Fed Sustains USDX Rally; Chinese Shares Fall on Weak Data

The EUR/USD extended its decline on Thursday, slipping below the 1.1600 mark as investors weighed the European Central Bank’s (ECB) decision to hold rates steady against the Federal Reserve’s “hawkish” 25-basis-point rate cut.

The ECB left its key rates unchanged — with the Deposit Facility, Main Refinancing, and Marginal Lending Rates holding at 2.00%, 2.15%, and 2.40%, respectively.

President Christine Lagarde described monetary policy as being “in a good place,” noting that downside risks have eased amid signs of resilience in the Eurozone economy. Lagarde cited the US–China trade truce, easing geopolitical tensions in the Middle East, and stable transatlantic trade relations as factors supporting growth.

Across the Atlantic, the Federal Reserve delivered a 25-basis-point rate cut, bringing the target range to 3.75%–4.00%, but hinted at a potential pause in its easing cycle.

Chair Jerome Powell said the Federal Open Market Committee (FOMC) was divided, with Governor Stephen Miran favoring a larger 50-bps cut and Kansas City Fed President Jeffrey Schmid voting to hold rates unchanged. Powell emphasized that the labor market remains firm and that recent state-level unemployment data show no major deterioration.

Powell’s remark that “a further reduction in the policy rate at the December meeting is not a foregone conclusion — far from it” surprised markets, reinforcing the view that the Fed may now adopt a wait-and-see approach.

Meanwhile, renewed optimism in US–China trade relations further bolstered the Greenback. Following a meeting between President Trump and President Xi Jinping, both sides announced progress: China agreed to resume soybean purchases, while the US reduced fentanyl tariffs to 10% and lowered broader tariffs on Chinese goods from 57% to 47%. Trump also said discussions on rare earths and semiconductor cooperation were back on the table.

Gold prices edged lower early on Friday, pressured by a stronger U.S. dollar as investors reassessed the outlook for further Federal Reserve rate cuts. Despite the decline, bullion remains on track for its third straight monthly gain.

Gold has risen more than 4% so far this month, supported by safe-haven demand and expectations of a gradual shift in global monetary policy.

The Federal Reserve cut interest rates by 25 basis points on Wednesday, lowering its benchmark range to 3.75%–4.00% — the second reduction this year. However, subsequent comments from policymakers suggested a more cautious stance going forward, leading markets to scale back expectations for another cut at the December meeting.

The shift in sentiment helped lift the U.S. dollar index (DXY) to near a three-month high, making gold more expensive for holders of other currencies and weighing on prices.

Market sentiment was also influenced by progress in U.S.–China trade relations, after both sides agreed to reduce tariffs and expand agricultural and rare earths trade. The news added support to the dollar while limiting gold’s upside.

In India, gold traded at a discount for the first time in seven weeks, as recent price increases dampened local demand. However, a modest pullback in prices spurred renewed buying interest in other major Asian markets.

Oil prices remained steady in Asian trade on Friday, pressured by a stronger U.S. dollar following hawkish signals from the Federal Reserve, while concerns over oversupply and sluggish global demand kept crude futures on course for a third consecutive monthly loss.

Limited optimism surrounding progress in U.S.–China trade talks, combined with skepticism about additional U.S. sanctions on Russia, further weighed on sentiment.

Adding to the pressure, data showed Chinese manufacturing activity contracted for the seventh straight month, underscoring persistent weakness in demand from the world’s largest oil importer.

A firm U.S. dollar capped gains across commodities priced in the greenback after the Federal Reserve cut interest rates as expected but signaled a more cautious stance toward further easing. The hawkish tone reduced expectations for another cut in December, boosting the dollar and making oil more expensive for holders of other currencies.

Traders also unwound some of the geopolitical risk premium after Israel and Hamas reached a U.S.-brokered ceasefire, though the agreement remains fragile.

The Organization of the Petroleum Exporting Countries and its allies (OPEC+) are expected to agree to a 137,000 barrels-per-day production hike at their meeting on Sunday, according to recent reports.

The increase, likely effective from December, follows a similar rise in November and extends the group’s broader strategy of ramping output to offset weaker prices and capture greater market share.

Data this week showed Saudi Arabia’s crude exports climbed to a six-month high of 6.41 million barrels per day in August, highlighting the group’s steady push to expand supply despite softer global demand.

U.S. stock futures climbed sharply on Thursday evening as upbeat earnings from Apple and Amazon helped offset concerns about rising AI-related spending among major technology firms but did not manage to end the session with gains,

Investors had retreated from growth shares earlier in the day amid concerns over rising capital expenditures tied to AI infrastructure expansion across the sector. Meta Platforms slumped more than 11%, marking its sharpest one-day decline in nearly three years, while Microsoft dropped almost 3%, and Nvidia slid over 4%, as traders reassessed valuations and spending plans.

After the closing bell, however, strong quarterly results from Apple and Amazon reignited optimism.

Apple reported better-than-expected iPhone and services revenue, indicating solid demand ahead of the holiday season.

Amazon.com jumped 13% in extended trade after posting earnings that beat expectations, supported by a rebound in retail margins and continued strength in its cloud division, Amazon Web Services (AWS).

Earlier market weakness followed the Federal Reserve’s policy decision this week, which reduced expectations for further monetary easing. The Fed cut interest rates by 25 basis points but signaled that another reduction in December was “not a foregone conclusion,” tempering hopes for a more aggressive stimulus path.