US Equities Rebound Amid Eased Trade Tensions and Mixed Economic Signals | Weekly Market Analysis

Key events this week:

Monday, October 20, 2025

• China - GDP (YoY) (Q3)

Wednesday, October 22, 2025

• UK - CPI (YoY) (Sep)
• USA - Crude Oil Inventories

Thursday, October 23, 2025

• USA - Initial Jobless Claims
• USA - Existing Home Sales (Sep)

Friday, October 24, 2025

• USA - Core CPI (MoM) (Sep)
• USA - CPI (YoY) (Sep)
• USA - CPI (MoM) (Sep)
• USA - S&P Global Manufacturing PMI (Oct)
• USA - S&P Global Services PMI (Oct)
• USA - New Home Sales (Sep)

US equity markets closed the week with gains on Friday, reversing earlier losses as investors found relief in softer trade rhetoric between the United States and China and a brief stabilization in the banking sector. The Dow Jones Industrial Average rose 238 points, or 0.5%, while the S&P 500 gained 0.5% and the Nasdaq Composite added 0.5%. Markets appeared to shrug off the ongoing US government shutdown, now in its third week, which continues to delay key economic reports and weigh on confidence in near-term growth prospects.

The Friday rally was largely fueled by easing concerns over escalating tariffs on Chinese imports. Earlier in the week, President Donald Trump signaled that his administration was reconsidering further punitive measures, suggesting a potential pause in the imposition of new tariffs. Investors interpreted the comments as a temporary cooling of the US-China trade conflict, prompting a short-term rebound in equity prices. Talks are expected to resume in the coming weeks, including high-level discussions between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, alongside planned meetings between Trump and President Xi Jinping. The market's cautious optimism was reflected in the resilience of sectors that had been most sensitive to trade disruptions, including industrials and technology.

Across the currency markets, the Japanese Yen started the new week weaker following news of a coalition agreement between Japan's ruling Liberal Democratic Party and the Japan Innovation Party. This arrangement positions Sanae Takaichi to become Japan's first female Prime Minister, reviving expectations for increased government spending and more accommodative monetary policy. Traders anticipate that the Bank of Japan may delay further rate hikes, which has put downward pressure on the JPY. The USD/JPY pair held onto gains from Friday, hovering around the 149.40–149.50 range. However, any advance appeared capped by expectations that the Federal Reserve could implement additional rate cuts later this year. Comments from BoJ officials signaling adherence to a gradual policy normalization path also tempered speculative selling against the JPY, suggesting caution among market participants.

The Australian Dollar extended gains against the US Dollar, bolstered by stable Chinese economic indicators and an unchanged interest rate stance from the People's Bank of China. China left its one- and five-year Loan Prime Rates at 3.00% and 3.50%, respectively, signaling a steady monetary approach. Chinese GDP growth in the third quarter came in at 4.8% year-over-year, slightly lower than the previous quarter's 5.2%, while quarter-over-quarter growth exceeded expectations at 1.1%. Retail sales and industrial production figures also surpassed forecasts, providing additional support for risk-sensitive currencies like the AUD. Despite this, upward pressure on the Australian Dollar was partially offset by an unexpected rise in the national unemployment rate to 4.5% in September, raising speculation of a Reserve Bank of Australia rate cut in November.

Meanwhile, the New Zealand Dollar traded higher against the US Dollar, supported by recent consumer price data showing a 3.0% year-over-year increase in the third quarter. The Reserve Bank of New Zealand's dovish stance, highlighted by a 50-basis-point rate cut last week and the prospect of additional reductions in November, has continued to shape market expectations. The NZD/USD pair reached near 0.5730 during early Asian trading, reflecting cautious optimism tempered by the possibility of further monetary easing.

In Europe, the Euro retraced some of its prior gains, trading around 1.1660 against the US Dollar. The movement followed reports that S&P Global Ratings downgraded France's credit rating from AA- to A+, citing heightened budget uncertainty despite the government's 2025 draft budget submission. This downgrade, combined with political turbulence in Paris and the recent resignation of Sebastien Lecornu as Prime Minister, weighed on sentiment for the single currency. Investors responded cautiously as the European Central Bank maintained that current policy settings remained appropriate for the 2% medium-term inflation target, emphasizing preparedness to address potential shocks amid two-sided inflation risks. EUR/USD stability may continue to hinge on upcoming Eurozone economic data and any signals of policy adjustments from ECB officials.

The British Pound opened the week modestly lower after a strong bounce on Friday, holding above the 1.3400 level. Mixed fundamentals, including disappointing UK employment data and concerns over the upcoming Autumn budget, have kept sentiment subdued. Markets are pricing in the possibility of gradual rate cuts from the Bank of England if inflationary pressures ease. However, persistent fiscal uncertainties have limited further upside for the GBP/USD pair. Traders are now looking toward upcoming UK economic releases, particularly employment figures, which could provide renewed impetus for the Pound.

In commodity markets, Gold remained supported near all-time highs, reflecting ongoing geopolitical risks, trade uncertainties, and concerns over the US government shutdown. Expectations of additional rate cuts by the Federal Reserve have further bolstered the safe-haven metal, keeping demand elevated even as the US Dollar showed moderate stabilization. The yellow metal continues to benefit from portfolio inflows into exchange-traded funds, underscoring its role as a hedge against economic and fiscal uncertainty.

Crude Oil prices recovered modestly following the announcement of a softer tone from President Trump regarding tariffs on Chinese imports. The easing of trade war concerns alleviated some fears of a broader slowdown in demand. At the same time, a better-than-expected Canadian employment report added support to the commodity-linked Canadian Dollar. West Texas Intermediate traded higher in early Asian sessions, rebounding from last week's slump to near five-month lows. The combination of improving market sentiment and supply considerations contributed to a modest recovery in oil prices heading into the new week.

The USD/CAD pair showed some weakness, with spot prices hovering around the 1.4000 mark. The retreat reflected both a stronger Canadian employment backdrop and lingering market caution as the US government shutdown continued to restrict economic data flow. Limited follow-through selling suggested that the pair remained sensitive to short-term developments, including crude oil prices and fiscal signals from both countries.

Overall, the past week underscored the market's delicate balancing act between optimism over easing trade tensions and caution amid lingering domestic and international uncertainties. US equities demonstrated resilience, rebounding from midweek declines, while currency and commodity markets reacted dynamically to central bank communications, macroeconomic releases, and political developments across major economies. The outlook remains nuanced, with investors closely monitoring upcoming data from the United States, China, and Europe, alongside central bank commentary that could influence the trajectory of equities, FX, and commodities in the coming sessions.