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- The US dollar weakened following dovish remarks from the Fed and renewed trade tensions between the US and China, though markets remain hopeful for de-escalation ahead of the upcoming meeting.
- The British pound stabilized despite soft UK labor market, while the Australian and New Zealand dollars declined amid trade concerns and diverging central bank policies.
- Meanwhile, gold and silver extended their rally to record highs, supported by strong safe-haven demand.
Global markets remain clouded by uncertainty, as renewed tensions between the US and China sustain safe-haven demand for precious metals. Meanwhile, mixed economic data from major economies has weighed on the British pound as well as the Australian and New Zealand dollars.
Alongside these factors, political turmoil continues in both the US, which is still facing a government shutdown, and in Japan following coalition disputes. These factors continue to fuel volatility across global financial markets.
US Dollar Falls on Dovish Fed and US-China Trade Developments
The US dollar erased earlier gains following dovish comments from the Federal Reserve and renewed uncertainty surrounding US-China trade developments. Tensions rose after China introduced reciprocal port fees, excluding domestically built vessels, adding another layer of pressure on global trade.
However, US Treasury Secretary Bessent confirmed that a meeting will occur between Trump and China’s President Xi Jinping in South Korea in late October, raising hopes for de-escalation. While the upcoming meeting in South Korea offers hope for progress, investors remain cautious amid ongoing geopolitical risks. ⁽¹⁾
Federal Reserve Chair Jerome Powell said during a speech on October 14 that the Fed is nearing a point where it will stop reducing the size of its bond holdings and provided a few hints that more interest rate cuts are on the table. ⁽²⁾
Other Fed officials have reported recently that the weakness in the labor market has been taken into consideration, leading to the likelihood of additional rate cuts ahead.
The Fed is widely expected to deliver another quarter-point rate cut this month following a similar move earlier in September, with another reduction anticipated in December.
Source: TradingView DXY Chart
UK Labor Market Weakens, Sending the Pound Lower
The UK labor market showed weakness as the unemployment rate rose to 4.8%, above expectations of 4.7%. Unemployment claims for September also increased to 25.8k, exceeding forecasts, while employment slowed sharply to 91k, down from the previous figure of 232k. ⁽³⁾
As a result, GBP/USD weakened on October 14, as the weakness in the soft labor data could fuel expectations of rate cuts from the Bank of England.
Source: TradingView GBP/USD Chart
Aussi and Kiwi Weaken on Trade Tensions and Central Bank Shifts
The Australian dollar dropped more than 1%, while the New Zealand dollar lost 0.4% on October 14 amid US-China trade tensions. China has also imposed sanctions on five US subsidiaries of South Korean shipbuilder Hanwha Ocean, leading to more tensions and impacting export-reliant nations like Australia and New Zealand. ⁽⁴⁾
The New Zealand dollar extended declines from previous sessions due to the recent 50 basis point rate cut by the Reserve Bank of New Zealand, with more cuts expected by 2026aiming to support economic growth. In contrast, the Reserve Bank of Australia remains cautious, choosing to monitor incoming data with no rate cuts planned in the near future. ⁽⁵⁾
Source: TradingView AUD/USD Chart
Source: TradingView NZD/USD Chart
Yen Rises as Japan Faces Political Turmoil and Trade Uncertainty
The Japanese yen rose on safe-haven demand amid global trade developments and Japan’s political uncertainty. The political party Komeito has announced its exit from the ruling coalition led by the Liberal Democratic Party, increasing doubts over Sanae Takaichi’s policy agenda as first female prime minister for Japan. ⁽⁶⁾
Finance Minister Katsunobu Kato said Japan’s current environment differs from the Abenomics era of aggressive stimulus, noting that inflation, rather than deflation, is now the primary concern. ⁽⁷⁾
Source: TradingView USD/JPY Chart
Precious Metals Continue to Break Record Highs
Gold and silver continued to break record highs, with gold trading near $4200 and silver surpassing its 2011 highs at $52. Safe-haven demand for precious metals was driven by the ongoing US government shutdown and a historic short squeeze in London’s silver market.
Liquidity concerns in London have pushed benchmark silver prices above New York levels, prompting traders to ship physical silver bars across the Atlantic to capitalize on price premiums. However, the heightened volatility and dislocations in pricing may suggest that the bull run is entering a more unstable phase, with sharper swings likely ahead. ⁽⁸⁾
Source: TradingView Silver Chart
