Market sentiment remains positive early on Monday as traders prepare for a busy week, including major events such as US-China trade talks, Federal Open Market Committee (FOMC) meeting, Bank of Canada (BoC) meeting, Bank of Japan (BoJ) meeting, European Central Bank (ECB) decision, and Australian Consumer Price Index (CPI) release. This optimism is supported by expectations of a dovish Federal Reserve, hopes for a US-China trade agreement during the October 30 meeting between President Donald Trump and President Xi Jinping, and several key announcements from China.
Over the weekend, both US and Chinese negotiators expressed positive outcomes after two days of trade talks in Malaysia. US Treasury Secretary Scott Bessent confirmed that China will resume large-scale soybean purchases and delay expanding its rare-earth export licensing by a year. He also noted that Trump and Xi are expected to finalize a broad trade deal during the APEC summit in South Korea on Thursday.
Following a key Communist Party policy meeting, the People’s Bank of China (PBOC) announced plans to expand the yuan’s global role, including increasing its use in trade, enhancing two-way financial market openness, and strengthening the offshore yuan market. The shift in tone, omitting previous cautious language, indicates Beijing's growing confidence in promoting the yuan as a global currency.
China’s industrial profits surged by 21.6%, the fastest growth since November 2023, up from 20.4% previously. Chinese Premier Li Qiang met with European Council President Antonio Costa and expressed China's willingness to work with the European Union to ensure bilateral relations stay on track. Costa also voiced concern over China’s export controls on critical raw materials and urged China to help end Russia’s war in Ukraine.
In a separate development, China is looking to build a “more stable and strategic partnership” with Australia. Premier Li Qiang made the statement during talks with Australian Prime Minister Anthony Albanese in Malaysia, signaling efforts to stabilize relations after years of trade and diplomatic tension.
Japan’s service inflation accelerated, with services producer prices rising 3.0% in September, up from 2.7% in August, which supports the Bank of Japan’s (BOJ) confidence ahead of its meeting. The BOJ is expected to hold its policy stance steady this week amid Japan’s new Prime Minister Sanae Takaichi and concerns over a US economic slowdown.
Gold trading is weaker in Asia, weighed down by positive US-China trade news, while the ECB's Luis Escriva suggests an extended policy pause as inflation reaches target levels and economic growth diverges.
In trade news, President Trump announced a 10% tariff increase on Canada, adding to existing tariffs.
Last week, the US Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) for September, reinforcing expectations of further rate cuts from the Federal Reserve, which supported market sentiment. Positive third-quarter earnings reports from companies like Procter & Gamble, Intel, GE Aerospace, and Coca-Cola contrasted with weaker results from Tesla and Netflix. However, rising tariffs on China and uncertainty around a potential meeting between Trump and Xi Jinping raised concerns. Geopolitical tensions also grew with Western sanctions on Russian oil companies, though Trump remains relatively friendly with the Kremlin.
Amid these events, the US Dollar Index (DXY) held steady after a positive week, while the risk-sensitive AUDUSD reached a two-week high. Gold dropped after its first weekly loss in 10 weeks, and cryptocurrencies saw slight gains. The EURUSD ended a three-day winning streak, the GBPUSD stopped its six-day losing streak, and the USDJPY rose for the seventh consecutive day. The NZDUSD also gained, while the USDCAD eased. Crude oil prices rose to recover from a pullback the previous day.
EURUSD ended the week lower, despite rising for three straight days, as it retreated today amid mixed EU-China news and dovish remarks from ECB officials. A cautious mood ahead of this week's FOMC and ECB meetings also weighed on EUR/USD prices, despite some optimism in the market.
In contrast, GBPUSD posted its first daily gain in seven days, driven by mixed moves in the US Dollar and speculation surrounding the UK's November budget, even without major UK data or news.
Meanwhile, USD/JPY surged to a two-week high, rising for the seventh consecutive day, supported by Japan's inflation and new leadership fueling concerns over the Bank of Japan's (BoJ) potential rate hike. However, traders remain cautious ahead of Thursday's BoJ meeting.
AUDUSD rises for the fourth straight day, reaching a two-week high, driven by hopes of easing US-China trade tensions and growing concerns about the Reserve Bank of Australia's (RBA) potential rate cut, following mostly negative Aussie data last week. Additionally, market positioning ahead of RBA Governor Michelle Bullock's upcoming policies supports the risk-sensitive pair.
NZDUSD follows the movement of its Aussie counterpart, posting daily gains, while USDCAD overlooks President Trump’s 10% tariff hike on Canada. The Canadian Dollar is supported by stronger crude oil prices, a key export, and market positioning ahead of this week’s FOMC and BoC monetary policy decisions.
Gold stays lower as bears target the key $4,045 support level, which includes the 21-day Exponential Moving Average (EMA) and an ascending support line from late August. The precious metal faces pressure from a stronger US Dollar and market consolidation of previous gains amid hopes for easing global tensions.
Meanwhile, crude oil posted its biggest weekly gain since early June, ending a three-week downtrend. This is fueled by China’s efforts to stabilize its economic transition and restore trade relations with major economies, along with discussions around Iran, Gaza, and Russia. However, rising inventories, OPEC+ supply increases, and concerns about higher output are putting pressure on oil prices.
Bitcoin (BTC) and Ethereum (ETH) extend their rally to a five-day winning streak, breaking a two-week downtrend with a positive weekly close. This is fueled by market optimism, institutional buying, and dovish Federal Reserve expectations.
Meanwhile, strong US Q3 earnings and optimism ahead of key corporate results are boosting sentiment, helping keep Asia-Pacific shares firm. This follows record highs and weekly gains in Wall Street benchmarks.
After an active start to a crucial week, traders can expect a quieter day ahead, with a speech from RBA Governor Michelle Bullock and mid-tier data releases from the US and Eurozone. The market may stay cautious ahead of this week’s major events, but the current trend could persist, supported by risk-on sentiment and the Fed's dovish stance. As a result, risk assets may continue to see gains, although the US Dollar could stay strong and test major pairs like AUDUSD, NZDUSD, and USDCAD.
May the trading luck be with you!
