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This past week, financial markets have faced a US government shutdown, mixed economic data and a handful of central bank decisions and speeches, along with wild price swings in commodities. Here’s what happened this week in markets.
US Dollar Rebounds Amid Government Shutdown
The US dollar rebounded after facing losses for four consecutive days following a shutdown of the US government for the first time since 2018, which brought more concerns of uncertainty to financial markets.
The shutdown led to government offices suspending operations. This includes the Bureau of Labor Statistics delaying today’s release of the September jobs report, one of the most important pieces of data for the Federal Reserve. Still, no clarity exists about when the data will be released.
The Federal Reserve relies on this labor market data to process their interest rate decisions. The next FOMC meeting is scheduled on October 28-29, but the absence of data could further complicate the FOMC’s policymaking.
ADP employment change showed job losses of 32,000 jobs in the private sector in September, the largest decline since March 2023. The actual figure was much worse than expected, which signals ongoing weaknesses in the labor market.
JOLTS Job openings remained flat in August, coming in at 7.22 million, following the 7.2 million job openings in July. ⁽¹⁾
Source: TradingView DXY Chart
Australia’s Trade Surplus Hits Seven-Year Low
Australia’s trade surplus reached a seven-year low at AUD 1.83 billion in August, far below the expected figure of AUD 6.2 billion. The decline was largely driven by lower exports, especially to the US due to new tariffs, and a decrease in gold exports. Imports reached a record high after declining in July. ⁽²⁾
The Australian dollar is on track for its first weekly gain in three weeks, supported by a weak US dollar and a hawkish RBA that held rates steady at 3.6%. RBA Governor Bullock stated that inflation remains tamed, despite a slightly higher than expected CPI number.
Source: TradingView AUD/USD Chart
Euro Zone Inflation Rises, ECB Stays Calm
Eurozone inflation rose to 2.2% in September, up from August’s 2% figure, driven by higher services prices and a small decline in energy prices. The rise in inflation has aligned with expectations and is likely to keep the European Central Bank calm. ⁽³⁾
ECB President Christine Lagarde has said that inflation risks are contained, noting that the ECB’s 2.15% policy rate has placed the central bank in a good position for future monetary policy changes.
The ECB is also expected to keep rates unchanged at their next meeting on October 30, with some policymakers stating that September data is the reason to avoid continuing the rate cut cycle.
US Manufacturing and Consumer Confidence Weaken
Consumer confidence in the US fell to 94.2 in September, below the expected forecast of 96, and declining from August’s 97.8 figure. The survey indicates growing caution among US consumers. ⁽⁴⁾
CB Consumer Confidence Index
Source: MacroMicro, CB Consumer Confidence Chart
US manufacturing ISM PMI showed a contraction for seven consecutive months in September, with a reading of 49.1. ⁽⁵⁾
Gold and Silver Reach New Record Highs
Gold is aiming for its seventh consecutive weekly gain alongside silver after hitting fresh highs earlier this week, supported by safe-haven demand and dovish expectations from the Federal Reserve.
Investor sentiment for safe-haven demand has been heightened by the US government shutdown, which threatens thousands of federal jobs and could delay key economic data releases, including the crucial Nonfarm Payrolls report.
Source: TradingView Gold Chart
Source: TradingView Silver Chart
Japanese Yen Pulls Back on BOJ Comments
The Japanese yen pulled back momentum as traders monitor the impact of potential rate hike expectations by the Bank of Japan and a leadership election this weekend. This reduced the yen’s sharpest weekly gain in more than four months.
BOJ Governor Kazuo Ueda struck a cautious tone in comments about the global economy, lowering expectations of an imminent rate hike. BOJ Governor Kazuo Ueda reaffirmed Friday that rates will be raised if growth and inflation evolve in line with projections. ⁽⁶⁾
Markets are also focused on a Liberal Democratic Party election on Saturday that will determine Japan’s next prime minister. The LDP is set to choose a successor to former Prime Minister Shigeru Ishiba, who resigned last month, with debates centering on household relief measures versus fiscal discipline. ⁽⁷⁾
Source: TradingView USD/JPY Chart
OPEC+ Might Continue to Hike Production
Oil dropped to a four-month low and is on track for its worst week since June, weighed down by expectations that OPEC+ could push ahead with further production hikes. Reports suggested the group may raise output by up to 500,000 barrels per day in November, tripling October’s increase, as Saudi Arabia seeks to reclaim market share. ⁽⁸⁾
Oversupply concerns were amplified as EIA data showed US inventories of crude, gasoline, and distillates rose last week while refining activity and demand eased. ⁽⁹⁾
Source: TradingView Brent Crude Oil Chart
Looking Ahead
This week’s economic data and developments showed mixed sentiment, with politics, monetary policy and mixed economic data impacting financial markets.
Uncertainty remains in the picture, with the US government shutdown delaying major economic reports, mixed signals from central banks, and mixed data trends across major economies.
