Global financial markets are currently focused on three key themes: whether the US dollar and Treasury yields will continue their recent corrective moves, whether earnings growth in the artificial intelligence (AI) sector can be sustained, and whether highly leveraged AI companies will scale back their appetite for additional financing.

Market participants are debating whether the US economy can maintain its underlying growth momentum and whether inflation is easing at different rates across major economies. Recent movements across global asset classes largely reflect investors pricing in these uncertainties ahead of time.

With the November 3 US midterm elections approaching, expectations in prediction markets have remained broadly unchanged. Pricing on platforms such as Polymarket has shown little movement, suggesting that traders have not materially reassessed their expectations for the election outcome. The House of Representatives is viewed as more consequential than the Senate in shaping the fiscal outlook. If Democrats regain control of the House, the direction of US fiscal policy for 2027–2028 could become largely constrained, regardless of the Senate results. Such an outcome could potentially support risk sentiment while also providing a tailwind for the US dollar.

Meanwhile, David Zervos, a newly appointed adviser to the US Treasury Secretary, said the International Monetary Fund (IMF) should examine its own forecasting track record before criticizing US fiscal policy. IMF Managing Director Kristalina Georgieva stressed that economic growth alone would not be sufficient to bring down US debt rapidly and called for fiscal measures to address the issue. With US government debt exceeding $40 trillion and the 10-year Treasury yield remaining above 5%, these remarks have intensified scrutiny of the country's fiscal outlook.

In the energy market, attacks on commercial shipping have kept oil transportation costs elevated, making spot crude prices more susceptible to upward pressure than sustained declines. Ukrainian strikes on Russian refineries also remain a significant strategic factor in the broader Russia–Ukraine conflict.

Geopolitical risks continue to accumulate across the oil market, suggesting that the full extent of the associated risk premium may not yet be reflected in prices. Although the International Energy Agency's (IEA) coordinated release of strategic oil reserves has provided some relief, the scale of the intervention remains insufficient to address the underlying security threats to Middle Eastern shipping routes.

With tensions involving the Houthis, Iran and the United States, and Russia and Ukraine all presenting potential flashpoints, further attacks could occur with little warning. Oil prices are therefore likely to remain volatile at elevated levels in the near term. Any major disruption to critical shipping routes or damage to large refining facilities could trigger a sharp rise in crude oil and diesel prices.

 
Review of Last Week's Market Performance
US Equities

US stock indices closed lower on Friday as a sell-off in semiconductor stocks extended into an eighth consecutive session, marking the sector's longest losing streak since the 2008 global financial crisis.

The S&P 500 declined 1.1%, the Dow Jones Industrial Average fell 175 points, and the Nasdaq Composite dropped 2.5%.

For the week, the S&P 500 lost 2%, while the Nasdaq fell 5%. The Dow, however, managed to finish the week 156 points higher.

Gold

A softer US dollar helped support gold prices, with spot gold rising approximately 0.3% to $4,184.34 per ounce, although it still recorded a weekly decline of around 0.2%. US gold futures for December delivery advanced approximately 0.9% to $4,205.70.

Federal Reserve Chair Kevin Warsh offered no fresh guidance on monetary policy, leaving market expectations for an October rate hold largely unchanged. This provided some room for gold to extend its short-term rebound.

Silver

Silver remains under bearish pressure after breaking below a key technical level and retreating toward $55.67, close to the starting point of its previous rally.

Although prices have staged a modest rebound from this important support area, the broader bearish structure remains intact.

Any further recovery could bring silver back toward the $59–$61 zone, where former support may now act as resistance. A swift and sustained close above $61 would invalidate the current bearish scenario. Otherwise, renewed selling pressure could push prices toward $54, the next major downside target.

US Dollar Index

The US Dollar Index fell approximately 0.35% to around 101.70, bringing its weekly decline to roughly 0.55% and putting it on course for its first weekly loss in five weeks.

The euro gained approximately 0.33% to $1.1258, while USD/JPY traded near 157.89, with the yen poised to end a four-week losing streak.

Federal Reserve Chair Kevin Warsh's remarks at the annual meetings of the IMF and World Bank did little to alter the interest rate outlook, allowing the dollar to slide to its lowest level in nearly two weeks.

EUR/USD

EUR/USD gave back some of its earlier gains toward the end of last week, retreating to around 1.1240.

Nevertheless, the pair largely maintained the upward momentum established on Thursday, supported by the dollar's ongoing correction amid persistent market concerns surrounding the AI sector.

With the greenback under sustained selling pressure, it remained on track to register its first weekly decline in five weeks.

USD/JPY

Despite the broad-based weakness in the US dollar, the Japanese yen attracted only limited buying interest, as its underlying fundamental outlook remained fragile.

At the time of writing, USD/JPY was trading near 158.05, extending the sideways consolidation that has been in place since late September.

GBP/USD

GBP/USD maintained its firm tone, extending Thursday's gains to reach a weekly high near 1.3350 ahead of the weekend.

Sterling's additional recovery was primarily driven by persistent selling pressure on the US dollar, even as US Treasury yields edged higher across the yield curve.

AUD/USD

The Australian dollar regained momentum toward the end of last week, extending its rebound against the US dollar to around 0.6950.

Comments from Fed Chair Kevin Warsh reinforced selling pressure on the greenback, allowing AUD/USD to push higher.

Warsh reiterated his commitment to achieving price stability while refraining from providing any clear guidance on the future path of interest rates.

Crude Oil

Crude oil continued to demonstrate relative strength, building on its recent rebound from a major ascending trendline.

Prices broke decisively above the psychological $95.00 level and advanced beyond $98.95, forming a series of higher highs that suggests a fresh bullish leg is underway.

Should prices pull back, the $95.00 level and the underlying ascending trendline are expected to provide key support and help preserve the broader bullish structure.

Against this backdrop, crude oil retains the potential to extend its near-term advance toward the $100.00 area, with $100.29 emerging as a key upside reference level.

Bitcoin

Bitcoin gained 1.3% during early Asian trading on Friday, briefly approaching $82,000 as buyers quickly absorbed a short-lived dip below $80,000.

A rebound in Asian semiconductor stocks following Thursday's sell-off also helped improve broader market risk sentiment.

On Thursday, Bitcoin briefly slipped to approximately $79,800, breaking below the $80,400 support area that buyers had successfully defended twice over the preceding week.

However, the breakdown lasted only around two hours. Bitcoin subsequently rebounded to approximately $82,500 within the next two hours and remained above $81,000 throughout the Asian session, indicating that buying interest at lower levels remained resilient.

US Treasury Yields

The benchmark US 10-year Treasury yield edged higher to 5.12% on Friday, following an 11-basis-point decline in the previous session. Despite the modest recovery, the yield was still down approximately 14 basis points for the week.

Yields also remained below the highs reached earlier this month, when the benchmark 10-year yield climbed to its highest level since 2002.

Investors continued to reassess the Federal Reserve's monetary policy outlook, with comments from Fed Chair Kevin Warsh at the IMF meetings reinforcing expectations that interest rates would remain unchanged this month.

 
Market Outlook for This Week: October 19–23
The central focus for financial markets this week will be whether the US dollar and Treasury yields extend their recent tactical corrections, and whether signs of slowing earnings growth or mounting financing pressures begin to emerge among highly leveraged AI companies.

A series of major economic releases is scheduled throughout the week, including inflation and purchasing managers' index (PMI) data from several economies, China's third-quarter GDP figures, and the latest Loan Prime Rate (LPR) decisions.

These releases are expected to recalibrate expectations for monetary policy across major central banks and influence the pricing of interest rate differentials in global currency markets.

Meanwhile, US crude oil inventory data, ongoing geopolitical developments, and earnings reports from leading American corporations will shape investor risk appetite and potentially drive further volatility in oil prices and commodity-linked currencies.

The combination of major economic indicators, corporate earnings announcements, and central bank commentary should provide fresh insight into several key questions currently facing investors.

In particular, the data will help markets assess the likelihood of major central banks maintaining current interest rates or adjusting their policy stance, potentially influencing the near-term direction of foreign exchange markets, US equities, and global bond yields.

More broadly, global asset classes are likely to remain range-bound as risk sentiment fluctuates.

The US Dollar Index has retreated modestly from its recent highs, with its underlying performance continuing to be influenced by US Treasury yield movements, geopolitical safe-haven flows, and diverging economic conditions between the United States and Europe.

 
Conclusion
Geopolitical tensions in the Middle East and the ongoing Russia–Ukraine conflict remain significant sources of uncertainty for financial markets, with the potential to trigger sudden shifts in safe-haven demand and cross-asset capital flows.

Several institutions have warned that continued declines in crude oil inventories, combined with escalating geopolitical tensions, could fuel another rebound in oil prices. This, in turn, could push global inflation expectations higher and indirectly exert upward pressure on US Treasury yields.

Meanwhile, upcoming earnings reports from highly leveraged AI companies will be closely watched for signs of slowing revenue growth or tightening financing conditions. Any deterioration in these areas could weigh on growth-stock valuations and undermine broader investor risk appetite.

For the US dollar, the recent pullback appears to be primarily a short-term, positioning-driven correction rather than a definitive shift in its underlying trend.

Ultimately, US employment and inflation data will remain the key determinants of the dollar's medium-term direction, while geopolitical developments, corporate earnings, and changing interest rate expectations are likely to drive near-term market volatility.

*General advice only