Key Takeaways
- Oil prices rose sharply after attacks on Saudi energy infrastructure, bringing inflation risks back into focus.
- The Federal Reserve held rates but kept a firm tone, leaving the possibility of a December increase open.
- The US dollar remained supported by higher yields, keeping the euro near the lower end of its range.
- Gold and Bitcoin weakened as yield pressure outweighed haven and ETF demand.
- Equities held their range, but investors scrutinised whether AI spending can deliver sufficient returns.
- November attention will centre on the US elections, energy supply, inflation data and AI earnings guidance.
October marked a shift back toward geopolitical and inflation concerns, as investors moved away from the resilience themes of earlier months and focused on energy prices, monetary policy and bond yields.
Higher oil prices and firmer yields created pressure across currencies, metals and crypto, while corporate earnings helped keep equities supported. Markets were left divided, with no single theme dominating.
The key question heading into November is whether energy costs and inflation pressure ease enough to reduce the case for further rate increases.
Dollar Strength Keeps the Euro Under Pressure
The US dollar remained firm in October as higher yields and the Fed’s policy stance supported demand, leaving EURUSD near the lower end of its trading range.
The Fed’s decision to hold rates was accompanied by a cautious message. Inflation remained elevated, economic activity was described as strong, and two voting officials preferred an immediate increase. This kept markets focused on the possibility of tightening in December.
The euro struggled to find support. The European Central Bank also held rates, but higher energy costs added pressure to an economy reliant on imported energy. The ECB’s announcement that Christine Lagarde will step down as president in February 2027 added another development to monitor.
Key factors influencing the dollar and euro include:
- Fed Policy Direction: Inflation and employment data will shape expectations for a December decision.
- Government Bond Yields: Higher yields continue to support demand for the dollar.
- Energy Costs: Oil prices remain a pressure point for the euro area.
- Global Policy Divergence: Differences between the Fed and ECB remain important for currency movements.
Oil Retreats but Supply Risks Remain
Oil markets were volatile in October as attacks on Saudi energy sites and concerns about key Middle Eastern shipping routes pushed Brent crude sharply higher.
Prices eased after the US ruled out immediate military action against Iran, but they remained above where the month began. Uncertainty stayed elevated, particularly after reports that the US and Israel had drawn up plans for renewed attacks on Iran following the November elections.
The outlook for oil will depend on diplomatic developments, the security of energy infrastructure and shipping, and whether supply disruption risks continue to feed into inflation expectations.
AI Earnings Expose Spending Tensions
Equity markets held within a range in October despite higher oil prices and yields, with technology shares becoming more volatile in the second half of the month.
Corporate results produced contrasting reactions. SpaceX reported its first profitable quarter and saw its shares rise, while Meta and Tesla both beat expectations but saw their shares fall as investors focused on AI spending plans. Tesla and SpaceX also confirmed that independent committees had been established to examine a possible merger.
AI remained an important source of support, but earnings strength alone did not guarantee a positive reaction. Investors are increasingly focused on whether companies can turn heavy investment into sustainable growth.
Gold and Bitcoin Reflect Yield Pressure
Gold weakened in October, falling to a three-month low as higher yields and expectations of further rate increases outweighed demand for safety during the conflict. Because gold pays no interest, rising returns on government debt made it more costly to hold. Silver also declined to its lowest level in nearly a year.
Bitcoin also retreated. Spot ETF inflows reached their largest single-day level in a month, but the demand was not enough to reverse the broader decline. Bitcoin moved alongside technology shares as a risk asset, while higher yields added further pressure.
Both markets will continue responding to changes in bond yields, rate expectations and overall risk sentiment, with geopolitical developments remaining a potential source of haven demand.
Early Signals for November
November markets will focus on several key themes:
- US Elections and Energy Supply: The 3 November midterm elections and Middle East developments will be closely watched. Any disruption to energy supplies or shipping could affect oil prices and inflation expectations.
- Inflation and Fed Policy: US employment and inflation data will help determine whether expectations for a December increase strengthen or fade, including whether October’s higher oil prices feed into inflation readings.
- AI Earnings Outlook: Spending guidance, evidence of returns on investment and any Tesla–SpaceX merger developments could influence sentiment.
- Metals and Crypto Demand: Gold and Bitcoin will be monitored for signs that yield pressure is easing or that haven and ETF demand is strengthening.
October showed that markets can hold steady even as energy costs and yields rise, but not without strain. A strong dollar, weaker metals and crypto, and range-bound equities defined the month, and November will test whether easing energy costs and moderating inflation can change that picture.
For an in-dept review of October and potential signals for November, read the full monthly market insight here.