Market sentiment remained cautious early Friday as strong United States economic data cast doubt on expectations for a dovish Federal Reserve. This came alongside escalating trade war concerns and heightened geopolitical tensions, while investors awaited the release of the August Core Personal Consumption Expenditure (Core PCE) Price Index, the Federal Open Market Committee’s preferred inflation measure, as well as global updates on efforts to end the wars in Ukraine and Gaza.
On the economic front, Personal Consumption Expenditure (PCE) Prices for the second quarter (Q2) rose slightly to 2.1% quarter-over-quarter (QoQ), exceeding both the forecast and the prior reading of 2.0%. Core PCE, which excludes food and energy, also rose to 2.6% QoQ in Q2, up from 2.5%. The final reading of Gross Domestic Product (GDP) growth for Q2 was revised significantly higher to 3.8%, compared to the earlier estimate of 3.3%. Initial Jobless Claims for the week ending September 23 fell to 218,000, an eight-week low, beating expectations of 235,000 and the previous revised figure of 232,000.
Durable Goods Orders for August surged by 2.9% month-over-month (MoM), a three-month high that sharply outperformed the expected decline of 0.5% and the prior revised reading of -2.7%. Core Durable Goods Orders, which exclude transportation, rose by 0.4% MoM, above the flat forecast but below the previous revised figure of 1.0%. Preliminary data for the August Goods Trade Balance showed a narrower trade deficit. At the same time, Wholesale Inventories fell by 0.2% MoM, missing expectations for a 0.1% increase and hitting a three-month low.
In the policy sphere, several Federal Reserve officials gave mixed signals that further confused markets. San Francisco Fed President Mary Daly stated that the inflation impact of tariffs has been smaller than anticipated. Dallas Fed President Lorie Logan suggested that the central bank may shift away from its reliance on the federal funds rate. Chicago Fed President Austan Goolsbee said the labor market remains broadly stable but is showing mild signs of cooling. Fed official Schmid noted that the central bank is close to meeting its policy goals but must remain forward-looking. Meanwhile, Fed Governor Stephen Miran expressed concern that tariffs may increasingly fuel inflation.
In Washington, President Donald Trump signed an executive order approving a $14 billion deal to allow TikTok to continue operating in the United States, pending regulatory approval from Beijing. Under the deal, ByteDance will hold less than 20%, while Oracle, Silver Lake, and MGX Fund will jointly control around 45%, and existing ByteDance investors will retain 35%.
Shortly after, Trump unveiled a new wave of tariffs set to take effect on October 1. These include 100% tariffs on pharmaceuticals—with exemptions for companies building U.S. plants—50% tariffs on kitchen cabinets and bathroom vanities, 30% on upholstered furniture, and 25% on heavy trucks. The announcement hit pharmaceutical stocks. In equity markets, Japan’s TOPIX index hit a record high, while the Nikkei underperformed due to weakness in technology stocks.
Geopolitical tensions intensified as South Korea fired warning shots at a North Korean commercial vessel that crossed the disputed Northern Limit Line near Baengnyeong Island.
In Europe, the European Commission is preparing to impose tariffs ranging from 25% to 50% on steel and related products imported from China, according to German newspaper Handelsblatt, citing senior European Union officials. Reuters confirmed the report, though further details remain unclear.
In Japan, the government revised its July real wage data to show a 0.2% decline, compared to an earlier estimate of a 0.5% increase. Nominal wages also slowed to 3.4% year-over-year (YoY), down from 4.1%. This marked the seventh consecutive month of contracting inflation-adjusted pay, further complicating the Bank of Japan’s case for future interest rate hikes.
Inflation data from Tokyo for September 2025 also came in softer than expected. The headline Consumer Price Index (CPI) rose by 2.5% YoY, below the expected 2.8% and the previous reading of 2.6%. CPI excluding fresh food rose by 2.0% YoY, below both the 2.8% forecast and the prior 2.5%. CPI excluding fresh food and energy, a key core inflation measure, also came in at 2.5% YoY, missing the 2.9% forecast and falling from 3.0%. These figures have eased pressure on the Bank of Japan to tighten policy further. Separately, Japan announced a new Japan Bank for International Cooperation (JBIC) initiative, which will channel 550 billion U.S. dollars into U.S.-bound investments under a bilateral trade agreement.
Japan’s chief tariff negotiator Akazawa declined to comment directly on Trump’s new tariff plan but confirmed that the United States has agreed not to apply higher tariffs on Japanese pharmaceuticals or semiconductors than it does on similar goods from other countries. Japan will continue to evaluate the implications of the U.S. measures and how they relate to existing agreements.
In New Zealand, the ANZ-Roy Morgan Consumer Confidence Index rose to 94.6 in September from 92.0 in August. This followed dismal second-quarter GDP data, which showed a 0.9% QoQ contraction, far worse than the expected 0.3% decline. The weak performance has strengthened expectations for interest rate cuts by the Reserve Bank of New Zealand (RBNZ). A 25 basis point cut is now widely anticipated at the next policy meeting on October 8, and some analysts are even calling for a 50 basis point reduction. Anna Breman has been appointed as the next RBNZ Governor and will take office on December 1. She will be involved in two meetings before then, scheduled for October 8 and November 26.
In the U.S. stock market, major indices fell for a third straight day. Beyond macroeconomic data and tariff headlines, investors focused on developments at Intel Corporation. The company is working to form strategic alliances with Apple Inc. and Taiwan Semiconductor Manufacturing Company (TSMC) as part of its recovery plan. The U.S. government has acquired a 10% stake in Intel and is encouraging other tech firms to support the effort. SoftBank Group has committed 2 billion U.S. dollars, while Nvidia Corporation has pledged 5 billion U.S. dollars to the initiative.
In currency markets, the U.S. Dollar Index (DXY) surged to a three-week high, briefly pulling down gold prices before the precious metal recovered and ended higher on Thursday. Gold eased again early Friday. Major currencies continued to struggle, with the Australian dollar (AUD) and New Zealand dollar (NZD) declining the most against the U.S. dollar, followed by the euro (EUR) and the British pound (GBP). The U.S. dollar to Japanese yen pair (USDJPY) pulled back from an eight-week high, ending a two-day rally, while the U.S. dollar to Canadian dollar pair (USDCAD) fluctuated near its highest level since May 20, halting a four-day uptrend. Crude oil prices also paused their three-day rally near a three-week high, and cryptocurrencies attempted to recover after suffering sharp losses the day before.
EURUSD and GBPUSD both paused their two-day losing streaks, bouncing modestly from their lowest levels since early September and August, respectively. The rebound appears driven by market positioning ahead of the upcoming Federal Reserve inflation data. However, weak fundamentals in Europe, ranging from soft economic data to ongoing geopolitical and trade concerns, continue to weigh on the euro. Similarly, GBPUSD remains under pressure due to disappointing UK Purchasing Managers’ Index (PMI) figures, a sluggish housing market, and growing uncertainty surrounding the government’s upcoming Autumn budget.
Meanwhile, USDJPY pulled back from its highest level since August 1, ending a two-day rally. This retreat comes despite soft Japanese wage and inflation data, likely due to former Bank of Japan officials advocating for further rate hikes and optimism over recent U.S.-Japan trade agreements.
AUDUSD and NZDUSD both paused their three-day losing streaks after hitting their lowest levels since September 5 and April 11, respectively. The sharper decline in NZDUSD overlooked slightly positive domestic data, as markets remained focused on concerns over a potential rate cut by the RBNZ, following the weak second-quarter GDP figures noted earlier.
Meanwhile, USDCAD posted its first daily loss in five sessions, though the decline was modest, as the pair hovered near its highest level since May 20. The Canadian dollar struggled to benefit from stronger crude oil prices—Canada’s key export—amid a broadly stronger U.S. dollar, lingering dovish sentiment around the Bank of Canada (BoC), and mixed signals regarding U.S.-Canada trade relations and recent tensions between Canada and China over trade negotiations.
Gold remains steady around $3,745 after retreating for three straight days from its all-time high near $3,791. The recent pause is likely driven by month-end positioning, a stronger U.S. dollar, and overbought technical conditions. Still, strong physical demand from China, India, and major central banks, along with gold’s traditional safe-haven appeal, continues to support bullish sentiment. If today’s U.S. data comes in weaker, gold buyers may attempt another push toward the $3,800 mark.
WTI crude oil remains steady at a three-week high after a three-day rally, with prices consolidating despite a stronger U.S. dollar. The resilience in oil appears driven by escalating geopolitical tensions and skepticism that any potential OPEC+ output increase will be enough to curb demand, especially as stimulus efforts in China continue to boost energy consumption.
Meanwhile, Bitcoin (BTC) posted its steepest drop in six weeks, hitting a three-week low, while Ethereum (ETH) saw its biggest daily decline in a month as it slipped to a seven-week low. The sharp fall in major cryptocurrencies was fueled by month-end positioning, a firmer U.S. dollar, and mixed industry developments, although a modest corrective bounce followed.
Looking ahead, the Bank of England’s Quarterly Bulletin and remarks from mid-tier central bank officials may offer some interim direction to markets ahead of the U.S. Core Personal Consumption Expenditure (Core PCE) Price Index release, the Federal Open Market Committee’s preferred inflation gauge. With recent U.S. data showing resilience, the U.S. dollar remains poised for further gains, which could weigh on gold, equities, and cryptocurrencies.
Market expectations point to a slight cooling in the monthly Core PCE Price Index to 0.2% month-over-month (MoM) from 0.3%, while the year-over-year (YoY) rate is seen holding steady at 2.9%. However, any surprise uptick in the broader PCE Price Index or unexpected strength in the headline figures could reinforce U.S. dollar strength and extend pressure on risk assets.
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