The ongoing U.S. government shutdown has not only delayed key economic data but also raised concerns over Federal Reserve rate decisions, adding more uncertainty to market sentiment. The shutdown has postponed the release of the weekly jobless claims and factory orders data. The U.S. jobs report has also been delayed, which was expected to show a rise of 52,000 in nonfarm payrolls. Meanwhile, the Automatic Data Processing (ADP) employment estimate, which excludes government workers, showed a decline of 32,000 jobs in September, suggesting a cooling labor market. This data lowered interest rates and boosted the likelihood of a Federal Reserve rate cut in October. There is now an 89% chance that the Federal Reserve will cut rates in December as well.
In other economic data, the Challenger job cuts report revealed 54,064 announced layoffs in September, a sharp decline from 85,979 in August, and 26% lower than last year. However, year-to-date layoffs have reached 946,426, marking the highest total since 2020. The government sector accounted for a significant portion of these cuts, with 299,755 planned layoffs. This signals a softening in the labor market despite September's improvement.
Both Federal Reserve President Lorie Logan and Chicago Federal Reserve President Austan Goolsbee expressed caution about future rate cuts. Lorie Logan emphasized that inflation is still above target, and while the labor market is cooling, demand remains strong. She advised caution in cutting rates too quickly. Austan Goolsbee highlighted that the U.S. government shutdown will delay pay for federal workers, but real-time data suggest the unemployment rate remains stable. He also noted that the Federal Reserve would need to proceed with the data it has, but must be careful not to overdo the rate cuts.
Senate Majority Leader John Thune said that it is unlikely the Senate will vote this weekend to reopen the government. Meanwhile, former President Donald Trump is considering issuing $1,000–$2,000 stimulus checks to taxpayers, funded by tariff revenues. However, his administration is also subsidizing Argentine soybean exports to China, which hurts U.S. farmers. Treasury Secretary Scott Bessent warned that the ongoing shutdown could negatively affect the U.S. economy, GDP, and workers, with new aid for farmers expected to be announced on Tuesday.
On the global front, Russian President Vladimir Putin made remarks about Russia’s involvement in Ukraine, stating that Russia is open to continuing talks. He downplayed the idea that Russia is a threat to the North Atlantic Treaty Organization (NATO) and instead, blamed the West for the lack of peace in Ukraine. Putin also responded to Trump's "paper tiger" comment by saying that if Russia is weak, then NATO is equally weak, and that Russia is essentially fighting NATO. He emphasized the need to restore U.S.-Russia relations.
In Germany, Munich Airport was temporarily shut down after drones were detected flying over the airport. In China, the Communist Party will hold its annual conclave from October 20 to 23 to unveil a new five-year plan, which is expected to have significant implications for global markets.
Japan’s unemployment rate for August came in at 2.6%, slightly higher than the expected 2.4%. Bank of Japan (BoJ) Governor Kazuo Ueda reiterated that the BoJ’s policy remains flexible, with no clear direction ahead of its upcoming meeting. He pointed out that rising food prices are prompting consumers to reduce spending. Japan’s Finance Minister Shunichi Suzuki is also closely watching the impact of the U.S. government shutdown. Attention now turns to Japan’s upcoming Liberal Democratic Party (LDP) leadership election, where a potential win by Shinjiro Koizumi could support the yen and possibly lead to an October BoJ rate hike.
In Australia, all three S&P Global Purchasing Managers' Index (PMIs) showed a decline in September, but they still remained in expansion, suggesting that the economy continues to grow at a moderate pace.
The volatility in crude oil prices this year has been largely driven by unpredictable factors, including Organization of the Petroleum Exporting Countries (OPEC)+ production cuts, China’s strategic oil stockpiling, and ongoing geopolitical tensions. These factors have made forecasting difficult, leaving the market vulnerable to further volatility.
Back in the U.S., the White House is engaging in a broad campaign to negotiate deals across 30 strategic industries in advance of the 2026 midterm elections. This includes leveraging tariff relief, regulatory changes, and acquiring equity stakes in companies like Intel and U.S. Steel. The administration is also working to expand the authority of the U.S. International Development Finance Corporation to $250 billion to help fund these initiatives.
Finally, Nvidia's planned deal with the United Arab Emirates (UAE) has stalled due to U.S. investment demands and concerns over China. U.S. equities have shown mixed results, with both the S&P 500 and Nasdaq struggling to maintain their gains. Meanwhile, the U.S. dollar has strengthened against the euro, pound, and Australian dollar. Nvidia reached a new high above $190, while Tesla saw a 5% decline from its pre-market high.
Against this backdrop, the U.S. Dollar Index (DXY) bounced off a weekly low to snap a four-day losing streak, despite lacking recovery momentum early Friday. The DXY’s rebound triggered the much-awaited pullback in Gold prices, stalling a five-day winning streak, despite hitting an all-time high (ATH) to drag it for the second consecutive day early Friday. Meanwhile, major currencies are retreating against the USD, while Crude Oil licks its wounds at the lowest level since May 30. Meanwhile, equities trade directionless, while cryptocurrencies take a breather after hitting multi-day highs the previous day.
EURUSD remains uncertain after a two-day losing streak, while GBPUSD falls for the second consecutive day. USDJPY extends its recovery from a two-week low. The EURUSD and GBPUSD are facing pressure from cautious remarks by the European Central Bank (ECB), mixed European Union (EU) data, and concerns over UK employment and growth. Meanwhile, USDJPY is supported by Bank of Japan (BoJ) Governor Kazuo Ueda's cautious tone and market positioning ahead of Japan’s Prime Minister selection on Saturday.
AUDUSD stalled its four-day winning streak on the previous day and remains under pressure early Friday, with market caution and ongoing concerns about China, especially during the country's Golden Week holidays. Meanwhile, NZDUSD remains relatively flat, resisting downward pressure. USDCAD also halts its three-day winning streak as crude oil posts a corrective bounce from a four-month low.
Gold halted its five-day winning streak and cooled off after reaching an all-time high (ATH), with a U.S. Dollar corrective bounce and broader market positioning tied to various U.S. political and geopolitical developments. The delay or cancellation of key U.S. data has heightened market uncertainty around the Federal Reserve's next moves, although two rate cuts in 2025 are still likely. This uncertainty has tempered Gold buying, despite strong weekly and monthly gains. Additionally, China's Golden Week holidays and preparations for India's gold-buying season are influencing market sentiment.
Market preparations for this weekend's OPEC+ meeting, rising geopolitical tensions around Ukraine, and China’s oil stockpiling are creating uncertainty for energy traders, even though oil prices have bounced off a four-month low, halting a five-day losing streak.
Meanwhile, Bitcoin (BTC) cools off at a seven-week high, testing its two-day winning streak. Similarly, Ethereum (ETH) challenges its own two-day rise, reaching its highest level in two weeks.
With U.S. federal offices closed, key data releases, including the non-farm payrolls (NFP), have been delayed, shifting the market's focus to risk factors as the main drivers of near-term movements. This could support the U.S. Dollar's recent bounce, potentially extending the pullback in Gold, the Euro, and Antipodean currencies.
As the market awaits clarity, traders remain largely positioned for a 25 basis point rate cut from the Federal Reserve by the end of the month. However, any subtle shifts in the Fed's outlook, such as those hinted at by Fed President Lorie Logan, could spark significant volatility.
On Friday, key speakers include Fed Presidents Logan, Williams, and Jefferson, as well as ECB President Christine Lagarde and board member Isabel Schnabel. Additionally, BoE Governor Andrew Bailey will discuss macro-financial stability in a fragmenting world, making for a busy day ahead in global markets.
May the trading luck be with you!
