This week, U.S. markets faced heightened instability, with fears of a government shutdown and escalating trade disputes with the European Union compounding the effects of Federal Reserve policy changes. These developments led to declines in major indices and increased investor caution. The yield on 10-year Treasury bonds climbed to 4.6%, its highest since May. Meanwhile, the U.S. Dollar Index surged to a two-year high, exerting further pressure on global currencies like the yen and the pound.
Oil prices slipped below $70 per barrel, temporarily easing inflation concerns. However, market focus has now shifted to the release of U.S. personal consumption expenditure (PCE) inflation data, which is anticipated to provide crucial economic insights.

Asia-Pacific Markets
Key indices in Japan and China experienced declines, driven by fears of rising interest rates and growing trade tensions. The Japanese yen gained strength amid expectations of a potential rate hike by the Bank of Japan. Meanwhile, central banks in emerging markets, including Brazil and South Korea, stepped in to stabilize their currencies as the dollar continued to gain ground.

European Markets
European equities came under pressure after Donald Trump threatened tariffs on EU goods. The STOXX 600 index dropped by 1.1%, recording its worst weekly performance since September.
Inflationary pressures and persistently high U.S. interest rates drove the dollar higher. The euro also faced headwinds, with the EUR/USD pair nearing support levels between 1.0230 and 1.0330.

American Markets
The Federal Reserve reduced interest rates this week while raising projections for inflation and rates in 2025. This "hawkish cut" unsettled investors, causing the S&P 500 index to decline and futures to drop nearly 1% before Friday's session. Additionally, a funding bill supported by Donald Trump failed to pass in the House of Representatives, heightening the risk of a partial government shutdown. Should Congress fail to act before the midnight deadline, over two million federal employees could miss paychecks, and key government functions, including border security, may be disrupted.