Traders turned cautious on Wednesday after a strong previous day, as they focused on key events like the U.S. Federal Reserve's (Fed) monetary policy decision and the Bank of Canada’s (BoC) interest rate decision. This caution was compounded by geopolitical risks in the Middle East and mixed U.S. data, weighing on earlier optimism. The U.S. dollar firmed modestly against the euro and pound, while USD/CAD dropped for the third consecutive day, hitting a three-week low despite softer crude oil prices.
In Asia, most equities continued to rise, extending Wall Street's tech-driven rally. Market attention now turns to the Fed's decision and major earnings reports later in the week.
October 28 marked another historically strong day for U.S. stocks, but some late profit-taking emerged, likely due to Fed uncertainty.
U.S. President Donald Trump hinted at reducing tariffs on China related to fentanyl and discussed escalating federal intervention in cities facing unrest. Trump’s tariffs on Brazil are also under scrutiny, with some Republican senators joining Democrats to vote against his trade emergency.
In Israel, Prime Minister Netanyahu ordered military action in Gaza, while Hamas postponed the handover of an Israeli hostage’s body.
In China, the Chung Yeung Festival was observed, with Mainland China markets open but Hong Kong's stock exchange closed. This holiday caused lower liquidity, especially in China- and Hong Kong-linked instruments.
North Korea launched missiles, claiming them as part of its nuclear program. Japan saw brief yen volatility after U.S. Treasury Secretary Scott Bassent praised Japan’s Bank of Japan (BoJ) independence.
In the U.K., a sharp drop in food prices caused the first decline in shop prices in seven months, reinforcing expectations that the Bank of England may delay a rate cut. The market now sees a 65% chance of a rate cut in December.
The Australian dollar surged after Q3 inflation hit 3.2% year-on-year, driven by higher electricity prices. This strong inflation data diminished expectations for a Reserve Bank of Australia (RBA) rate cut in the near future.
The Reserve Bank of New Zealand (RBNZ) reported that financial conditions are improving, with falling interest rates and more favorable credit conditions. Meanwhile, oil inventories showed a larger-than-expected draw of 4 million barrels, lending support to oil prices.
In U.S. markets, tech stocks continued their rally, with the NASDAQ gaining 0.80%. Nvidia’s shares surged after its GTC Conference, bringing the company’s market cap to nearly $5 trillion. Earnings reports from Microsoft, Meta, and Alphabet are due tomorrow, and the Fed is expected to cut rates by 25 basis points.
U.S. stock indices closed at record highs: the Dow rose 161.70 points (+0.34%), the S&P 500 added 15.73 points (+0.23%), and the NASDAQ gained 190.04 points (+0.80%).
In the forex markets, the U.S. dollar bounced off a weekly low, snapping a two-day losing streak, while gold stalled its three-day downtrend and lingered at a three-week low. EURUSD snapped its five-day uptrend, and GBPUSD remained pressured at its lowest level since August 1. USDJPY stayed sidelined after breaking its seven-day uptrend. The AUDUSD posted a five-day uptrend, reaching a three-week high, while the NZDUSD lacked upside momentum despite rising to a three-week high.
Cryptocurrencies consolidate previous losses with mild gains, while the U.S. equities continued to set new all-time highs, but the Asian equities appear somewhat less strong.
Concerns over possible Ukrainian strikes on Russian oil facilities and mixed comments from European Central Bank (ECB) officials added to the U.S. dollar’s rebound, putting pressure on EURUSD after its five-day uptrend, especially with today’s FOMC meeting and Thursday’s ECB interest rate decision.
GBPUSD continued its decline from the previous day following weak UK inflation data, dropping to its lowest level since August 1. This movement also reflects trader uncertainty ahead of the UK’s November budget.
USDJPY showed typical volatility, initially falling to a five-day low before recovering. The early drop was likely tied to worries about the Bank of Japan (BoJ), supported by comments from U.S. Treasury Secretary Janet Yellen. However, the rebound likely resulted from the new Prime Minister’s dovish outlook and mixed economic data from Japan.
USDCAD ignored the softer crude oil prices, Canada’s main export, and fell for the third straight day, reaching a three-week low. This decline comes as markets prepare for today’s expected 0.25% rate cuts from both the Bank of Canada (BoC) and the Federal Reserve. The recent drop in USDCAD also doesn’t reflect the impact of Trump’s additional 10% tariffs on Canada or mostly negative data from Ottawa.
AUDUSD rose for the fifth consecutive day, hitting a three-week high, despite the USD’s rebound. This rally is supported by stronger market sentiment and hopes for China’s stimulus. In contrast, NZDUSD lacked momentum, held back by dovish signals from the Reserve Bank of New Zealand (RBNZ) and economic tensions in the Pacific. However, optimism from China and global economic growth is helping to support both Antipodean currencies.
Gold ended its three-day losing streak, holding at a three-week low, while crude oil stayed lower despite a larger-than-expected draw in U.S. API weekly crude inventories and news from Israel signaling a potential supply crunch. Gold’s profit-taking is driven by market hopes of overcoming the risk-negative factors that had previously pushed bullion prices to all-time highs.
Despite optimism and positive industry developments driving equities, cryptocurrencies lack upside momentum, despite snapping a two-day losing streak, as traders await fresh news that had previously boosted digital assets. The AI rally and strong Q3 earnings also pushed Wall Street benchmarks to new record highs, keeping buyers optimistic ahead of key earnings reports.
Looking ahead, the monetary policy decisions from the BoC and FOMC, along with mid-tier data from the U.S. and Europe, will make for a busy Wednesday. Key after-market Q3 earnings from Microsoft, Google, Meta, Caterpillar, Boeing, and Verizon will also be in focus.
Both the Fed and BoC are expected to announce 0.25% rate cuts, but their future guidance and rate statements will be critical. If the FOMC statement is dovish, the USD could weaken further, allowing risk assets to rise, potentially leading to a further decline in USDCAD and providing support for gold. Equities and crude oil might also gain, but while Wall Street may rally, crude oil may not see a strong rebound. Cryptocurrencies could see further recovery, and major currencies may stabilize. However, any hawkish surprise from the Fed could strengthen the USD and weigh on risk assets, particularly equities and the Antipodeans.
May the trading luck be with you!
