The risk sentiment remains mixed early Friday after a weak session, as traders reassess optimism over the U.S.-China trade deal “framework” following the first face-to-face meeting between U.S. President Donald Trump and Chinese President Xi Jinping since 2019. The meeting ended positively, boosting hopes for a more stable trade relationship. Additional support came from strong earnings by Apple and Amazon and expectations of new stimulus from China after softer official PMI data.
However, the U.S. Dollar and Treasury bond yields strengthened after hawkish comments from Federal Open Market Committee (FOMC) Chair Jerome Powell fueled speculation that the Federal Reserve will pause rate cuts in December. This pressured risk assets, while Gold snapped a four-day losing streak, rebounding from a two-week low and posting its biggest daily gain since October 20. The U.S. Dollar traded higher against major currencies, and Treasury yields reached new weekly highs.
U.S. stocks weakened as investors reacted negatively to the Federal Reserve’s stance and uncertainty in Washington regarding government funding and welfare programs. The Nasdaq fell 1.57% and the S&P 500 lost 1.0%, both closing at session lows. In after-hours trading, Apple shares rose 5% and Amazon surged 13% after stronger-than-expected earnings, offering some optimism for Friday’s session.
Donald Trump described his meeting with Xi Jinping as “a 12 out of 10,” noting that 155% tariffs had been avoided. Total tariffs on imported goods are expected to fall to around 47% from 57% after a 10% cut related to fentanyl cooperation. China agreed to resume purchases of soybeans, sorghum, and other farm products and to maintain open trade in Rare Earth, Critical Minerals, and Magnets. However, questions remain about whether the “framework” will lead to consistent long-term policy.
Elsewhere, the Trump–Korea trade deal is expected to boost the Kospi while pressuring the won due to U.S. investment outflows. The agreement reduces tariff uncertainty for Korean exporters but introduces steady foreign exchange outflows, which may weigh on the won. Autos, shipbuilders, and chipmakers are likely to benefit most from the tariff cuts.
The European Central Bank (ECB) kept its deposit rate unchanged, as expected, but ECB President Christine Lagarde said services continue to expand, driven by digital growth, while manufacturing remains constrained by tariffs. She highlighted that the ECB remains data-dependent and is not pre-committing to a specific rate path.
After the ECB meeting, reports indicated policymakers are preparing for a December debate on inflation and interest rates. Some suggest that a 2028 inflation projection below 2% could justify discussing rate cuts, while others caution against reacting to minor forecast deviations.
In Japan, the Bank of Japan kept rates unchanged. Governor Kazuo Ueda said there is no fixed schedule for the next rate hike, easing market concerns over an early tightening. He noted Japan’s moderate recovery, supported by easy monetary policy, though growth remains limited by trade slowdowns and weak overseas demand.
Early Friday, economic data showed Japan’s jobless rate steady at 2.6%, Retail Sales up 0.5% year-on-year, and Industrial Production rising 2.2% month-on-month in September. Tokyo inflation accelerated to 2.8%, strengthening expectations for a potential Bank of Japan rate hike in early 2026, although slow service-sector inflation suggests any tightening will be gradual. Finance Minister Satsuki Katayama warned against “one-sided, rapid” yen moves, signaling concern over currency weakness.
China’s official October Manufacturing PMI came in at 49.0 (expected 49.6), marking a seventh straight month of contraction and a six-month low, while the Services PMI stood at 50.1 (expected 50.0). China also announced an additional 200 billion yuan in new local bond quotas to boost investment.
In Australia, the third-quarter Producer Price Index rose 1.0% quarter-on-quarter and 3.5% year-on-year, while September Private Sector Credit increased 0.6% month-on-month, in line with expectations.
Reserve Bank of New Zealand Monetary Policy Committee member Prasanna Gai said U.S. tariffs have delivered a negative demand shock to New Zealand’s small, trade-dependent economy, worsening existing growth headwinds.
Against this backdrop, the U.S. Dollar Index (DXY) remains near a three-month high, eyeing its second consecutive weekly gain. This strength pressures Gold, which is on track for a second weekly decline after Thursday’s rebound. U.S. Treasury bonds are also set for a weekly gain following two days of increases, limiting Wall Street’s rally and weighing on major currencies, including EURUSD, GBPUSD, and the Antipodeans. USDJPY trades near its highest level since February, AUDUSD and NZDUSD extend three-day losing streaks, and USDCAD struggles to build on its biggest daily rise in three weeks after ending a three-day decline. West Texas Intermediate (WTI) crude oil remains under pressure, while Bitcoin (BTC) and Ethereum (ETH) have paused their four-day declines but still head for weekly losses.
Despite early Friday’s pause, supported by the U.S. Dollar’s consolidation, EURUSD and GBPUSD are both set for a second straight weekly loss, with GBPUSD leading the decline, while USDJPY is on track for a second weekly gain. The European Central Bank’s (ECB) decision to keep policy unchanged failed to support the Euro, as expectations grow for a possible rate cut in December amid a stronger U.S. Dollar and a hawkish stance from the Federal Open Market Committee (FOMC). Meanwhile, uncertainty over upcoming UK economic data and caution ahead of the November UK budget continue to pressure GBPUSD. USDJPY remains firm despite mostly positive Japanese data, as the Bank of Japan’s (BoJ) inaction and the arrival of new political leadership have raised doubts about future rate hikes.
Despite a broadly stronger U.S. Dollar and mixed market sentiment, AUDUSD remains on track for weekly gains, though the advance is modest. Similarly, USDCAD is heading for a second straight weekly loss as the Bank of Canada’s (BoC) hawkish rate cut and optimism over U.S.-Canada trade talks offset the impact of weaker crude oil prices, a key Canadian export. Meanwhile, NZDUSD is set for its first weekly decline in three weeks, pressured by risk aversion, disappointing New Zealand data, and dovish remarks from Reserve Bank of New Zealand (RBNZ) officials, despite support from China’s stimulus efforts and optimism over the Sino-American trade deal.
Elsewhere, West Texas Intermediate (WTI) crude oil remains on track for both weekly and monthly losses amid concerns over weak demand and expectations of increased supply if the Russia-Ukraine and Gaza conflicts come to an end. Additionally, worries over China’s economic outlook and the Organization of the Petroleum Exporting Countries Plus (OPEC+) production cuts continue to pressure prices, despite recent declines in weekly oil inventories.
Gold remains on track for a second straight weekly loss despite a strong rebound the previous day, as a firmer U.S. Dollar and higher Treasury bond yields continue to pressure the precious metal. Easing trade and political tensions, along with reduced expectations of further dovish action from the Federal Reserve, have also added to the downside. However, Gold is still set for a third consecutive monthly gain. The latest World Gold Council (WGC) report for the third quarter (Q3) highlighted robust global demand for Gold, supported by elevated prices, geopolitical and trade uncertainties, and expectations of softer interest rates ahead.
Despite overall market optimism, cryptocurrencies remain under pressure as higher U.S. Treasury bond yields and a stronger U.S. Dollar weigh on risk assets, erasing the previous week’s gains and signaling a potential monthly loss. Recent optimism around possible XRP and Solana Exchange-Traded Funds (ETFs) has failed to improve sentiment, as ETF demand continued to decline in late October.
Meanwhile, U.S. equities paused on Thursday after recently hitting all-time highs driven by a tech rally. The pullback was likely due to firmer bond yields and details from the latest third-quarter (Q3) earnings, which appeared strong at first glance but revealed concerns about U.S. tariffs and weaker demand from China. Still, Wall Street benchmarks remain on track for solid weekly and monthly gains.
With the week’s major data and events already out, traders will focus on key risk events for market direction, paying close attention to trade and political developments. Also in focus are third-quarter (Q3) earnings from Exxon Mobil, AbbVie, and Chevron, scheduled before U.S. markets open on Friday.
Given the market’s recent hawkish bias toward the Federal Reserve and mixed sentiment over the U.S.-China trade deal, the U.S. Dollar is likely to remain firm, putting pressure on major currencies, commodities, and cryptocurrencies. Equities and Gold, however, may trade mixed amid ongoing market indecision.
May the trading luck be with you!
