Takaichi Sanae's first phone conversation with Trump, market assesses the impact of U.S. sanctions on Russian oil

On October 27, spot gold was trading around US$4,083 per ounce. The price of gold hit its first weekly decline in 10 weeks last week as investors took profits and signs of easing trade tensions suppressed safe-haven demand.

The dollar was almost flat on Friday after new inflation data showed U.S. consumer prices rose less than expected in September, keeping the Federal Reserve still on track to cut interest rates again this week.

The U.S. Consumer Price Index (CPI) increased by 0.3% month-on-month and 3.0% year-on-year in September. Economists polled by Reuters expected the consumer price index to rise 0.4% last month and 3.1% year-on-year. The U.S. dollar index fell 0.021% to 98.934 points in late trading in New York. It had previously fallen as much as 0.2%, but still rose slightly last week.

Marc Chandler, chief market strategist at Bannockburn Capital Markets, said: The overall CPI was weaker than expected, and the dollar was sold off in response, even though before the report was released, the market was almost 100% convinced that the Federal Reserve would cut interest rates not only this week, but also in December. Despite the lack of economic data due to the government shutdown, the CPI report was released. The data, used by the Social Security Administration to calculate cost-of-living adjustments for millions of retirees and other welfare recipients, was supposed to be released on Oct. 15.

EUR/USD was trading at $1.163 in late New York trading, an increase of 0.06%. A survey on Friday showed that business activity in the euro zone grew faster than expected in October, led by the euro zone's services sector.

A release in Ontario, CanadaThe advertisement quoted a recording of former U.S. President Ronald Reagan criticizing tariffs. As a result, U.S. President Trump announced the termination of all trade negotiations with Canada, making concerns about trade wars once again the focus of the agenda. The Canadian dollar was slightly lower at C$1.40 against the U.S. dollar in late trading, but the overall market reaction was quite muted.

New U.S. sanctions on two major Russian oil www.xmhouses.companies over Russia's war in Ukraine pushed up oil prices. That weighed on currencies linked to oil imports, including the yen. The fate of the yen is also closely related to the policies of Japan's new Prime Minister Sanae Takaichi. The outside world generally believes that the high market is a fiscal and monetary dovish person.

The yen/dollar weakened to a two-week low, last trading at 152.85 yen. Data released last Friday showed that Japan's national core consumer price index (CPI) rose 2.9% year-on-year in September, which was higher than the Bank of Japan's 2% inflation target, keeping the market's expectations of a recent interest rate hike.

Takako is preparing an economic stimulus package that could exceed last year's $92 billion to help Japanese households cope with inflation, government sources familiar with the plan said last Wednesday.

The pound fell 0.15% against the dollar to $1.33 after UK retail sales data were stronger than expected. Sterling fell about 1% last week after weak inflation data increased investor expectations for a rate cut by the Bank of England this year.

Asian Markets

Japan’s inflation picked up in September, with core CPI (excluding fresh food) rising from 2.7% to 2.9% year-on-year, in line with expectations and marking the first acceleration in four months. The key indicator has remained at or above the Bank of Japan's 2% target since April 2022. The overall CPI also increased from 2.7% year-on-year to 2.9%, consistent with the core indicator.

Potential momentum is uneven. Core CPI, which excludes energy and fresh food and is considered a closer gauge of domestic demand, slowed to 3.0% year-on-year from 3.3%, indicating that broader inflationary pressures are gradually easing.

Food prices continued to rise, but at a slower rate - non-fresh food prices rose 7.6%, down from 8.0% in August. Rice prices, which soared earlier this year, rose 49.2%, slowing for the fourth straight month after peaking at more than 100% in May.

Meanwhile, prices for services, an indicator closely watched by the Bank of Japan, rose 1.4%, slightly down from 1.5% in August.

European Market

The latest preliminary value of the British Purchasing Managers Index brought a glimmer of optimism to the economy. The manufacturing index jumped from 46.2 to 49.6 in October, the highest level in 12 months. The services sector rose to 51.1 from 50.8, lifting the www.xmhouses.composite index to 51.1 from 50.1. The survey showed business conditions are slowly improving after a weak September, marking the first sign of renewed momentum since mid-year.

S&P Global MarketsChris Williamson, the newspaper's chief business economist, said the data "raised hope that September was a low point," noting that manufacturing grew for the first time in more than a year and that consumer demand for services was stronger. He added that inflationary pressures were falling back to levels "consistent with the Bank of England's 2% target", while unemployment was moderating and business confidence was picking up slightly.

Nonetheless, the overall pace of expansion remains modest, consistent with GDP growth of only around 0.1%. Export weakness persists as global trade is disrupted by U.S. tariff policies. Businesses are also cautious ahead of the November 26 budget, with many postponing hiring and investment decisions. While PMI data points to stabilization, the recovery remains fragile and heavily dependent on fiscal clarity and external demand.

UK retail activity unexpectedly rose in September, with sales increasing by 0.5% month-on-month, exceeding expectations for a month-on-month decline of -0.2%. The increase marked the fourth consecutive month of growth, lifting total sales to the highest level since July 2022. Strong non-store and apparel sales helped offset weakness in fuel and other discretionary categories.

In the third quarter, retail sales increased 0.9% from the previous quarter, confirming the steady rebound in household demand throughout the summer. Good weather in July and August is seen as a key driver, boosting apparel sales and supporting outdoor-related spending. Online and non-brick-and-mortar retailers also continued to see gains.

Business activity in the euro zone accelerated in October, with the www.xmhouses.composite purchasing managers index rising to a 17-month high of 52.2 from 51.2, marking the strongest expansion since mid-2024. The rebound was driven by the services sector, with the PMI services index jumping from 51.3 to 52.6, a 14-month high, while the manufacturing sector finally edged up to the neutral 50.0 mark after months of contraction.

However, the improvement in major economies remains uneven. Cyrus de la Rubia, chief economist at www.xmhouses.commerzbank Hamburg, noted that France was increasingly a drag, with the pace of contraction accelerating for two consecutive months amid political turmoil and budget disputes under Prime Minister Sébastien Lecornu. In contrast, Germany's outlook was "significantly brighter", helping to boost the EU's overall data. Still, manufacturing has been "stagnant for nearly six months," and weak new orders offer "little hope of a turnaround," de la Rubbia said.

Inflation trends provide some www.xmhouses.comfort to policymakers. Price pressures in services, the ECB's focus, "remained moderate", with sales price inflation rising slightly but remaining close to long-term averages. The PMI data are therefore unlikely to alter the ECB's cautious stance, reinforcing expectations that officials will delay further rate cuts until there are clearer signs of sustained deflation.

American CityMarket

Business activities in the United States expanded steadily in October, with the www.xmhouses.composite PMI rising from 53.9 to 54.8. Both sectors improved, with manufacturing rising slightly to 52.2 from 52.0 and services climbing to 55.2 from 54.2, indicating a general pickup in momentum.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data pointed to "continued strong economic growth" at the start of the fourth quarter, consistent with an annualized rate of around 2.5% - a similar pace to the third quarter.

However, optimism about the future has waned significantly. Williamson noted that business confidence fell to one of its lowest levels in three years as www.xmhouses.companies expressed growing concern about the economic impact of tariffs and uncertain policy direction.

Price trends present a mixed picture. Input costs continue to rise sharply, reflecting the pass-through of tariffs, but www.xmhouses.companies are struggling to raise prices under www.xmhouses.competitive pressure. As a result, selling price inflation fell to its lowest level since April.

U.S. inflation edged higher in September, but details in the report suggest price pressures are cooling off on the surface. Overall CPI accelerated from 2.9% to 3.0% year-on-year, but was slightly lower than the 3.1% expected. This is the highest level since January.

However, core CPI (excluding food and energy) slowed to 3.0% from 3.1%, which was lower than expected and also fell from 3.1% in the previous two months. After remaining at 3.1% for two consecutive months, the core interest rate may enter a gradual downward trend.

On a monthly basis, overall prices rose 0.3% month-on-month, while core prices only rose 0.2%, both weaker than expected. Energy costs were once again the main driver of overall gains, with the gasoline index soaring 4.1% and the broader energy index rising 1.5%. Food prices also continued to inch higher, up 0.2%, as grocery costs rose more than the price of eating out.

European Market

The latest preliminary value of the UK Purchasing Managers Index brought a glimmer of optimism to the economy, with the manufacturing index jumping from 46.2 to 49.6 in October, the highest level in 12 months. The services sector rose to 51.1 from 50.8, lifting the www.xmhouses.composite index to 51.1 from 50.1. The survey showed business conditions are slowly improving after a weak September, marking the first sign of renewed momentum since mid-year.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data "raised hope that September was a low point," noting that manufacturing grew for the first time in more than a year and consumer demand for services was stronger. He added that inflationary pressures were falling back to levels "consistent with the Bank of England's 2% target", while unemployment was moderating and business confidence was picking up slightly.

Nonetheless, the overall pace of expansion remains modest, consistent with GDP growth of only around 0.1%. Export weakness persists as global trade is disrupted by U.S. tariff policies. Businesses are also cautious ahead of the November 26 budget, with many postponing hiring and investment decisions. While PMI data points to stabilization, the recovery remains fragile and heavily dependent on fiscal clarity and external demand.

UK retail activity unexpectedly rose in September, with sales increasing by 0.5% month-on-month, exceeding expectations for a month-on-month decline of -0.2%. The increase marked the fourth consecutive month of growth, lifting total sales to the highest level since July 2022. Strong non-store and apparel sales helped offset weakness in fuel and other discretionary categories.

In the third quarter, retail sales increased 0.9% from the previous quarter, confirming the steady rebound in household demand throughout the summer. Good weather in July and August is seen as a key driver, boosting apparel sales and supporting outdoor-related spending. Online and non-brick-and-mortar retailers also continued to see gains.

Business activity in the euro zone accelerated in October, with the www.xmhouses.composite purchasing managers index rising to a 17-month high of 52.2 from 51.2, marking the strongest expansion since mid-2024. The rebound was driven by the services sector, with the PMI services index jumping from 51.3 to 52.6, a 14-month high, while the manufacturing sector finally edged up to the neutral 50.0 mark after months of contraction.

However, the improvement in major economies remains uneven. Cyrus de la Rubia, chief economist at www.xmhouses.commerzbank Hamburg, noted that France was increasingly a drag, with the pace of contraction accelerating for two consecutive months amid political turmoil and budget disputes under Prime Minister Sébastien Lecornu. In contrast, Germany's outlook was "significantly brighter", helping to boost the EU's overall data. Still, manufacturing has been "stagnant for nearly six months," and weak new orders offer "little hope of a turnaround," de la Rubbia said.

Inflation trends provide some www.xmhouses.comfort to policymakers. Price pressures in services, the ECB's focus, "remained moderate", with sales price inflation rising slightly but remaining close to long-term averages. The PMI data are therefore unlikely to alter the ECB's cautious stance, reinforcing expectations that officials will delay further rate cuts until there are clearer signs of sustained deflation.

U.S. market

Business activities in the United States expanded steadily in October, with the www.xmhouses.comprehensive PMI rising from 53.9 to 54.8. Both sectors improved, with manufacturing rising slightly to 52.2 from 52.0 and services climbing to 55.2 from 54.2, indicating a general pickup in momentum.

Chris Williamson, chief business economist at S&P Global Market Intelligence, said the data pointed to "continued strong economic growth" at the beginning of the fourth quarter, which was about 2.5%The annualized growth rate on the right is consistent -- similar to the third quarter's pace.

However, optimism about the future has waned significantly. Williamson noted that business confidence fell to one of its lowest levels in three years as www.xmhouses.companies expressed growing concern about the economic impact of tariffs and uncertain policy direction.

Price trends present a mixed picture. Input costs continue to rise sharply, reflecting the pass-through of tariffs, but www.xmhouses.companies are struggling to raise prices under www.xmhouses.competitive pressure. As a result, selling price inflation fell to its lowest level since April.

U.S. inflation edged higher in September, but details in the report suggest price pressures are cooling off on the surface. Overall CPI accelerated from 2.9% to 3.0% year-on-year, but was slightly lower than the 3.1% expected. This is the highest level since January.

However, core CPI (excluding food and energy) slowed to 3.0% from 3.1%, which was lower than expected and also fell from 3.1% in the previous two months. After remaining at 3.1% for two consecutive months, the core interest rate may enter a gradual downward trend.

On a monthly basis, overall prices rose 0.3% month-on-month, while core prices only rose 0.2%, both weaker than expected. Energy costs were once again the main driver of overall gains, with the gasoline index soaring 4.1% and the broader energy index rising 1.5%. Food prices also continued to inch higher, up 0.2%, as grocery costs rose more than the price of eating out.

The above content is all about "[XM Group]: Takaichi Sanae held the first telephone conversation with Trump, and the market assessed the impact of US sanctions on Russian oil". It was carefully www.xmhouses.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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