{"id":31717,"date":"2025-11-03T08:39:27","date_gmt":"2025-11-03T08:39:27","guid":{"rendered":"https:\/\/www.vtmarkets.com\/?p=31717"},"modified":"2025-11-03T08:39:27","modified_gmt":"2025-11-03T08:39:27","slug":"trade-truce-sets-the-tone","status":"publish","type":"post","link":"https:\/\/www.vtmarkets.com\/en-asia\/week_ahead\/trade-truce-sets-the-tone\/","title":{"rendered":"Week Ahead: Trade Truce Sets The Tone"},"content":{"rendered":"\n
Financial markets are heading into the new week with more hesitation than conviction.<\/p>\n\n\n\n
The Federal Reserve\u2019s late-October update shifted the landscape. A December rate cut is no longer seen as a done deal.<\/p>\n\n\n\n
Chair Jerome Powell reiterated that policy decisions will remain data-dependent, yet with a federal government shutdown halting much of the data flow, the Fed is effectively ‘driving through fog’. Traders, in turn, are rethinking how quickly monetary easing might resume.<\/p>\n\n\n\n
The outcome so far? A mixed dollar, cautious equity markets, and investors taking refuge in safe-haven assets until clearer signals emerge.<\/p>\n\n\n\n
The Fog Before The Cut<\/h2>\n\n\n\n
Before the Fed\u2019s October meeting, futures markets were nearly unanimous in predicting a rate cut in December.<\/p>\n\n\n\n
But Powell\u2019s cautious tone has flipped the sentiment. According to the CME FedWatch Tool, the odds of a cut have tumbled from roughly 90% to around 63%, while Polymarket data suggests a 66% probability of a 25-basis-point reduction and a 32% chance of no change.<\/p>\n\n\n
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In short, the market still sees easing ahead. It just no longer trusts it will come smoothly.<\/p>\n\n\n\n
The shift reflects Powell\u2019s warning about divisions within the Fed and the impact of the data blackout due to the government shutdown.<\/p>\n\n\n\n
Without updated figures, policymakers are essentially flying blind, and traders are hedging both sides of the trade to manage risk.<\/p>\n\n\n\n
Options markets point to growing volatility pricing, suggesting investors expect a slower, bumpier approach to policy easing rather than a straightforward rate-cut trajectory.<\/p>\n\n\n\n
A Case For Patience<\/h2>\n\n\n\n
If inflation continues its downward path, the Fed will have the justification to cut rates, but not necessarily the urgency.<\/p>\n\n\n\n
September\u2019s CPI rose 3.0% year-on-year, slightly up from 2.9%, largely due to higher energy costs. Yet beneath the surface, inflation pressures are easing:<\/p>\n\n\n\n
– Core CPI stayed at 0.3% month-on-month, in line with a gradual cooling trend.<\/p>\n\n\n\n
– The shelter component, the biggest driver of inflation, dropped to 0.16% m\/m, its lowest level in more than a year.<\/p>\n\n\n\n
– Over 51% of CPI categories are now in outright decline from their peaks, well above the long-term average of 32%.<\/p>\n\n\n\n
Such broad-based disinflation indicates that the inflation battle is mostly won.<\/p>\n\n\n\n
While Fed staff still forecast core PCE to end the year near 3%, the broader trend in price pressures looks decisively softer.<\/p>\n\n\n\n
The key takeaway? Inflation is falling sharply. Yet the Fed remains cautious about cutting rates too soon and risking a policy reversal if prices reaccelerate.<\/p>\n\n\n\n
From Euphoria To Hesitation<\/h2>\n\n\n\n
The market\u2019s behaviour after Powell\u2019s press conference told its own story.<\/p>\n\n\n\n
– US equities retreated from recent highs as traders priced in fewer cuts and slower growth prospects.<\/p>\n\n\n\n
– The US Dollar Index (USDX) climbed back toward the 99.00\u2013100.00 zone, signalling a defensive shift.<\/p>\n\n\n\n
– Gold stalled around $2,070, caught between softer inflation data and a firmer dollar.<\/p>\n\n\n\n
– Bond yields drifted lower, though not enough to reignite a sustained equity rally.<\/p>\n\n\n\n
Prediction platforms such as Polymarket reflect this sentiment, showing a notable drop in confidence. It’s still leaning dovish, but with heavy hedging across asset classes.<\/p>\n\n\n\n
Over $9 million has now been wagered on the Fed\u2019s December decision, underscoring how pivotal it is to global positioning and risk sentiment.<\/p>\n\n\n\n
Cautious Easing On The Horizon<\/h2>\n\n\n\n
The next move may depend less on a single economic print and more on how long the uncertainty lingers.<\/p>\n\n\n\n
If the government shutdown stretches into mid-November, as betting markets imply, the Fed could enter December with limited data visibility.<\/p>\n\n\n\n
That scenario favours a 25-basis-point cut as the most likely outcome, but with low conviction.<\/p>\n\n\n\n
In essence, the market faces a split narrative:<\/p>\n\n\n\n
– Macroeconomic indicators justify a cut.<\/p>\n\n\n\n
– Policy caution urges delay.<\/p>\n\n\n\n
– And risk assets remain directionless in the meantime.<\/p>\n\n\n\n
Market Movements Of The Week<\/h2>\n\n\n\n
USDX (Dollar Index)<\/h3>\n\n\n
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– Still supported by reduced rate-cut certainty, consolidation near 99.00. – Watch 98.50 as short-term support, resistance at 100.20. – Break above 100 could extend toward 100.75, reversal signals near 98.50.<\/p>\n\n\n\n
Gold (XAUUSD)<\/h3>\n\n\n
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– Stalled around $4,070 as traders balance cooling inflation with firmer yields. – Resistance at $4,120, support near $3,930. – Range-bound until a clearer Fed direction.<\/p>\n\n\n\n
SP500<\/h3>\n\n\n
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– Pulled back after testing 6,950 as caution dominates. – 6,750 support remains critical. 7,000 psychological barrier caps upside. – Sensitive to shifts in rate-cut probabilities and shutdown headlines.<\/p>\n\n\n\n
BTCUSD<\/h3>\n\n\n
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– Consolidating above 106,000. Upside targets 112,800\u2013114,650 if risk stabilises. – Break below 106,000 exposes 103,500. – Volatility may pick up as liquidity thins into mid-month.<\/p>\n\n\n\n
Market Snapshot<\/h2>\n\n\n\n
Markets have shifted from confidence to caution following Powell\u2019s recent remarks, which underscored the Federal Reserve\u2019s data-dependent stance.<\/p>\n\n\n\n
Although inflation continues to ease across key sectors, the path forward for policy remains uncertain. Traders are now positioning for a possible rate cut in December, but with no clear signal from the Fed, the U.S. dollar has held steady and broader risk sentiment remains subdued.<\/p>\n\n\n\n
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