Fed Interest Rates In Focus, AI News Drives Tech Stocks

The EUR/USD pair posted modest gains on Tuesday as easing tensions between the United States and China pressured the US Dollar. The move comes amid ongoing uncertainty over the US government shutdown and ahead of the Federal Reserve’s rate decision later today.

Improved sentiment surrounding US–China trade relations curbed demand for the US Dollar, traditionally seen as a safe-haven asset. Meanwhile, the latest Conference Board (CB) Consumer Confidence Index fell to 94.6 in October from 95.6 in September — the second consecutive monthly decline. The data suggested US households are less optimistic about the economic outlook, citing concerns over job availability and persistently high prices due to import tariffs. Market participants are also anticipating a potential Fed rate cut, with policymakers maintaining a data-dependent stance despite the constraints posed by the ongoing shutdown.

In Europe, the European Central Bank (ECB) Consumer Expectations Survey showed one-year inflation expectations easing slightly to 2.7% from 2.8%, while three-year expectations held steady at 2.5%. The ECB is widely expected to keep its key interest rate unchanged at 2% during Thursday’s policy meeting, a move that could provide further stability for the common currency.

Despite the overall positive tone, political developments in France limited the Euro’s advance. The ongoing budget debate has raised tensions, with the Socialist Party warning it could bring down the government unless the upcoming fiscal plan includes a significant wealth tax increase.

Traders now turn their focus to the upcoming Trump–Xi meeting in South Korea on Thursday, which could set the tone for broader market sentiment heading into the end of the week.

Gold prices slipped to a three-week low on Tuesday as renewed optimism surrounding U.S.–China trade talks reduced demand for the safe-haven metal. Investor attention has now shifted toward the Federal Reserve’s upcoming interest rate decision later this week.

Despite gaining more than 51% so far this year on the back of geopolitical tensions and expectations of U.S. rate cuts, gold’s safe-haven appeal has weakened amid signs of progress in U.S.–China negotiations. Senior U.S. and Chinese officials finalized the framework of a potential trade agreement over the weekend, which both presidents are expected to review during their Thursday meeting.

Markets are now focused on the Federal Reserve’s two-day policy meeting, where the U.S. central bank is widely expected to cut interest rates by 25 basis points. Gold’s decline also comes as broader risk appetite improves, with global equities hovering near record highs and the U.S. dollar holding firm ahead of the Fed decision. Analysts say a dovish tone from the central bank could offer short-term support for bullion, but sustained optimism over trade may continue to limit upside momentum.

Oil prices extended their losses on Tuesday, sliding about 2% for a third consecutive session as markets assessed the impact of U.S. sanctions on Russia’s two largest oil producers and the prospect of an OPEC+ production increase.

The decline follows last week’s rally — the strongest since June — after U.S. President Donald Trump announced fresh Ukraine-related sanctions targeting Russian energy giants Lukoil and Rosneft.

Following the U.S. sanctions, Lukoil announced plans to sell its international assets, marking the most significant move yet by a Russian energy firm since Western penalties were imposed over Moscow’s invasion of Ukraine in February 2022. The company accounts for roughly 2% of global oil output.

Meanwhile, OPEC+, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, is reportedly considering a small production increase in December, according to four sources familiar with discussions.

Investor sentiment is also being shaped by prospects of a U.S.–China trade agreement, with Presidents Trump and Xi Jinping scheduled to meet on Thursday in South Korea.

Preliminary data from the American Petroleum Institute (API) showed that U.S. crude inventories fell by 4.02 million barrels in the week ending October 24, while gasoline stocks dropped 6.35 million barrels and distillate inventories declined 4.36 million barrels.

U.S. stocks climbed to fresh record highs on Tuesday, driven by renewed optimism over a potential U.S.–China trade breakthrough and growing expectations that the Federal Reserve will cut interest rates when its two-day policy meeting concludes on Wednesday.

Investor sentiment strengthened after a Wall Street Journal report suggested that Washington may be willing to reduce tariffs on Chinese goods if Beijing agrees to tighten controls on exports of chemicals used to produce fentanyl. According to the report, the U.S. could halve its 20% tariff on certain chemical products as part of the proposal.

The Federal Reserve began its latest two-day policy meeting on Tuesday, with markets pricing in a 25-basis-point rate cut — the second this year — that would lower the federal funds rate to the 3.75%–4.00% range.

Earnings season remains in focus, with Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) all set to report results this week.

Amazon announced plans to cut 14,000 corporate positions, streamlining operations amid surging AI-related investments. The company’s corporate workforce currently includes about 350,000 employees, out of a total staff of 1.56 million worldwide. United Parcel Service reported better-than-expected Q3 earnings, despite weaker domestic shipping volumes, while PayPal announced a partnership with OpenAI to integrate its payments wallet into ChatGPT.