EUR/USD rebounds above 1.1600 as trade tensions intensify; Macron reappoints Lecornu

Forex

Summary:

The Euro rebounded above 1.1600 on Friday after four straight sessions of losses, supported by easing political tension in France following President Macron’s reappointment of Sébastien Lecornu as Prime Minister and a weaker U.S. dollar. The greenback declined amid renewed U.S.-China trade tensions and softer consumer sentiment data, reinforcing expectations of Fed rate cuts.

Fundamental Analysis

The Euro (EUR) managed to rebound above the 1.1600 mark on Friday after four consecutive days of losses, buoyed by a broad retreat in the U.S. dollar and easing political uncertainty in France. French President Emmanuel Macron officially reappointed Sébastien Lecornu as Prime Minister, ending days of speculation that had fueled investor unease.

Macron stated on X.com that the new government will focus on “stabilizing the nation’s budget by year-end and addressing the daily challenges of our citizens,” signaling a policy reset aimed at restoring confidence after weeks of political gridlock. This move helped calm fears of further volatility in French government bonds, which had seen mild pressure earlier in the week.

Meanwhile, the U.S. dollar (USD) weakened sharply as renewed trade tensions between Washington and Beijing reignited risk aversion. President Trump’s latest remarks threatening a “massive increase in tariffs” on China, in retaliation for recent rare-earth export restrictions, weighed heavily on the greenback. Investors fear a fresh escalation in the trade conflict could dampen global growth prospects, prompting markets to scale back expectations of a prolonged U.S. economic outperformance.

Adding to the bearish dollar tone, the University of Michigan (UoM) Consumer Sentiment Index for October came in broadly unchanged. Although optimism about inflation continued to improve, concerns surrounding the ongoing government shutdown and labor market softness kept consumers cautious. This mixed data reinforces expectations that the Federal Reserve may proceed with a rate cut cycle, further undermining USD demand across the board.

Technical Outlook: EUR/USD Eyes Recovery Toward 1.1700

EUR/USD rebounds above 1.1600 as trade tensions intensify; Macron reappoints Lecornu_1

On the technical front, EUR/USD has staged a modest rebound but remains below the 72-day Exponential Moving Average (EMA), currently positioned at 1.1675 on the H4 chart, underscoring that the pair is still trading within a short-term bearish structure.

A sustained break above the 1.1665 resistance zone (coinciding with the EMA and prior consolidation ceiling) would open the door for a move toward the 1.1700 psychological barrier, followed by 1.1760, where sellers are likely to re-emerge.

On the downside, immediate support lies at 1.1600, a critical psychological and structural pivot. A decisive break below this level could expose the next major support at 1.1514, aligning with the late September swing low.

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Economic

Commodity

Silver Skyrockets Amid London Market Squeeze

Silver prices surged on Monday, climbing as much as 3% to approach $52 per ounce levels unseen in more than four decades as a severe short squeeze in the London metals market intensified. The rally reflects both physical market tightness and speculative positioning, with traders scrambling to cover short bets amid limited available supply. The scarcity of freely tradable silver has driven an extraordinary premium for London benchmark prices over those in New York, prompting traders to airlift bars across the Atlantic an unusual and costly move typically reserved for gold.

The rally pushed silver closer to the 1980 record of $52.50 per ounce, which was set during the Hunt brothers’ speculative buying frenzy. This episode underscores the same causal chain of events: reduced liquidity and a mismatch between physical availability and leveraged short exposure have fueled a rapid, self-reinforcing price surge.

Gold Hits New Record on Haven Demand and Monetary Support

Gold extended its exceptional year-to-date rally, rising 1.3% to $4,068.21 per ounce and marking its eighth consecutive weekly gain. The metal’s climb has been propelled by a confluence of factors: continued central bank accumulation, inflows into exchange-traded funds, and the Federal Reserve’s ongoing cycle of interest rate cuts. Lower rates reduce the opportunity cost of holding non-yielding assets like gold, while the weakening confidence in the U.S. dollar reinforces its appeal as a store of value.

Investor behavior also reflects a strong correlation between geopolitical uncertainty and safe-haven accumulation. The latest flare-up in U.S.–China trade tensions, coupled with the threat of a U.S. government shutdown and political scrutiny of the Fed’s independence, has amplified risk aversion across global markets. This convergence of macro risks has renewed demand for gold, which now serves both as an inflation hedge and as insurance against systemic instability.

Trade Tensions Reignite Safe-Haven Flows

The metals rally came just as President Donald Trump’s administration appeared to soften its stance toward Beijing. Over the weekend, Trump suggested a willingness to resume talks, after earlier threats to impose 100% tariffs on Chinese goods. In response, China urged Washington to abandon “provocative” tariff threats and return to dialogue.

Yet, as analyst Kyle Rodda from Capital.com observed, even when “trade volatility may go silent, it never disappears.” His comment encapsulates the persistent causal relationship between geopolitical instability and investor rotation into gold uncertainty acts as the consistent fuel sustaining the metal’s multi-month ascent.

Liquidity Crunch Amplifies Silver’s Ascent

Silver’s meteoric rise is also tied to worsening liquidity conditions in London. Market participants report that the availability of unencumbered silver stocks has fallen dramatically after months of heavy withdrawals. The resulting scarcity, combined with speculative short positions, triggered a feedback loop: as prices rise, short sellers rush to close positions, tightening supply further and pushing prices higher.

The imbalance has widened the London–New York price spread to unprecedented levels, prompting traders to exploit arbitrage opportunities. The decision to fly physical silver bars across the Atlantic underscores the severity of the supply dislocation and the strength of profit incentives in this constrained environment.

Section 232 Probe Adds Policy Risk to Precious Metals

Adding to the volatility is the U.S. administration’s pending Section 232 investigation into critical minerals a review that includes silver, platinum, and palladium. Traders fear that any decision to impose new levies or trade barriers could constrict supply chains further. This policy uncertainty acts as an indirect causal accelerator for speculative buying, as market participants hedge against potential disruptions to cross-border flows of key metals.

The bullish momentum extended across the entire precious metals spectrum. Platinum traded near $1,634 per ounce, up nearly 3%, while palladium rose as much as 3.6%. The Bloomberg Dollar Spot Index was little changed, reflecting that metals strength was driven more by market fundamentals and investor sentiment than by currency depreciation.

The synchronized advance across metals reflects a structural shift in portfolio allocation toward tangible assets amid declining real yields, intensifying trade disputes, and persistent geopolitical instability. These dynamics form a reinforcing relationship: each new macro shock deepens investor appetite for physical assets, pushing prices higher and amplifying scarcity concerns.

A Market Fueled by Fear, Liquidity, and Leverage

The simultaneous surge in gold and silver marks one of the most dramatic chapters in the 2025 commodity cycle. Gold’s rise captures broad-based investor anxiety over macroeconomic fragility, while silver’s rally embodies the raw mechanics of leverage, liquidity constraints, and speculative momentum.

Whether this momentum persists depends on the interplay between monetary policy, trade diplomacy, and physical supply availability. For now, the twin forces of economic uncertainty and market tightness have merged to propel precious metals into a rarefied zone where psychology, policy, and scarcity converge to rewrite historical price records.

Source: Bloomberg

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Glendon

Economic

Forex

Chinese shipments overseas grew at the fastest rate in six months, far exceeding forecasts in a sign of resilience that’s giving Beijing a stronger hand in the latest trade war with the US.

Exports rose 8.3% in September from a year earlier, according to data from the General Administration of Customs on Monday (Oct 13). That was faster than the 6.6% median estimate in a Bloomberg survey of economists and shows there’s no slowdown yet in the record-breaking flood of goods leaving China’s shores.

Shipments to the US plunged 27%, the sixth month of double-digit declines.

“China’s exports have remained resilient despite US tariffs, thanks to a diversified export market and strong competitiveness,” said Michelle Lam, Greater China economist at Societe Generale SA. “The limited impact from US tariffs on overall trade so far has likely emboldened China to take a tougher stance in US-China trade negotiations.”

Companies have responded to higher US tariffs by trying to seek out alternative markets or routing goods indirectly to the world’s biggest economy.

Exports to the European Union rose by more than 14%, the most in over three years, and those to Africa surged 56%. Shipments to the 10-nation Southeast Asian trading bloc grew almost 16%.

The strength of demand from markets other than the US means that Chinese firms should be less affected by the further increase in tariffs threatened by US President Donald Trump. Higher sales overseas are also providing a boost to a domestic economy in deflation and still struggling to reverse a decline in housing demand and prices.

China is set to announce third-quarter data for economic activity on Oct 20, with most analysts predicting a slowdown from the first half of the year. Still, a strong showing in the first two quarters all but ensures China will reach the official growth target of around 5%.

Imports grew 7.4% in September, far more than forecast, leaving a surplus of US$90.5 billion (RM382.27 billion).

“The current external environment remains grim and complex,” Wang Jun, deputy head of the customs authority, told reporters in Beijing. “Foreign trade faces rising uncertainty and difficulties. Taking into consideration a high base from last year, we need hard work to stabilise trade development in the fourth quarter.”

China unveiled wide-ranging global export controls on products containing even traces of certain rare earths last week, prompting Trump to fire back by threatening to cancel a planned in-person meeting with China President Xi Jinping — their first in six years. The US leader also announced plans to put an additional 100% tariff on Chinese goods, along with sweeping curbs on “any and all critical software”.

The Trump administration later signalled openness to a deal with China to quell fresh trade tensions while also warning that recent export controls announced by Beijing were a major barrier to talks.

Bloomberg Economics estimates that a 100% US tariff hike would lift effective rates on Chinese goods to around 140% — a level that shuts down trade. While the current rate is 25 percentage points above the world average, China’s dominance of manufacturing has kept its exports flowing.

“A durable escalation could prolong China’s deflation, potentially triggering more policy rebalancing efforts,” Morgan Stanley economists led by Robin Xing said in a report before the data release. “In the case of China’s strict rare earth curbs and the US’ durable 100% tariff hike, China’s export growth could decelerate quickly via the direct tariff shock and global supply chain disruption.”

Source: Theedgemarkets

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Commodity

Oil Prices Recover After Steep Drop

Global oil benchmarks regained ground on Monday, rebounding from one of their sharpest declines in recent months. Brent crude climbed above $63 a barrel after tumbling 3.8% on Friday the largest drop since August while West Texas Intermediate (WTI) hovered near $60. The recovery followed indications that President Donald Trump’s administration may be open to re-engaging with Beijing, offering a momentary respite for traders rattled by escalating trade tensions.

The price reaction illustrates the market’s close correlation with geopolitical developments: even a modest diplomatic gesture can prompt a significant reversal in sentiment, particularly when prior declines had already priced in a worst-case scenario.

Trade Tensions and Tariff Threats Continue to Weigh on Market

Oil’s volatility this month has been fueled by renewed economic friction between Washington and Beijing. On Friday, Trump announced plans to impose an additional 100% tariff on Chinese goods and expand export controls on “any and all critical software,” effective November 1. These measures were framed as retaliation against China’s new port fees on U.S. ships and export restrictions on rare earth elements and other key materials.

Beijing, in turn, accused Washington of provocation but maintained that it remained open to negotiations. Over the weekend, Trump signaled a more conciliatory stance, remarking on Air Force One that “we’ll be fine with China” while reaffirming that the tariff plan remains active. His dual messaging reflects a familiar dynamic in U.S.–China relations oscillating between confrontation and conciliation which sustains market uncertainty.

Investor Sentiment: Short-Term Relief, Long-Term Skepticism

Market participants largely interpreted the rebound as a temporary correction rather than the start of a sustained rally. Haris Khurshid, Chief Investment Officer at Karobaar Capital LP, noted that traders were merely “covering after last week’s selloff,” describing the price recovery as a “positioning rebound.” His observation captures a causal relationship between shifting rhetoric and price action: when diplomatic signals soften, speculative positions unwind, but underlying demand fundamentals remain unchanged.

Unless concrete progress emerges from future U.S.–China talks, Khurshid warned, the rally could fade quickly. The current rebound, therefore, reflects relief rather than renewed confidence in oil’s long-term outlook.

Global Shipping Disruptions Add Supply Chain Risk

China’s imposition of port fees on U.S.-owned vessels effective October 14 has already disrupted logistics networks, leading to last-minute cancellations of cargoes, including oil shipments. These disruptions have pushed up shipping rates and amplified operational costs for traders. The move mirrors U.S. levies on Chinese vessels, underscoring how trade disputes are increasingly spilling into the maritime logistics and energy transport sectors.

This correlation between trade policy and energy costs demonstrates the growing interconnectedness of global supply chains. As both nations weaponize tariffs and fees, transport inefficiencies and higher freight costs could indirectly pressure crude prices in the longer term, depending on how demand reacts to rising trade frictions.

Fundamentals Still Weak: Rising Supply and Easing Geopolitical Risks

Beyond geopolitics, oil markets remain constrained by structural oversupply concerns. The Organization of the Petroleum Exporting Countries (OPEC) and its allies have been gradually adding production, increasing the risk of a glut later this year. The additional supply coincides with slowing global economic momentum and muted consumption forecasts, reducing the likelihood of a sustained price recovery.

Meanwhile, geopolitical risk premiums in the Middle East have eased slightly. The fragile ceasefire between Israel and Hamas has diminished fears of immediate conflict escalation in the region, which accounts for roughly one-third of global oil production. However, Trump’s remark about potentially supplying Ukraine with long-range Tomahawk missiles capable of striking deeper into Russian territory introduced a fresh geopolitical variable, raising questions about broader supply disruptions in OPEC+ territories, including Russia.

Fragile Calm in a Market Driven by Politics

Oil’s rebound at the start of the week signals a temporary stabilization rather than a fundamental shift in market outlook. Prices continue to react sensitively to the interplay of political signaling, trade policy shifts, and short-term positioning. As long as Washington and Beijing maintain an adversarial yet unpredictable dialogue, crude markets are likely to remain volatile.

Without tangible diplomatic progress or a clear change in global supply-demand balance, the current uptick remains vulnerable more a pause in anxiety than a return to stability.

Source: Bloomberg

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Economic

Rare Earth Rally Driven by Renewed Geopolitical Friction

Rare earth mining stocks surged on Monday as investors bet that the escalating trade dispute between the United States and China would accelerate global diversification away from Beijing’s dominance in critical mineral exports. The rise followed U.S. President Donald Trump’s threat to impose sweeping new tariffs on Chinese goods in retaliation for China’s tightening of export controls, measures that have reignited concerns over supply security in the global technology and defense industries.

Arafura Rare Earths Ltd., which is developing a major project in Australia’s Northern Territory, jumped as much as 27% its highest level in more than two years while Australian Strategic Materials Ltd. soared up to 42%. Lynas Rare Earths Ltd., one of the world’s largest non-Chinese producers, climbed 8.5%, and Iluka Resources Ltd. gained as much as 6.3%. Collectively, these advances represent a sharp investor shift toward Western-aligned suppliers of strategic minerals as tensions over export control policies deepen.

Policy Catalysts: Strategic Stockpiles and U.S.–Australia Cooperation

Amid the geopolitical flare-up, The Age reported that Canberra is considering the creation of a A$1.2 billion (US$782 million) strategic minerals reserve under a proposed agreement with the U.S. government. The move, if confirmed, would mark a significant step in formalizing long-term cooperation on critical resource security between the two allies.

The proposed reserve represents a causative response to growing fears that China’s tightening export regime could disrupt industrial production across sectors reliant on rare earths, from electric vehicles to advanced weapons systems. Western governments, already aware of China’s near-monopoly over global refining capacity, appear poised to convert the current trade friction into an opportunity to bolster supply independence.

China’s Expanding Controls Reinforce Supply Fears

The market reaction follows Beijing’s announcement last Thursday that it would broaden its export controls to cover more rare earth elements and extend restrictions to any product containing even trace amounts of these materials. This policy shift directly challenges global manufacturers, as it potentially affects a wide spectrum of high-tech goods.

China’s stance, presented as a defensive response to earlier U.S. restrictions, has heightened perceptions of long-term supply risk. This causal link between political decisions and commodity price action has strengthened investor appetite for alternative suppliers like Australia and the U.S., viewed as stable jurisdictions with favorable regulatory environments.

Western and Chinese Stocks Move in Divergent Patterns

In an interesting contrast, Chinese rare earth companies also advanced, even as the broader mainland market fell due to escalating trade concerns. Shares in JL Mag Rare-Earth Co. jumped up to 17%, China Northern Rare Earth Group rose nearly 10%, and China Rare Earth Resources and Technology Co. gained 8.7%. This correlation indicates that while the trade conflict introduces global risk, it simultaneously enhances the perceived profitability of Chinese firms benefiting from higher prices and restricted exports.

Meanwhile, U.S.-listed MP Materials Corp., backed by the Department of Defense to secure domestic supply, climbed more than 8% on Friday to a record high. This rise underscores how geopolitical confrontation can create parallel bullish effects across competing national industries Chinese firms profiting from scarcity, and Western firms from strategic reallocation of capital.

Market Interpretation: Strategic Realignment Over Speculative Spike

While Monday’s gains may appear driven by speculative momentum, the underlying trend reveals a deeper structural realignment of the global rare earth supply chain. The current rally represents more than a short-term reaction it reflects investor recognition of long-term geopolitical decoupling and government intervention in resource security.

The link between political uncertainty and commodity performance is both causal and reinforcing: each new trade restriction amplifies the strategic premium attached to non-Chinese producers. This dynamic is expected to persist, particularly as Western governments incorporate critical minerals into broader national security frameworks.

Rare Earths at the Center of Economic Security Strategy

The rare earth price rally illustrates how geopolitical competition continues to reshape global markets. As Beijing and Washington spar over export controls and tariffs, investors increasingly treat resource diversification as a cornerstone of economic resilience. Australia’s emerging role as a strategic supplier underscores the transition from market-based trade to policy-driven resource alignment.

Whether the latest surge proves sustainable will depend on how far each side escalates or compromises in the weeks ahead. Yet one conclusion is clear: the era when China’s dominance over rare earths could operate outside of global political scrutiny is ending, replaced by a new phase where minerals and diplomacy are deeply intertwined.

Source: Bloomberg

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Economic

Forex

Bank of England Governor Andrew Bailey arrives in Washington this week under even more than the usual scrutiny. He’s now clearly the key vote on a sharply divided Monetary Policy Committee.

The governor has the opportunity to signal his allegiances in two appearances alongside the International Monetary Fund and World Bank meetings at a time when a number of prominent economists have started warning that markets are underpricing the chance of further interest-rate cuts this year.

Bailey is now seen as the crucial swing voter on the nine-strong MPC which is split between four hawkish officials who oppose more reductions and four more dovish rate-setters keen to keep easing hopes alive.

The split reflects different views on whether a spike in inflation to almost double the BOE’s 2% target will cause price pressures to linger and make any attempt to lower borrowing costs too risky. Two of Bailey’s deputies, Sarah Breeden and Dave Ramsden, have in recent weeks played down the threat and said that underlying inflation remains on track.

Expectations surrounding Chancellor of the Exchequer Rachel Reeves’ autumn budget, which she unveils three weeks after the meeting on Nov. 26, are also seen as crucial for guiding the panel.

Bailey has struck a very fine balance in recent comments, saying that the rates which govern millions of Britons’ borrowing costs need to be lower but has warned, “exactly when that will be, and how much it will be, will depend on the path of inflation going down.” He has also signaled that he is content with market pricing that sees little prospect of a cut before the end of the year.

Investors have all but ruled one out at the next meeting in November and see around a 20% chance of a cut in December. However, some economists, including at Barclays, Nomura and TD Securities, still believe that a move before the end of the year is in play.

Jack Meaning, chief UK economist at Barclays, told Bloomberg Bailey seems “genuinely torn between the two camps.” He highlighted tightening financial conditions and the potential for upcoming gross domestic product and labor-market data to disappoint.

If those conditions transpire and inflation remains consistent with the MPC’s expectations that inflation will peak in September and then gradually cool by the end of the year “then, on balance, we think it could sway Bailey to lean to the more dovish side,” he added.

James Rossiter, head of global macro strategy at TD Securities, is among those who view markets as significantly under-pricing the odds of a cut. “There are clearly some on the MPC who are comfortable with the quarterly pace,” he said, adding that “it’s somewhat up to data surprises to dictate the way things go.”

Bloomberg Economics BOESPEAK index, an automated model that tracks the interest-rate sentiment within MPC comments, has moved in a more hawkish direction in recent weeks after gauging a dovish stance from the panel over the summer. It still places Bailey’s recent remarks as tending toward the doves.

The timing of next month’s meeting complicates the BOE’s thinking, since it comes two weeks after September inflation data that is expected to show price growth hitting 4%, and with the budget looming.

That means the period between November and December’s meetings may be crucial. It’s a time when the MPC will receive two rounds of inflation and jobs data.

In addition, the BOE will be watching the budget closely after Reeves was blamed for driving inflation higher with her increase to payroll taxes in April. Another raft of the tax hikes that are widely expected could cut both ways, depending on whether they are seen as more likely to fuel price pressures or subdue the economy further.

The current market pricing “is not a lot for a central bank that has a history of surprising,” said George Buckley, chief UK economist at Nomura.

“A lot really depends how much the tightening announcements in the budget will be upfront versus how much will be delayed until future years,” he said. “If they front-load it, then that will appear in the BOE’s forecast into GDP and that will pull down ultimately on inflation.”

A Bloomberg survey just before the September meeting suggested that the consensus of forecasters still expected a reduction in borrowing costs in the fourth quarter. However, some economists have since deferred their prediction for the next cut to 2026, amid concerns over rising inflation expectations fueled by surging food bills.

Source: Bloomberg Europe

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Michelle

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\China’s foreign trade showed surprising strength in September, with both exports and imports beating forecasts despite headwinds from mounting global tensions and weakening domestic demand.

However, with a surge in imports, trade balance shrank to a surplus of $90.45 billion, less than expectations of $98.96 billion. The surplus also fell from the $102.33 billion seen in the prior month, customs data showed on Monday.

Exports in dollar terms jumped 8.3% year-on-year, well ahead of the 6.0% gain projected by analysts and sharply up from August’s 4.4% rise.

Imports rose 7.4%, also far exceeding the anticipated 1.5% and reversing the modest 1.3% growth logged in August.

The performance signaled resilience in China’s external sector even as other economic indicators point to softness at home.

Exporters are increasingly shifting focus away from the United States toward Southeast Asia, Africa, and India to offset U.S. tariff pressure. Still, weakness lingers in domestic demand as fixed-asset investment, retail sales, and manufacturing orders remain sluggish.

Policymakers may view the stronger trade print as justification to delay aggressive stimulus measures, but further upside hinges on whether global demand holds up and whether trade tensions intensify.

U.S. President Donald Trump ramped up trade tensions last week, threatening to impose an additional 100% tariffs on Chinese exports, with Beijing vowing to retaliate if measures come into effect.