inflation still somewhat above target. Market expectations for a December cut have fallen to 65%.
BlackRock’s Head of Fixed Income, Rick Rieder—considered a potential successor to Powell when his term ends in May 2026—suggested the Federal Reserve could stay on hold until June 2026. Following the FOMC outcome, the USD and Treasury yields rose, while stocks slipped.
Corporate earnings added some support to sentiment, with Microsoft, Meta, and Alphabet all beating quarterly revenue and profit expectations.
In other developments, Trump announced that the Department of War will resume nuclear weapons testing for the first time since 1992, following Russia’s claim of testing a tsunami-generating nuclear weapon. He also said South Korea will build a nuclear-powered submarine in Philadelphia’s shipyards, though such announcements often reflect preliminary frameworks rather than finalized deals.
Meanwhile, the U.S. Senate voted 50–46 to end the national emergency declaration that enabled tariffs on Canada, marking a second rebuke of Trump’s trade policies in as many days. However, the measure is unlikely to advance in the Republican-controlled House of Representatives.
The Bank of Japan (BOJ) kept its short-term policy rate at 0.5%, maintaining an accommodative stance as it weighs rising inflation expectations against global and trade-related risks. The BOJ expects moderate growth amid weaker external demand but foresees a steady rise in wages and prices. Its quarterly outlook projects inflation to gradually reach the 2% target by fiscal 2027, with real interest rates remaining deeply negative.
In New Zealand, Business Confidence improved to 58.1% in October 2025 from 49.6% previously.
The Bank of Canada (BoC) cut interest rates by 0.25% to 2.25%, with Governor Tiff Macklem citing trade uncertainty, U.S. tariffs, and persistent inflation pressures. Macklem acknowledged that Canada faces a “structural productivity crisis” but said the BoC stands ready to act if the outlook changes materially. The Canadian Dollar strengthened to a one-month high following the announcement.
Crude oil inventories fell sharply by 6.858 million barrels, compared to expectations of a 0.211 million decline, pushing prices up 0.3% to $60.38 per barrel on Wednesday before easing on Thursday. Gold attempted to recover from a three-week low, ending its four-day losing streak.
The U.S. Dollar Index (DXY) reversed its post-Fed gains, allowing major currencies and Antipodeans to rebound, led by EURUSD’s rise. USDJPY remained subdued, gold prices firmed, and USDCAD extended a four-day losing streak despite the BoC rate cut. Bitcoin (BTCUSD) and Ethereum (ETHUSD) both fell for a fourth straight day, while Asia-Pacific equities edged higher. That said, Wall Street benchmarks refreshed all-time highs before ending the day’s trading on a mixed note, mainly due to the FOMC-linked moves.
EURUSD reversed its post-FOMC loss, marking its first daily gain in six sessions and the biggest in two weeks, as positive developments from the Trump–Xi meeting boosted market optimism and weakened the U.S. Dollar. The Euro also gained support from expectations that the European Central Bank (ECB) will maintain its policy rate for a third consecutive meeting, signaling a possible end to the rate-cut cycle. However, EURUSD may face headwinds if the ECB highlights persistent economic uncertainty and ongoing tensions with China, the U.S., and Russia, even while keeping rates unchanged.
GBPUSD rebounded from a 5.5-month low, ending its two-day losing streak amid broad U.S. Dollar weakness and renewed market optimism following the U.S.-China trade talks. USDJPY, however, remained directionless as the Bank of Japan’s decision to keep rates unchanged was accompanied by mixed signals from the central bank.
The risk-on sentiment and China’s stimulus announcements provided strong support to AUDUSD, NZDUSD, and USDCAD. AUDUSD and NZDUSD reversed their previous day’s losses, while USDCAD extended its four-day decline, erasing Thursday’s late rebound from a 5.5-month low, even after the Bank of Canada (BoC) cut rates by 0.25% and cited economic strain. Meanwhile, New Zealand Business Confidence data and the pullback in crude oil prices—Canada’s key export—had little market impact.
Crude oil reversed the previous day’s corrective bounce following an upbeat U.S. Energy Information Administration (EIA) Weekly inventory report, which showed a higher-than-expected draw in crude oil stockpiles. Meanwhile, Gold prices also rebounded from a three-week low, snapping a four-day losing streak as cautiously optimistic markets and a softer U.S. Dollar (USD) attracted Gold buyers.
Bitcoin (BTCUSD) and Ethereum (ETHUSD) both fell for a fourth consecutive day despite a softer U.S. Dollar (USD), as crypto market sentiment remained cautious and October gains were pared amid uncertainty over a potential U.S. government shutdown.
Wall Street stocks were mixed, with the USD and Treasury yields rising after Federal Reserve (Fed) Chair Jerome Powell indicated that another rate cut is “far from assured.” U.S. stocks oscillated near record levels on Wednesday as the Fed’s actions supported the job market but cautioned that further assistance is not guaranteed.
The S&P 500 finished virtually flat, edging down less than 0.1%, the Dow Jones Industrial Average dipped 73 points, or 0.2%, and the Nasdaq Composite rose 0.5%, all following recent all-time highs.
Microsoft exceeded earnings and revenue forecasts, driven by continued strength in Azure, while Meta reported another strong quarter, surpassing revenue and profit expectations. Alphabet also posted better-than-expected Q3 earnings and revenue.
After the initial market reaction to the Trump-Xi talks and the Bank of Japan (BoJ) decision, investors will focus on German and Eurozone Q3 GDP, along with a range of mid-tier economic data from Europe and the U.S., ahead of the European Central Bank (ECB) meeting and Q3 earnings from Apple, Amazon, Eli Lilly, and Mastercard.
While the ECB is expected to maintain its current monetary policy for a third consecutive meeting, a cautious tone from ECB President Christine Lagarde could weigh on EURUSD, allowing the U.S. Dollar (USD) to pare gains, particularly if U.S. data are positive.
Cryptocurrencies may face continued pressure, equities could rise, and other major currencies might trade mixed unless further positive surprises emerge.
Conversely, any escalation in geopolitical risks—such as a potential U.S. nuclear test, tensions in Gaza, or Trump’s comments on Russia-Ukraine—could bolster the USD, put additional pressure on risk assets, and support Gold in defending recent gains.
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