The "shutdown" of the U.S. federal government continues. Analysis of the short-term trends of spot gold, silver, crude oil, and foreign exchange on October 20

Global market overview

1. European and American market conditions

The three major U.S. stock index futures all rose, with the Dow futures rising 0.14%, the S&P 500 futures rising 0.27%, and the Nasdaq futures rising 0.35%. Germany's DAX index rose 1.12%, Britain's FTSE 100 index rose 0.38%, France's CAC 40 index fell 0.17%, and the European Stoxx 50 index rose 0.64%.

2. Interpretation of market news

The "shutdown" of the U.S. federal government continues to affect the nuclear sector

The "shutdown" of the U.S. federal government has lasted for more than 19 days. According to US media reports on the 19th, due to the "shutdown", approximately 1,400 employees of the National Nuclear Security Administration, a subsidiary of the US Department of Energy, will be forced to take unpaid leave starting on the 20th. This is the first time since the agency was established in 2000. Work involving sites where nuclear weapons are assembled will be affected and related facilities will enter safety shutdown mode. According to reports, if the "shutdown" continues, related weapons manufacturing and the enrichment of special nuclear materials will also stop starting from the 28th at the earliest.

Hamas will discuss the continuation of the ceasefire in Gaza with the mediators in Cairo

On the 20th local time, a source close to the negotiations said that the Palestinian Islamic Resistance Movement (Hamas) delegation will meet with mediators Qatar and Egyptian officials in Cairo, Egypt, on the same day to discuss the continuation of the ceasefire in the Gaza Strip. The source said the delegation, led by Hamas official Khalil Haya, will discuss "dozens of air strikes that killed dozens of people in the Gaza Strip on the 19th." The source also revealed that the Hamas delegation will also meet with the Egyptianand officials to discuss an upcoming intra-Palestinian dialogue hosted by Egypt aimed at "achieving unity among Palestinian factions."

Brazilian inflation expectations have dropped slightly, and the high interest rate environment will continue

⑴ Brazilian economists have slightly adjusted the IPCA inflation index expectation for 2025 from 4.72% to 4.70%. ⑵Inflation expectations for 2026 are also slightly lowered, from 4.28% to 4.27%. ⑶The market expects that the benchmark interest rate will remain at 15.00% by the end of 2025, consistent with previous predictions. ⑷The interest rate is expected to remain at 12.25% by the end of 2026, indicating the slow normalization of monetary policy. ⑸The GDP growth forecast for 2025 rose slightly from 2.16% to 2.17%, showing a mild upward revision trend. ⑹ The economic growth is expected to remain at 1.80% in 2026, reflecting that medium- and long-term growth momentum is still insufficient. ⑺The exchange rate of the real against the US dollar is expected to remain stable, with a target price of 5.45 by the end of 2025. ⑻The exchange rate is expected to remain at 5.50 by the end of 2026, indicating that currency depreciation pressure is controllable.

The capacity expansion of the Polish LNG terminal has changed the energy landscape of Central and Eastern Europe

⑴The Polish natural gas pipeline operator announced that it will solicit binding bids for the expansion capacity of the floating LNG terminal near Gdansk. ⑵ This move stems from the strong interest shown by shipping xmaccount.companies in expansion projects. Operators are building terminals with an annual regasification capacity of 6.1 billion cubic meters. ⑶The expansion plan considers adding a second unit, which is expected to achieve an annual regasification capacity of 4.5 billion cubic meters. ⑷Nearly half of the regasified LNG will be exported to neighboring countries such as Ukraine, Slovakia, the Czech Republic and Lithuania. ⑸The annual export volume is expected to be between 6.9 and 8.9 billion cubic meters, and may gradually drop to approximately 2.6 billion cubic meters in the next few decades. ⑹ As many as 14 domestic and foreign xmaccount.companies have expressed interest in the planned facilities, and the forecast demand in 2031-2032 exceeds its production capacity by nearly four times. ⑺The collection of binding bids will be launched in the first quarter of 2026. The EU's ban on Russian gas imports in June will create new opportunities for member states. ⑻ Ukraine has received multiple batches of LNG supplies through Poland this year, and more European xmaccount.companies are paying attention to LNG transmission channels through Poland.

Credit clouds are overwhelming, and undercurrents of mergers and acquisitions in the U.S. banking industry are surging

⑴ Four senior industry insiders pointed out that concerns about the risk of loan losses of U.S. banks are giving rise to market expectations for an acceleration of industry mergers and acquisitions. ⑵Recent bankruptcies and non-performing loan issues in the auto industry have dragged down the performance of bank stocks. The U.S. KBW Regional Bank Index plunged more than 6% on Thursday. ⑶ According to legal professionals, stock market activities and valuation pressure have become important catalysts for merger and acquisition negotiations, and current market trends may accelerate this process. ⑷A new round of market panic stemmed from Zions Bank's disclosure of losses related to two business loans and a fraud lawsuit filed by Western Alliance. ⑸ Industry executives emphasized that there are essential differences between current credit concerns and the banking crisis in 2023, mainly due to the opaque information on loan risk exposures. ⑹Although the stock priceVolatility may hinder valuation consensus in the short term, but in the longer term credit concerns will prompt more small and medium-sized banks to consider sale options. ⑺Investment bank analysis shows that seven regional banks, including Zions, Flagstar, and First Horizon, may become attractive M&A targets. ⑻ There were 51 bank mergers and acquisitions announced in the third quarter, setting a single-quarter record in four years. ⑼ Industry bankers believe that market uncertainty highlights the importance of bank size in resisting shocks and provides support for long-term mergers and acquisitions. ⑽ Strategists pointed out that the latest wave of selling will restart strategic merger and acquisition negotiations. If the market's perception of bank corporate value changes, the merger and acquisition schedule may be accelerated.

The storm in the euro zone bond market calmed down, and safe-haven yields rebounded

⑴The euro zone’s benchmark government bond yields rose on Monday as concerns about Trump’s tariff remarks and the health of the U.S. banking industry eased. ⑵ The market's demand for safe assets has weakened, limiting the impact of France's unexpected rating downgrade last Friday. ⑶The yield on German 10-year government bonds rose 1 basis point to 2.59%, after hitting 2.523%, the lowest since June 25, on Friday. ⑷The chief economist of the agency pointed out that the current market fluctuations are mainly driven by U.S. stocks and credit products, and the reaction of the bond market itself is relatively flat. ⑸ The downgrade of France's rating did not trigger a violent market reaction. It is expected that such impact will be released slowly rather than immediately. ⑹ The money market expects the European Central Bank to keep interest rates unchanged at its meeting on October 30, and expects to cut interest rates only once before the end of July 2026. ⑺ Germany’s two-year yield, which is more sensitive to ECB policies, rose 2.4 basis points to 1.94%. ⑻ After the political risks in France eased, the spread between German and French 10-year government bonds fell from the high point earlier this month and currently remains at 79.36 basis points.

The CDS spreads of U.S. banks are high, and the haze of bad debts has enveloped the market

⑴The default insurance cost of U.S. bank bonds continues to remain at a relatively high level, reflecting the market’s lingering concerns about the stability of regional banks. ⑵ This round of concerns stems from last week’s disclosure of non-performing loan exposures by two U.S. banks. ⑶ Although the market may try to put aside fears of a broader credit crisis, another announcement of similar events could trigger a new round of volatility. ⑷The five-year credit default swap spreads of Bank of America and Citigroup are currently trading at 58 basis points. ⑸The spread level climbed to the current position after the release of the relevant report last Thursday.

With the Federal Reserve’s policy meeting imminent, the lack of data makes decision-making more difficult

⑴ The Federal Reserve will hold a policy meeting next week, but the government shutdown has interrupted the release of key economic data, affecting its judgment on the economic situation. ⑵ Although official employment data has been missing since the shutdown on October 1, available information still shows weak employment growth. ⑶The Federal Reserve's own economic survey shows that consumer spending may be experiencing cracks, and business confidence surveys also point to a decline. ⑷However, xmaccount.companies also warned of upward price risks, inflation continued to be higher than the 2% target, and economic growth forecastsRevised higher on clarity on corporate investment. ⑸Financial markets expect the Federal Reserve to cut interest rates by 25 basis points to a range of 3.75%-4.00% at its October 28-29 meeting. ⑹ Analysts pointed out that policymakers are currently "flying blindly" and the labor market situation has become the biggest unknown. ⑺ Federal Reserve Chairman Powell and other officials have recently focused on the labor market, with average monthly employment growth falling to 29,000 from June to August. ⑻New risks include bank loan loss disclosures and renewed escalation of trade tensions. ⑼September CPI data will be released on October 24, and is expected to increase by 3.1% year-on-year to accelerate the upward trend. ⑽The PCE price index that the Federal Reserve focuses on has risen from a low of 2.3% in April to 2.7% in August. ⑾ Kansas City Fed President Schmid believes that the current interest rate level is "at the right place" and still poses downward pressure on inflation. ⑿ Fed officials have significantly different views, ranging from concerns about inflation to belief that interest rates are too high, and they all rely on the latest data to verify their expectations. ⒀ Richmond Fed President Barkin pointed out that alternative indicators such as credit card transaction data cannot replace the xmaccount.comprehensiveness of government data. ⒁ Fed Governor Waller pointed out that the current economy is showing multiple divergence characteristics and advocated "cautious" advancement of interest rate cuts. ⒂Minneapolis Fed President Kashkari emphasized that the longer the shutdown lasts, the lower confidence in economic judgment will be.

3. Trends of major currency pairs before the New York market opens

EUR/USD: As of 20:23 Beijing time, EUR/USD rose and is now at 1.1658, an increase of 0.04%. The price of (EUR/USD) fell in the last trading session in New York pre-market, erasing its early gains as it attempts to find higher lows on which to base itself, which may help it gain positive momentum for another rise. Bullish correction waves dominate the short term, as it trades above the EMA50, in addition to positive signals on the relative strength indicator after reaching oversold levels, there is ongoing positive pressure.

GBP/USD: As of 20:23 Beijing time, GBP/USD fell and is now at 1.3415, a decrease of 0.10%. Pre-market in New York, (GBPUSD) price rose above recent intraday levels, taking advantage of ongoing positive pressure as it trades above its EMA50, as well as a breakout of major bearish trend lines in the short-term and the dominance of bullish correction waves. Furthermore, positive signals from the Relative Strength Index after reaching oversold levels added to the negative pressure on the pair.

Spot gold: As of 20:23 Beijing time, spot gold has risen, now trading at 4295.18, an increase of 1.13%. Pre-market in New York, (gold) prices were trading around last session's levels, trying to gain support that might help it recover and rise again.Bullish momentum, after reaching oversold levels and positive signals, the primary bullish trend it trades dominates along with the short-term secondary trendline and the relative strength indicator shows positive divergence.

Spot silver: As of 20:23 Beijing time, spot silver rose and is currently trading at 52.229, an increase of 0.69%. Pre-market in New York, the (silver) price fell in the last trading session, relying on the support of its EMA50, trying to gain bullish momentum that may help it recover and rise again. The main bullish trend dominates in the short term and trades along the support trend line of this track. After reaching oversold levels, a positive signal of relative strength appeared on the relative strength indicator.

Crude oil market: As of 20:23 Beijing time, U.S. oil fell, now trading at 56.740, a decrease of 0.73%. Prices fell in the final trade of the day in New York pre-market, as the Relative Strength Index began to form a negative divergence, a negative signal after price action relative to overbought levels. The main downtrend dominates in the short term and the price is trading along the trendline while negative pressure persists as the price is below the EMA50, which reduces the likelihood of a price recovery in the near future.

4. Institutional view

Institution: Weak growth and fiscal concerns in the euro area may inhibit the rise of the euro

MonexEurope analysts pointed out that due to the weak growth trend and fiscal concerns in the euro area, the room for the euro's recent appreciation is still restricted. The bank believes that if market risk appetite remains strong and interest rate differentials continue to tilt toward the euro, there is still room for the euro to rise slightly. However, analysts emphasized that "continued concerns about economic growth and fiscal pressures in the euro area mean that it is difficult for the euro to achieve sustained gains before clearer signs of endogenous resilience emerge." This is in contrast to Monex's relatively optimistic expectations for the mid- to long-term prospects of the euro area.

Agency: British inflation data may become a factor of support for the pound

XTB analyst Kathleen Brooks pointed out that the acceleration of British inflation in September is expected to strengthen the Bank of England's reason to postpone further interest rate cuts until next year, thereby providing support for the pound. Data on Wednesday are expected to show UK inflation rose to 4.0% year-on-year in September, according to a survey of economists. Brooks said the next Bank of England rate cut is expected to be implemented as early as February next year, by which time inflation should have begun to ease. She said upward pressure on inflation and expectations of no more interest rate cuts before 2026 could boost the pound in the xmaccount.coming months.

The above content is all about "[XM Foreign Exchange Decision Analysis]: The U.S. federal government's "shutdown" continues, short-term trend analysis of spot gold, silver, crude oil, and foreign exchange on October 20". It is carefully xmaccount.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!

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