Market Mondays: Balancing cuts, earnings, and a stronger dollar

We enter the week still in a U.S. data blackout due to the government shutdown. That means no official Non-Farm Payrolls or other labour releases from the Bureau of Labor Statistics. Traders will instead lean on ADP private payrolls (Wednesday) and this week’s PMIs and other sentiment gauges to take the market’s pulse.

The Fed’s hawkish cut recalibrates expectations

Last week’s FOMC decision removed some of the market’s conviction about a long glide-path of rate cuts into 2026. Chair Powell’s tone—and follow-up remarks from several Fed officials—cooled what had become aggressive easing bets, without crushing the broader risk mood.

This led to a re-balancing of the Fed’s dual mandate.  With inflation still hovering closer to 3% than 2% into next year, the Fed signalled caution about cutting too far, too fast. This led to a repricing in markets. Fed Watch probabilities for a December cut slid from around 95% a week earlier to roughly 65% after the meeting. The message: easing is still possible, but not a blank check.

Earnings season: high bars and higher scrutiny

With about 64% of S&P 500 companies reported as of Friday, 83% have delivered positive EPS surprises. Blended year-over-year earnings growth has climbed to about 10.7%, up from 7.9% at the start of the season—another strong quarter on the whole.

Yet the reaction function is unforgiving where expectations are sky-high. Mega-cap tech stocks saw mixed performance. Meta’s shares were punished to a four-month low despite decent top-line figures, as tax effects and higher costs undercut the narrative. By contrast, enthusiasm around AI-linked capex remains a tailwind for the NVIDIA ecosystem, even with a modest pullback after the company briefly hit a $5T market cap.

What’s next this week: AMD headlines the late-season slate, with Qualcomm also in focus as a proxy for AI and edge computing demand. Investors want not only beats, but evidence that massive AI spend is earning a real return.

Market reactions: Indices, FX and precious metals

U.S. large-cap indices remain in disturbed but intact bullish channels. The pattern this year has been sharp pullbacks on negative headlines, followed by steady clawbacks to new highs. Positioning and retail client sentiment skew net-long on the S&P 500, Dow, and—after a wobble—again on the Nasdaq.

What could shift the tone near-term? A surprisingly strong/weak ADP print, guidance from this week’s key semis/AI earnings, any change in the December Fed outlook.

The U.S. dollar index staged a notable rebound, pressing toward resistance just below 100. Drivers include higher relative U.S. yields and the Fed’s more guarded stance on cuts. As the dollar firmed, EUR/USD broke below an ascending support line dating back to August, and GBP/USD retreated toward recent lows.

US dollar index (DXY) daily chart

Past performance is not a reliable indicator of future results.

Bank of England: a tricky mix of slow growth and sticky prices

Markets now price roughly 70% odds of no change this week and a 30% for a cut—an appreciable shift from early-month expectations. The BoE’s bind is classic stagflation risk: inflation remains above target even as growth and labour metrics cool. The policy path and tone from Governor Bailey will be pivotal for GBP beyond the immediate decision.

RBA: higher-for-longer bias

With headline CPI around 3.2% and trimmed mean near 3% for September, policy doesn’t look restrictive enough to justify imminent cuts. The RBA is widely expected to hold but retains a firm anti-inflation stance—relevant for AUD volatility into the Asia session.

Gold shifted from a steady “buy-the-dip” profile to a volatile, breakout-driven regime as prices surged to records and then snapped lower. Last week’s 5% one-day drop helped deflate overbought conditions (RSI had stayed hot through September–October), with fundamentals providing a nudge—cooler U.S.–China tensions and a slightly more hawkish Fed tone.

• Medium-term case intact: Central-bank buying, debasement hedging, and eventual softer policy still support the longer-run bull case.
• Tactics now matter: In a volatile regime, confirm breakouts/breakdowns rather than forcing ranges. Silver broadly tracks gold’s swings, with an added industrial-demand kicker amid constrained supply.

What to watch

• U.S. ADP private payrolls (Wed) and global PMIs for labour and growth signals during the blackout.
• AMD, Qualcomm earnings for AI demand read-through; any capex commentary that spills into NVIDIA expectations.
• BoE decision and guidance nuance on growth vs inflation.
• Dollar levels: DXY near 100; follow-through in EUR/USD after trendline break; GBP/USD around 1.31 support.
• Gold & Silver: Post-flush behaviour—does volatility compress or set up the next break?

Bottom line

This week is about expectations management. The Fed cooled the multi-year easing path without killing risk appetite; mega-cap tech must justify lofty multiples with tangible AI returns; the dollar has momentum again; and gold is trading the tape, not the story. Event risk is clustered—so adapt sizing and timing, let price action confirm your bias, and respect the new, more tactical tone across assets.