Markets navigated a volatile session on Tuesday, with risk assets pressured by escalating US-China trade tensions before recovering on hopes for continued dialogue, while gold extended its historic rally to fresh record highs above $4,100 per ounce.
The session was marked by competing narratives as China’s retaliatory measures against US firms clashed with reassurances from trade officials that President Trump and President Xi Jinping remain scheduled to meet later this month.
Check out the forex news and economic updates you may have missed in the latest trading session!
Headlines & Data:
- New Zealand Electronic Card Retail Sales for September 2025: -0.5% (0.3% forecast; 0.7% previous)
- Australia NAB Business Confidence for September 2025: 7.0 (9.0 forecast; 4.0 previous)
- Reserve Bank of Australia (RBA) meeting minutes: The Board held the cash rate steady at 3.60% and maintained a cautious and data-dependent stance as inflation remains slightly above target and employment stable
- Germany Consumer Prices Index Growth Rate Final for September 2025: 0.2% m/m (0.2% m/m forecast; 0.1% m/m previous); 2.4% y/y (2.4% y/y forecast; 2.2% y/y previous)
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U.K. Employment Change for August 2025: 91.0k (70.0k forecast; 232.0k previous)
- U.K. Unemployment Rate for August 2025: 4.8% (4.7% forecast; 4.7% previous)
- Swiss Producer & Import Prices for September 2025: -1.8% y/y (-2.0% y/y forecast; -1.8% y/y previous); -0.2% m/m (-0.2% m/m forecast; -0.6% m/m previous)
- Germany ZEW Economic Sentiment Index for October 2025: 39.3 (38.0 forecast; 37.3 previous)
- U.S. NFIB Business Optimism Index for September 2025: 98.8 (100.5 forecast; 100.8 previous)
- Bank of England’s Alan Taylor foresees a “bumpy landing” for the UK economy, blaming Trump’s trade tariffs for increased risk of inflation falling too low
- Canada Building Permits for August 2025: -1.2% m/m (0.2% m/m forecast; -0.1% m/m previous)
- Bank of England’s Alan Taylor foresees a “bumpy landing” for the UK economy.
- On Tuesday, Powell indicated the Fed is close to stopping its bond tightening program, but offered no long-term interest rate outlook
Broad Market Price Action:
Dollar Index, Gold, S&P 500, Oil, U.S. 10-yr Yield, Bitcoin Overlay Chart by TradingView
Tuesday’s session illustrated the market’s struggle between risk-off sentiment driven by US-China tensions and tentative optimism about potential diplomatic resolution, with safe-haven assets dominating performance.
Gold continued its remarkable ascent, surging approximately 0.8% to establish yet another record high above $4,144 per ounce. The precious metal’s relentless advance reflected heightened geopolitical uncertainty surrounding the US-China trade dispute, expectations for continued Federal Reserve rate cuts, and sustained safe-haven demand. Silver maintained strong momentum alongside gold’s rally.
The S&P 500 declined 0.21% to close near 6,634, pressured by the risk-off tone that dominated much of the session following China’s announcement of countermeasures against US-linked firms. The index initially dropped as much as 1.5% in early trading before recovering ground during the US afternoon session after Trade Representative Jamieson Greer confirmed that President Trump and President Xi remained scheduled to meet. Technology and semiconductor stocks faced particular pressure given their exposure to potential supply chain disruptions from rare earth export controls.
WTI crude oil fell 1.41% to settle around $58, weighed down by demand concerns stemming from the trade tensions between the world’s two largest economies. Energy markets reflected anxiety about potential economic slowdowns if trade disputes escalate further.
Bitcoin dropped 2.61% to trade near $112,789, underperforming traditional risk assets as cryptocurrencies faced selling pressure amid the broader risk-off environment and concerns about regulatory uncertainty.
The 10-year Treasury yield declined 0.86% to approximately 4.0%, as bond investors sought safety amid the trade tensions while also processing Federal Reserve Chair Powell’s remarks about labor market weakness and the potential end of quantitative tightening. The yield curve movement reflected markets pricing in greater likelihood of additional Fed rate cuts at the upcoming October meeting.
FX Market Behavior: U.S. Dollar vs. Majors:
Overlay of USD vs. Majors Chart by TradingView
The U.S. dollar experienced a choppy session on Tuesday, trading with a mixed bias across different sessions before ultimately closing slightly stronger against most major currencies despite increased expectations for Federal Reserve rate cuts.
The greenback’s Asian session performance was mixed, with the dollar arguably trading net weaker before the London open as markets digested China’s announcement of new port fees on US-owned, operated, and built vessels. The initial reaction suggested traders were positioning defensively ahead of key developments in the US-China trade dispute.
A decisive shift occurred during the London morning session, when the dollar rallied broadly against major currencies. The move appeared driven by classic safe-haven flows as European traders absorbed the full implications of China’s retaliatory measures and the potential for further trade escalation. Sterling faced particular pressure following the disappointing UK employment data, which showed unemployment rising to 4.8% and wage growth slowing to 4.7%, increasing expectations for Bank of England rate cuts.
The dollar’s strength proved temporary during the U.S. afternoon session, as the greenback reversed course and declined against most major currencies. The turning point correlated with when Trade Representative Greer told CNBC that Trump and Xi remained scheduled to meet, easing immediate concerns about a complete breakdown in trade relations.
Federal Reserve Chair Powell’s speech likely further weighed on the dollar as he highlighted labor market weakness and signaled the Fed may soon stop shrinking its balance sheet, reinforcing expectations for an October rate cut.
Despite the intraday volatility and afternoon weakness, the dollar managed to close the session mixed against major currencies, arguably neutral to net positive for the day. This resilience in the face of dovish Fed signals suggests markets remain concerned about global growth prospects and fiscal sustainability in other major economies, providing underlying support for the greenback. The yen and Swiss franc showed relative strength as traditional safe havens attracted defensive flows amid the trade uncertainty, while commodity currencies faced pressure on growth concerns.
Upcoming Potential Catalysts on the Economic Calendar
- Australia Westpac Leading Index for September 2025 at 12:00 am GMT
- China Consumer Price Index Growth Rate for September 2025 at 1:30 am GMT
- Japan Industrial Production Final for August 2025 at 4:30 am GMT
- Euro area ECB Guindos Speech at 7:40 am GMT
- U.K. BoE Ramsden Speech at 8:00 am GMT
- Euro area Industrial Production for August 2025 at 9:00 am GMT
- U.S. MBA 30-Year Mortgage Rate & Mortgage Applications for October 10, 2025 at 11:00 am GMT
- Canada Wholesale & Manufacturing Sales Final for August 2025 at 12:30 pm GMT
- U.S. NY Empire State Manufacturing Index for October 2025 at 12:30 pm GMT
- U.K. BoE Breeden Speech at 3:00 pm GMT
- U.S. Fed Bostic Speech at 4:10 pm GMT
- U.S. Fed Miran Speech at 4:30 pm GMT
- U.S. Fed Waller Speech at 5:00 pm GMT
- Euro area ECB Guindos Speech at 6:00 pm GMT
- U.S. Fed Beige Book at 6:00 pm GMT
- U.S. Fed Schmid Speech at 6:30 pm GMT
Wednesday’s focus will center on China’s inflation data, which could provide insights into deflationary pressures and inform monetary policy expectations as Beijing navigates trade tensions with Washington. The US-China trade relationship remains the dominant market driver, with any headlines regarding the planned Trump-Xi meeting or developments in the rare earths dispute likely to trigger significant volatility.
The NY Empire State Manufacturing Index will offer an early read on how October is shaping up for the manufacturing sector amid tariff uncertainties. Meanwhile, a parade of Federal Reserve speakers including Bostic, Miran, Waller, and Schmid, along with the Fed’s Beige Book release, will provide multiple opportunities for policymakers to clarify their views on the economic outlook and appropriate policy path given recent labor market softness.
Stay frosty out there forex friends and don’t forget to check out our Forex Correlation Calculator when taking any trades!
