The U.S. government has been shut down for more than a week, and the yen collapsed after Sanae outperformed the market? The political situation in France is reorganized again!

It’s been a tense week for global markets as the U.S. government shutdown enters its second week. Things that initially seemed innocuous are now beginning to unsettle investors. The lack of economic data and the increasing uncertainty caused by the sharp rise in the US dollar have begun to weigh on market sentiment, breaking the market's stable bullish rhythm since late September.

The U.S. dollar exchange rate weakened in tandem with yields, and the U.S. dollar index fell from its weekly high. Traders are weighing the twin impacts of declining odds of a rate cut and rising political uncertainty overseas.

Trump’s remarks hit the market’s risk appetite, prompting investors to turn to bonds and gold; after a brief decline in the stock market, bargain-hunting funds entered the market and pushed the stock price back up. The yield on the 10-year U.S. Treasury note fell 8 basis points to 4.063%; the yield on the 2-year Treasury note fell 7 basis points to 3.522%.

The current U.S. government is in a deadlock, and the economic calendar is sparse. Affected by the government shutdown (currently entering its 10th day), the market is still in a state of data release interruption.

Despite some opposition within the Fed, statements by Fed officials strengthened the possibility of an interest rate cut, and the U.S. dollar index fell from Thursday's two-month high to 99.33. Federal Reserve Governor Christopher Waller said on Friday that the central bank should remain "cautious" but confirmed its support for easy policy.

Federal funds futures currently indicate a 25 basis rate cut in October.The probability of another interest rate cut is 95%; the probability of another interest rate cut in December has dropped to 80%. Minutes of the Federal Open Market www.xmxmxm.cnmittee (FOMC) meeting released earlier this week showed that members generally supported interest rate cuts, but there was no clear consensus on the pace of rate cuts. Incomplete inflation data due to the government shutdown is one of the reasons for the unclear pace.

Foreign exchange market: The U.S. dollar index continued to be strong this week, rising sharply overall. As of Thursday, it had risen for four consecutive trading days, and once broke through the 99 mark, setting a two-month high, and closed at 98.84 on Friday. Although expectations for interest rate cuts have increased, political uncertainty and safe-haven demand have supported the dollar's strength. In terms of non-U.S. currencies, the U.S. dollar against the yen had an eye-catching trend this week, rising sharply overall. It once broke through the 153 mark on Friday, setting an eight-month high. It fell back on Friday due to obstacles in the future of Prime Minister Sanae in the high market, and closed at 151.19, up 2.53% this week. Suppressed by the strong U.S. dollar, the pound, euro, and Australian dollar all fell against the U.S. dollar this week.

Gold market: Gold led the global market this week, closing at $4,010.43 per ounce, ending gains for the eighth consecutive week. Driven by expectations of interest rate cuts and risk aversion, gold prices hit new highs in succession, reaching a maximum of nearly $4,060 per ounce after breaking through the 4,000 mark on Wednesday, before retreating. Spot silver once broke through the $51/ounce mark for the first time since 2011, and closed at $49.97/ounce on Friday, also rising for eight consecutive weeks.

Crude oil market: Oil prices fluctuated, rising first and then falling. The supply and demand game dominates the trend, with rising inventories suppressing the rally. The first phase of the ceasefire in Kazakhstan and the easing of geopolitical tensions have exerted a certain drag on oil prices. In U.S. trading on Friday, oil prices accelerated their decline.

Review of Weekly News

1. The U.S. government has been "shut down" for more than a week, and the deadlock between the two parties has yet to be resolved

The U.S. federal government has been shut down for more than a week. In the sixth Senate vote, the two parties still did not reach a consensus.

The Republicans proposed a bill to fund the government until November 21, but it did not include the health care provisions demanded by the Democrats. The motion received 54 votes in favor and 45 against, 6 votes short of the 60-vote threshold for passage. The Democratic Party proposed another bill to extend government operating funds until October 31 and extend medical insurance subsidies, but it only received 47 votes and did not receive the support of any Republican senators.

The two parties have a tough stance, and the core of their disagreement is whether to continue the medical insurance subsidies under the Affordable Care Act. Senate Democratic leader Schumer accused House Speaker Johnson of being a "real obstacle" to the crisis, while Republicans insisted that the government must be restarted first before negotiations.

The government shutdown has had a substantial impact on federal agencies. About 2 million government employees have had their salaries suspended. Although personnel in key positions such as the military and air traffic control need to continue working, their salaries have been suspended. The government shutdown has also caused flight delays, suspended subsidies, and disrupted public services. White HouseThe Council of Economic Advisers estimates that every week of shutdown will cause economic losses of approximately US$15 billion, affecting both people's lives and the economy.

The employment and inflation data that the Federal Reserve relies on for its decision-making were also forced to postpone the release. According to the New York Times, despite the government shutdown, the Bureau of Labor Statistics has recalled some employees in an attempt to ensure that the Consumer Price Index (CPI) report is released as scheduled. The CPI report was originally scheduled to be released on October 15, but the final release date has not yet been determined, but it will almost certainly be released before the Federal Reserve's important policy meeting at the end of this month.

The decision to release this data is closely related to the adjustment of social security benefits. According to legal procedures, social security benefits need to be adjusted annually based on changes in the cost of living, based on inflation data in the third quarter. Therefore, any delay in September price data may directly affect the announcement of the welfare adjustment package.

Under the contingency plan announced by the Labor Department last month, the Bureau of Labor Statistics should suspend all operations, including regular data releases, during the funding interruption, and should not release economic data. Initially, it was expected that only the acting director would remain on duty.

2. Israel and Hamas reached a ceasefire agreement for the first phase of the Gaza conflict, and peace in the Middle East was at dawn

On October 8, 2025, local time, US President Trump announced that Israel and Hamas had reached a ceasefire agreement for the first phase of the Gaza conflict. The agreement is the first phase of Trump's 20-point Gaza plan, which calls for Israel to withdraw its troops to "agreed defense lines." However, the two sides still disagree on details such as the time and scope of the withdrawal and the fate of Hamas.

According to the agreement, Hamas will release 20 living Israeli hostages held by it within 72 hours, and Israel promises to withdraw its troops to the adjusted agreed line and release nearly 2,000 Palestinian detainees. In addition, Israel will open 400 aid trucks into Gaza every day in the first five days after the ceasefire, and will gradually expand thereafter to alleviate the local humanitarian crisis.

Israeli Prime Minister Benjamin www.xmxmxm.cnanyahu’s office announced that the Israeli government has approved the Gaza ceasefire agreement with Hamas. He thanked the IDF soldiers and security forces for their courage and sacrifice. The Israeli military also confirmed that it has begun preparations for the implementation of the agreement and will withdraw its troops to the adjusted deployment line.

Hamas confirmed the ceasefire agreement and said the agreement also included the release of Palestinian prisoners by Israel. Hamas has submitted a list of Palestinian prisoners it wants to release to Israel and is awaiting a final deal. Hamas stressed that despite Israel's demands for disarmament, it would not accept disarmament conditions while Israeli troops still occupy Palestinian land.

3. The minutes of the Federal Reserve reveal internal differences, and the path of interest rate cuts is foggy due to lack of data

The minutes of the Federal Reserve’s September meeting show that officials have significant differences on the path of interest rate cuts. Although most officials support further interest rate cuts during the year, seven officials still believe that no further rate cuts are needed. Support a more substantial interest rate cut of 50 basis pointsOnly Fed Governor Milan made a point.

The minutes of the meeting showed that officials were generally concerned about slowing employment growth and ultimately decided to lower the benchmark interest rate by 25 basis points to a range of 4%-4.25%. Investors widely expect the Fed to cut interest rates by another 25 basis points at its next meeting on October 28-29, but officials remain cautious about the potential impact of inflation and tariff measures.

Some officials pointed out that the tariff measures may temporarily push up prices, but the rising cost of imported goods and raw materials will erode corporate profits, thereby inhibiting hiring intentions. Additionally, tighter immigration restrictions could slow labor force growth, further depressing the pace of job growth.

Currently, there are serious differences between the hawk and dove camps within the Federal Reserve. Some officials support continuing to cut interest rates, while others are skeptical. The government shutdown has delayed the release of many important economic data, including the September employment report, making it more difficult for officials to bridge differences through the latest data.

Hawk officials such as Kansas City Fed President Schmid are skeptical of further interest rate cuts and believe that the current policy stance is only slightly restrictive and is appropriately positioned. Federal Reserve Governor Barr also warned that inflation may not return to target levels until the end of 2027, calling for caution in further interest rate cuts. Minneapolis Fed President Neel Kashkari warned that current economic data is showing signs of stagflation, and a sharp interest rate cut may lead to the coexistence of low unemployment and high inflation.

Dovish officials such as San Francisco Fed President Daly and New York Fed President Williams support continuing to cut interest rates, believing that the weakness of the labor market and lower-than-expected inflation levels justify the reduction. Fed Governor Milan even publicly called for five significant interest rate cuts to prevent economic risks. He believes that the current interest rate level is too high and has posed risks to the U.S. economy.

In addition, U.S. Treasury Secretary Bessent conducted several weeks of interviews with 11 candidates for the chairman of the Federal Reserve. The questioning mainly focused on the interest rate stance and the exit of the quantitative easing policy. In interviews that can last up to two hours, candidates are also asked about Bessant's views on a recent article calling for an overhaul of the Federal Reserve and criticizing its quantitative easing program as a "gain-of-function monetary policy experiment." Bessant also highlighted the Fed's "mission expansion" problem during the interview and asked how the candidate would govern the agency.

News on Friday showed that the list of candidates for Fed chairman has been reduced from 11 to 5, including two current Fed officials, Bowman and Waller, as well as Hassett, Warsh and BlackRock's Riedel. Riedel became a "dark horse" as a well-known figure on Wall Street who had never worked at the Federal Reserve. The final candidate may be nominated first as a director and then promoted to chairman.

4. The Ministry of www.xmxmxm.cnmerce and the General Administration of Customs issued four announcements to strengthen export control of superhard materials, rare earths, lithium batteries, etc.

On October 9, my country’s Ministry of www.xmxmxm.cnmerce issued an announcement announcing the implementation of export controls on overseas rare earth items and rare earth-related technologies, and that anti-drone technology www.xmxmxm.cnpanies14 foreign entities were included in the list of unreliable entities. The Ministry of www.xmxmxm.cnmerce will also issue four announcements in succession with the General Administration of Customs, announcing the implementation of export controls on related items such as superhard materials, some rare earth equipment and raw and auxiliary materials, some medium and heavy rare earths, lithium batteries and artificial graphite anode materials. Export operators need to apply for a license and indicate item www.xmxmxm.cnrmation in the customs declaration form. The announcement will be implemented from November 8, 2025, and aims to safeguard national security and fulfill international obligations.

5. Trump’s new tariff measures: impose a 25% tariff on medium and heavy-duty trucks and abandon the tax on generic drugs

On October 7, Trump announced that the United States will impose a 25% tariff on medium- and heavy-duty trucks starting from November 1, 2025. The move is Trump's latest tariff measure to protect U.S. industry. Trump had previously planned to implement the tariffs from October 1, but the timeline was delayed as www.xmxmxm.cnpanies expressed concerns about the potential impact.

Last year, the United States imported about 245,000 medium and heavy-duty trucks, with a trade volume of more than 20 billion US dollars. The proposal could have broad implications for a number of www.xmxmxm.cnpanies, including Daimler Truck Holding's Freightliner, Volvo Group's Mack Trucks, and Paccar's Peterbilt and Kenworth.

As for drug tariffs, the U.S. government confirmed that it does not plan to impose tariffs on foreign generic drugs, which involve 90% of Americans’ daily medication. The move was prompted by concerns that the tax would lead to higher drug prices and shortages.

Nevertheless, the U.S. government is still considering providing federal grants or loans to domestic generic drug manufacturers to promote the reshoring of manufacturing. There are internal divisions over the tariffs, with some officials warning of the negative impacts of the levies and protectionists emphasizing the national security risks.

Also this week, the European www.xmxmxm.cnmission proposed imposing new tariffs on steel imports, raising tariffs to 50% and cutting import quotas by about 45%. The new plan cuts the total annual import quota to 18.35 million tons, and only about 10% of steel can enter duty-free.

It is said that this move is aimed at protecting the local steel industry and drawing on the ideas of US trade protectionism. The proposal requires approval by EU member states and the European Parliament and is in line with World Trade Organization (WTO) rules. The UK steel industry may be hit hard as the EU is its main export market.

6. The French Prime Minister "flash resigned" and Macron faced a political dilemma

On the evening of October 8, local time, the Elysee Palace, the French presidential palace, confirmed that President Macron would appoint a new prime minister within 48 hours. Previously, then-French Prime Minister Le Corny submitted his resignation to Macron, becoming the seventh prime minister to resign during Macron's term.

Le Corne said that there is a high probability that the French government will not hold early legislative elections, nor will it allow Macron to resign to solve this political crisis. He believes that Macron should continue to perform his presidential duties until the end of his term in 2027. "Now is not the time to change the president."

Le Kearney also pointed out that the centrist camp and the ruling allies in the parliament, together with some opposition parties, are still capable of forming a new government. heHe emphasized that "there is a majority in the government that can govern", but this path is "very challenging."

In order to buy more time to weigh and resolve priorities, Macron had asked Le Corny to contact the parties in the National Assembly again to try to reach a consensus on France's next budget.

Le Corny said that talks with various parties over the past two days showed that the possibility of the dissolution of the French Parliament is significantly reduced. He predicts that a new budget will be submitted to the cabinet next Monday, but this budget is "not perfect yet and there are still many things that need to be discussed."

Macron is currently facing a serious political crisis. His allies have turned against him, and former prime ministers have also publicly criticized him.

Macron’s former “disciple” Gabriel Attal accused him of being stubborn in his decision-making, Edouard Philippe called for an early election, and Elisabeth Bornet suggested suspending pension reform. Macron urgently needs to find a new prime minister to unite all parties, but opposition from all parties has put him in trouble.

7. Takaichi Sanae denies triggering the weakening of the yen, downplaying interest rate hike remarks, and the path of the prime minister is full of variables

This week, the yen fell to an eight-month low against the U.S. dollar. Japanese Finance Minister Kato Katsunobu warned of rapid unilateral market fluctuations and hinted at possible intervention in the exchange rate. The yen continued to weaken despite new Liberal Democratic Party president Sanae Takaichi's attempts to calm the market. Market expectations are that the Bank of Japan may raise interest rates ahead of schedule to cope with inflationary pressures caused by the depreciation of the yen.

Previously, Japan’s former economic security minister Sanae Takaichi won the Liberal Democratic Party presidential election and is expected to become Japan’s first female prime minister. After the news came out, the market reacted quickly, with the yen plummeting and Japanese stocks rising sharply.

On Friday, Japan’s Komeito Party announced its withdrawal from the 26-year-old ruling alliance with the Liberal Democratic Party. This decision may change the Japanese political landscape and affect the appointment of Takaichi Sanae as prime minister. The Komeito party has made it clear that it will not support Sanae Takaichi as prime minister, which makes her path to the prime minister full of uncertainties. After the news came out, the U.S. dollar fell against the Japanese yen in the short term, and market expectations changed significantly.

Takaichi Sanae clearly denied that it intentionally caused excessive weakness in the yen. She said in an interview with the TV station that a weak yen has pros and cons, especially in response to concerns about Trump's tariffs. For export-focused www.xmxmxm.cnpanies, a weak yen can provide a certain buffer.

In addition, Takaichi Sanae tried to play down its remarks a year ago that the Bank of Japan was "stupid" to raise interest rates. When asked if she still thought it would be "stupid" for the Bank of Japan to raise interest rates before the end of the year, Takaichi Sanae said: "Oh, please don't mention this. I know I am in no position to www.xmxmxm.cnment on interest rate hikes."

Takaichi Sanae is regarded as the heir to "Abenomics" and advocates expansionary fiscal policy, planning to promote Japan's economic growth through tax cuts, economic stimulus and government investment. She proposed to formulate a plan to double the size of Japan's economy within 10 years.

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