In the week ahead: U.S. Inflation Data (CPI), Flash Manufacturing & Services PMI’s

The EUR/USD pair is trading near 1.1670 in early European hours on Monday, with the Euro (EUR) strengthening against the US Dollar (USD) amid improved risk sentiment. However, lingering budget uncertainty in France may limit the pair’s upside momentum. Market participants now turn their focus to Germany’s September Producer Price Index (PPI), due later in the session.

According to Bloomberg, S&P Global Ratings has downgraded France’s sovereign credit rating to A+ from AA-, marking the second downgrade in just over a month after similar actions from Fitch and DBRS. The downgrade reflects growing fiscal concerns and follows a turbulent week in French politics.

French Prime Minister Sebastien Lecornu narrowly survived two no-confidence votes in parliament last week, a crisis that forced the government to abandon President Emmanuel Macron’s controversial 2023 pension reform to retain support. The ongoing political instability in France could weigh on the Euro’s short-term performance against the US Dollar.

Across the Atlantic, the US Federal Reserve (Fed) is widely expected to cut interest rates by 25 basis points at its upcoming October 28–29, 2025 meeting. According to the CME FedWatch Tool, markets have priced in nearly a 100% probability of a rate cut, which would bring the federal funds rate down to a 3.75%–4.00% target range.

Meanwhile, the ongoing US government shutdown—now entering its 20th day—continues to cast a shadow over the US economy. Lawmakers have failed to resolve the budget stalemate despite ten failed Senate votes, marking the third-longest shutdown in modern history. Prolonged gridlock could further undermine the US Dollar against major counterparts.

Gold prices edged higher on Monday, supported by growing expectations of further U.S. interest rate cuts and ahead of key inflation data and trade negotiations between Washington and Beijing later this week.

Gold prices fell on Friday, the sharpest drop since mid-May, after U.S. President Donald Trump stated that his proposed 100% tariff on Chinese goods would not be sustainable. Trump added that he planned to meet with Chinese President Xi Jinping, expressing optimism that U.S.-China relations would remain stable.

Market participants are now eyeing two key catalysts this week: the U.S.-China trade talks and the upcoming U.S. Consumer Price Index (CPI) release on Friday. Analysts expect core inflation to remain steady at 3.1% in September, a reading that is unlikely to unsettle markets given the Federal Reserve’s dovish stance and lack of resistance to rate cut expectations.

According to the CME FedWatch Tool, traders have fully priced in a quarter-point rate cut by the Federal Reserve this month, with another reduction anticipated in December.

Despite Friday’s correction, gold remains up more than 60% year-to-date. The rally has been fueled by geopolitical tensions, aggressive rate-cut bets, central bank purchases, de-dollarization trends, and strong exchange-traded fund (ETF) inflows.

Oil prices fell in Asian trading on Monday, extending last week’s declines as investors grappled with persistent concerns over sluggish global demand and the potential for a supply glut in the coming months.

Modest support came from renewed Israel-Hamas hostilities over the weekend, though tensions eased after Jerusalem confirmed that a U.S.-brokered ceasefire remained in place. Markets also kept an eye on Washington’s diplomatic efforts to broker peace between Russia and Ukraine, as well as rising trade frictions between the U.S. and China.

Israel announced on Sunday that its ceasefire with Hamas in Gaza had resumed following a weekend flare-up that left two Israeli soldiers and nearly 30 Palestinians dead. The escalation marked the first major test of the U.S.-brokered truce agreed earlier in October.

Crude prices have been under sustained pressure in recent weeks as investors digest signs of softening global demand alongside rising production levels. The International Energy Agency (IEA) issued a bearish monthly outlook, warning that persistent OPEC+ output increases could lead to a supply overhang by 2026.

Weak economic data from China, the world’s top oil importer, has further dampened sentiment. Traders now await China’s Q3 GDP figures, due later on Monday, for additional clues on the strength of demand recovery.

In the United States, an ongoing government shutdown has delayed key economic reports, adding uncertainty to the outlook for domestic fuel consumption.

Meanwhile, heightened U.S.-China trade tensions have also weighed on market sentiment. However, recent conciliatory remarks from U.S. officials offered mild support, suggesting a possible easing of trade frictions.

The US 500 closed higher on Friday, rebounding from earlier losses as regional banks staged a recovery following a sharp selloff, while easing U.S.-China trade tensions lifted investor sentiment.

Despite the positive close, market confidence remained capped by the U.S. government shutdown, now entering its third week, which has delayed key economic data releases and raised concerns over near-term growth prospects.

Investor optimism improved after President Donald Trump signaled a potential easing of trade tensions with China, suggesting that the high tariffs on Chinese imports may not remain in place indefinitely.

The president also revealed plans to meet with Chinese President Xi Jinping in South Korea within two weeks, raising hopes that the discussions could pave the way for renewed trade negotiations.

Shares of regional banks bounced back following a steep selloff earlier in the week, as several lenders posted better-than-expected third-quarter results, easing immediate concerns over the sector’s stability.

In corporate news, Oracle Corporation delivered an upbeat long-term financial outlook, attributing the strength to surging demand for artificial intelligence (AI) technologies — demand the company described as “really hard to comprehend.”

Meanwhile, Micron Technology is reportedly halting the supply of server chips to Chinese data centers, according to Reuters, following the company’s earlier ban by Beijing in 2023. The move underscores continued geopolitical and trade friction in the technology sector.