Market sentiment is modestly positive early Friday, despite mixed signals and uncertainty over a possible U.S. government shutdown and caution ahead of key U.S. consumer sentiment data. Optimism is driven by hopes that U.S. inflation data will still be released in October even if the shutdown continues, combined with reports of an end to the Israel‑Hamas war and dovish comments from the Federal Reserve.
Still, Fed Chair Jerome Powell’s silence, strong U.S. consumer spending in July, and remarks by President Donald Trump have kept traders alert and supported the U.S. Dollar. Delta Airlines noted consumers resumed spending in July after a pause since April and Liberation Day. Their CEO expects further acceleration, raising the risk of renewed inflation and potential disappointment over 103 basis points of rate cuts currently priced in through next October.
The U.S. Senate won’t reconvene until Tuesday evening, locking in at least four more days of shutdown unless recalled earlier. The Bureau of Labor Statistics (BLS) confirmed it plans to publish the September Consumer Price Index (CPI) despite the shutdown. Data collection was completed before October 1, allowing limited staff to resume processing. The CPI may not be published by October 15 as planned, but officials aim to release it before the Federal Reserve’s October 28–29 meeting.
Among Fed officials, Governor Michael Barr appeared more hawkish, saying he does not see tariff spillovers into services inflation and advocating caution given uncertainty in inflation and jobs. Fed’s Kashkari echoed Barr’s views. San Francisco Fed President Mary Daly said inflation has eased more than feared and expects further cuts. New York Fed President John Williams supported more rate cuts this year to help a cooling labor market, while emphasising the importance of Fed independence amid political pressure.
U.S. Treasury Secretary Bessent expects India to reduce Russian oil purchases and believes China will return to buying soybeans later in the season. He also said that without the shutdown, support for farmers would have been announced already.
The Trump administration proposes barring Chinese airlines from overflying Russia on all U.S. flights. Trump said he will make permanent cuts to Democratic programs during the shutdown, plans to visit the Middle East soon, and intends to work with Iran toward peace. He also argued that tariffs are essential for national strength.
The Hamas leadership claims a permanent ceasefire, and the war has ended today. The U.S. will deploy 200 troops—none entering Gaza—to help anchor a new Gaza stability force, working with Egypt, Qatar, Turkey, and the UAE to prevent new clashes and support Israel‑Arab normalization talks.
In equities, a few stocks powered through on an otherwise weak day. Nvidia hit fresh record highs as investors piled into AI names. The Dow shed 43.36 points (–0.52%) to 46,358.42, the S&P fell 18.61 points (–0.28%) to 6,735.11, and the NASDAQ dropped 18.75 points (–0.08%) to 23,024.63.
In Japan, prime ministerial hopeful Sanae Takaichi pledged immediate stimulus and a gasoline tax cut, sparking fears she may threaten the Bank of Japan’s independence. She also said she would moderate yen weakness. Japan’s September Producer Price Index jumped 2.7 % year over year (vs. 2.5 % expected), but the yen’s reaction was muted. Finance Minister Shunichi Kato intervened verbally to discourage rapid currency movements.
The U.S. and Japan reiterated their trade agreement, with negotiators Ryosei Akazawa and Howard Lutnick reaffirming plans to deepen strategic economic ties.
Reserve Bank of Australia (RBA) Governor Michelle Bullock said services inflation remains sticky and the central bank remains data‑driven. In New Zealand, the September Manufacturing PMI held steady at 49.9.
Against this backdrop, the U.S. Dollar Index (DXY) surged to a 10‑week high, triggering a needed gold pullback. Gold saw its largest drop in two months, ended a four‑day win streak, and reversed from record highs. It remains under pressure early Friday as markets consolidate.
EURUSD dropped to a two‑month low in its four‑day slide before a modest bounce. USDJPY pulled back from an eight‑month high, ending a six‑day climb. GBPUSD lost most in five weeks, testing its weakest since early August before edging up. AUDUSD held near a two‑week low, NZDUSD halted a three‑day fall after setting its lowest since April, and USDCAD reached a six‑month high as the U.S. Dollar strengthened and crude oil retreated. U.S. equities reversed previous gains and closed lower, while cryptocurrencies also slipped due to a stronger U.S. Dollar and market consolidation.
EURUSD snaps a four-day losing streak, rebounding from a two-month low as markets normalize after sharp moves. The recovery is also linked to easing political tensions in France and a U.S. Dollar pullback ahead of October’s U.S. consumer sentiment and inflation expectations data.
GBPUSD also rebounds from its lowest since early August, halting a three-day slide as the U.S. Dollar retreats. UK Prime Minister Keir Starmer’s visit to India and progress on a trade deal with the U.S. support the British Pound, though concerns over the UK’s November budget and mixed signals from the Bank of England still weigh on sentiment.
USDJPY retreats from its highest level since February, as the U.S. Dollar weakens alongside Japan’s verbal FX intervention, upbeat Producer Price Index data, and positive comments from U.S. and Japanese trade officials.
AUDUSD rebounds from a one-week low as Reserve Bank of Australia Governor Michele Bullock’s upbeat comments, a softer U.S. Dollar, and slight market optimism support the recovery. NZDUSD also bounces from a six-month low, helped by an unchanged New Zealand Manufacturing PMI and doubts that the Reserve Bank of New Zealand will cut rates in November after a deeper-than-expected cut in October. Meanwhile, USDCAD fluctuates near a six-month high after a three-day rally, as weaker crude oil prices offset the U.S. Dollar pullback and keep traders cautious ahead of Canada’s employment data.
Gold saw a long-awaited pullback on Thursday and remained under pressure early Friday as the U.S. Dollar strengthened amid mixed risk sentiment and caution ahead of key U.S. data. The retreat also reflects market consolidation after gold hit record highs over the previous three-day rally. China's return and profit-booking likely added to XAU’s overdue correction.
WTI crude oil slips from a one-week high after a four-day rally, pressured by easing Gaza tensions, a stronger U.S. Dollar, and higher-than-expected U.S. crude oil inventories. Ongoing Ukraine-Russia risks and uncertainty over the Gaza ceasefire remain, as global policymakers fear a possible new Israeli ground invasion early next week under the latest agreement.
Cryptocurrencies also retreat, weighed down by the firmer U.S. Dollar, lack of fresh catalysts, and weak performance from firms holding crypto in their reserves.
Equities decline as economic concerns, U.S. government shutdown uncertainty, and strong consumer spending raise inflation fears and threaten the Federal Reserve’s dovish outlook. AI stocks, however, continue to rise on Nvidia-driven momentum.
Canada’s employment data for September and October’s U.S. Michigan Consumer Sentiment are in focus, but markets will keep a closer eye on headlines around the U.S. government shutdown, Federal Reserve’s policy signals, geopolitical developments in Ukraine and Gaza, and Donald Trump’s tariff and political moves.
With sentiment still mixed, strong U.S. data could help the U.S. Dollar hold its recent gains, potentially deepening the ongoing pullback in gold, cryptocurrencies, and equities.
Overall, markets remain on edge, awaiting clearer direction from both data and geopolitics.
May the trading luck be with you!
