Risk sentiment remains slightly positive as weaker U.S. data boosts expectations for a dovish Federal Reserve stance. U.S. equities reached record highs, while fears of a U.S.-China trade war eased.
The U.S. Empire State Manufacturing Index for September dropped sharply to -8.7, a three-month low, well below expectations of 4.3. This decline highlights persistent inflation, employment concerns, and slowing economic growth, reinforcing expectations for the Fed to adopt a cautious policy stance. As a result, the U.S. Dollar (USD) continues to weaken.
Tech stocks led the equity rally. Tesla shares surged after Elon Musk bought $1 billion in stock. Alphabet (Google’s parent) hit a record high, driven by growing interest in its Gemini AI model, particularly its "Nano Banana" image generator. Alphabet’s market cap surpassed $3 trillion, joining Microsoft, Apple, and Nvidia. Nvidia remained flat despite China accusing it of violating anti-monopoly laws.
In policy news, President Trump supported shifting U.S.-listed companies from quarterly to semi-annual reporting, pending approval by the Securities and Exchange Commission (SEC), boosting market optimism.
On the trade front, U.S. Treasury Secretary Scott Bessent confirmed that the U.S. and China reached a framework deal on TikTok, easing trade tensions. He added that Trump and Xi Jinping would speak on Friday, further improving sentiment.
U.S. Trade Representative (USTR) Head Greer also signaled openness to pausing tariffs, depending on the trade talks' progress. Trump shared on Truth Social that the recent U.S.-China trade meeting in Europe had “gone VERY WELL” and suggested a positive outcome for a popular company among young Americans.
Regarding sanctions, Bessent stated that the U.S. would not impose tariffs on Chinese goods linked to Russian oil unless European countries take similar steps. The U.S. is also considering stricter sanctions on Russian oil majors and potential measures involving $300 billion in frozen Russian assets to back loans for Ukraine.
In China, a new policy was announced to boost consumption through "15-minute convenience living circles", aimed at improving access to essential services and shops within neighborhoods.
Back in the U.S., Stephen Miran was narrowly confirmed to the Federal Open Market Committee (FOMC), a win for Trump in increasing his influence over monetary policy. Meanwhile, a U.S. appeals court rejected Trump’s attempt to remove Federal Reserve Governor Lisa Cook, ensuring her participation in the September 16-17 Fed policy meeting.
In Japan, Chief Cabinet Secretary Yoshimasa Hayashi expressed satisfaction with the U.S.-Japan tariff agreement, coinciding with a modest strengthening of the Japanese Yen (JPY).
Fitch Ratings downgraded France’s credit rating to A+, citing a political crisis and rising national debt.
From Australia, RBA Assistant Governor Sarah Hunter said inflation is near the target, although risks are balanced, and monetary policy impacts take time to unfold. In New Zealand, the Food Price Index for August rose 0.3% m/m and 5.0% y/y, in line with July figures.
Canada reported stronger-than-expected manufacturing sales in July at 2.5%, beating expectations of 1.8%. Wholesale trade also outperformed, although it slightly missed expectations at 1.2% versus 1.3%.
In Canadian politics, Prime Minister Mark Carney opposed the Teck Resources–Anglo American merger, warning he would block the deal unless the combined company’s headquarters were moved to Canada.
The U.S. Dollar Index (DXY) dropped to a seven-week low, falling for a second consecutive day. This allowed major currencies and commodities to hold onto recent gains, while Asia-Pacific equities followed Wall Street’s lead.
The EURUSD and GBPUSD pairs rose for the fourth and second consecutive days, respectively, while USDJPY fell to a one-week low. AUDUSD and NZDUSD hit multi-week highs before retreating slightly on mixed data. The USDCAD remained under pressure near a two-week low, affected by stronger Canadian data, higher crude oil prices (a key Canadian export), and a weaker USD, ahead of Canada inflation data and U.S. retail sales reports.
U.S. crude oil prices extended gains for a third consecutive day, ahead of economic data and the weekly API inventory report.
In the crypto market, Bitcoin (BTC) recovered, while Ethereum (ETH) continued its decline after a three-day losing streak.
EURUSD continues its four-day uptrend, disregarding France's credit rating downgrade, geopolitical tensions with Russia, and trade concerns with the U.S. The pair is supported by the ECB's economic optimism.
Similarly, GBPUSD remains strong for the second consecutive day, despite a mixed UK jobs report and weaker housing market data.
Meanwhile, USDJPY drops to a week’s low, extending its two-day losing streak, as discussions around a potential Bank of Japan (BOJ) rate hike contrast with the Fed’s signals for consecutive rate cuts. Additionally, U.S.-Japan trade agreements are likely benefiting the Yen.
AUDUSD pulled back after reaching its highest level since November 2024, as Reserve Bank of Australia (RBA) official Hunter failed to reinforce the central bank’s hawkish stance. NZDUSD also posted mild losses after a strong start to the week, pressured by softer New Zealand food price data. Still, the Australian Dollar remains more attractive to traders than the New Zealand Dollar, given its risk-barometer status and the RBA’s relatively more hawkish bias compared to the Reserve Bank of New Zealand (RBNZ).
On Monday, USDCAD broke an eight-week ascending trend line support with its sharpest daily drop since August 22. The decline was driven by stronger crude oil prices—Canada’s key export—along with mostly upbeat Canadian data. Adding to the pressure were talks that the Bank of Canada (BoC) may soon pause its rate cuts and expectations that the U.S.-Canada trade deal will eventually be finalized despite recent jitters. These factors supported USDCAD bears ahead of today’s Canadian inflation and U.S. Retail Sales releases.
Crude oil extended its rally for a third straight day, building on last week’s gains, as supply-crunch fears, hopes of Chinese stimulus, and trade deal optimism lifted prices. However, expectations of an OPEC+ supply increase and U.S. President Donald Trump’s push for more drilling capped the upside ahead of U.S. economic data and weekly inventory reports.
Gold edged higher after briefly touching a record near $3,690, supported by a weaker U.S. Dollar, upbeat sentiment, and technical breakouts. Demand from India and China—two of the world’s biggest buyers—along with its safe-haven appeal, also underpinned the bullish tone for XAU.
Cryptocurrencies bounced back after a weak start, supported by institutional inflows, a technical breakout, and a softer USD, though Ethereum (ETH) remains under pressure. At the same time, Wall Street extended gains on the back of tech-friendly headlines, upbeat earnings, and U.S. President Donald Trump’s moves to ease equity flows and remove reporting hurdles, alongside the Federal Reserve’s (Fed) rate-cut bias.
On Tuesday, Eurozone Industrial Production, ZEW sentiment surveys from Germany and the EU, and Canada’s headline inflation data will join U.S. Retail Sales and weekly U.S. crude oil inventories in guiding markets, alongside broader risk catalysts. These releases could fuel a risk-on mood ahead of the Federal Open Market Committee (FOMC) decision, pressuring the U.S. Dollar further while supporting commodities and Antipodeans, particularly USDCAD and Gold. However, major momentum is unlikely before Wednesday.
May the trading luck be with you!
