A Trader’s Weekly Playbook: Key Market Drivers, Fed Rate Risks & Gold Momentum

High-Level Macro & Trading Themes: Theme's that are front of mind 

US Government Shutdown 

• Starting on a positive note, reports suggest Senate Republican Leader John Thune has said a deal is “coming together” that could be voted on today or tomorrow... It’s been speculated that around 10 Democratic senators could vote in favour of a package that would extend Affordable Care Act (ACA)/Obamacare healthcare subsidies for 12 months. 
• The importance of this potential agreement is worth considering. The shutdown has always centred on the ACA/Obamacare. If Trump can only forge a deal by extending the healthcare subsidies — worth roughly $350 billion over 10 years — there seems little chance he’ll be able to pass the planned $1 trillion in healthcare spending cuts through the “Big Beautiful Bill” next year. Consequently, forward deficit projections could move closer to 8%. That said, if he can eliminate the Senate filibuster and Republicans avoid major midterm losses, those cuts could still be passed. 
• Should a deal emerge, the reopening of the government could see the Fed’s TGA account fall from $943 billion as the Treasury Department resumes payments. This would be a small positive for risk sentiment, though it’s more operational in nature. It differs from the liquidity-inspired tailwinds seen when banks or money market funds receive capital back from maturing Treasury bills, which, if not reinvested, could enhance repo supply and improve US funding conditions. 

Market Players Played Defense Last Week - Will that flow reverse this week?

• For much of last week, we saw reduced interest in once high-flying AI plays. While dip buyers emerged on Friday, many traders sold core holdings to reduce risk. Moves of note: 
  • Semiconductors ETF (SMH): -4.1% w/w 
  • MAG7 basket: -3.2% w/w (Nvidia -7.1% w/w) - Microsoft's share price has fallen for eight straight sessions
  • UBS AI Winners basket: -5.2% w/w 
  • AI Power Gen: -4.7% 
  • Retail Favourite basket: -5.6% 
  • Quantum Computing basket: -9.6% w/w 
• Funds rotated into low-volatility defensive sectors, while also cyclicals also underperformed defensive sectors. 

• Lower-quality equities were liquidated even more aggressively — Goldman Sachs High Short Interest basket: -8% w/w; Non-profitable Tech: -7.3% w/w. 
• “Sell the fact” reactions to earnings were notable. Despite strong results from some market favourites, reactions were negative. Palantir’s CEO declared its “best ever” earnings, yet shares fell 7.9% on the day. Meta dropped 11.3% post-results and is now down 21% from its August high. This raises the risk that traders may hesitate to be overexposed to Nvidia ahead of its 19 November earnings. Focus has also turned to corporate credit. There has been growing scrutiny on the financing of the AI build-out through increased debt issuance by Meta, Alphabet, Oracle, and CoreWeave. Some widening in credit default swaps may have pressured equities, though this theme may stabilise this week as investors refocus on debt-to-EBITDA levels and pare back “Dot Com 2.0” comparisons. 
• QE (Quantitative Easing) chatter resurfaced after NY Fed President John Williams noted the Fed may soon need to expand its balance sheet to rebuild liquidity. Some see this as QE — and a bullish catalyst — but this version would differ from classic QE. Traditional QE involves a set monthly target of Treasury or MBS purchases designed to compress term premiums and reduce long-term borrowing costs. What’s being discussed for early 2026 would likely be “QE-lite,” aimed at replenishing reserves and supporting funding markets rather than providing broad-based monetary stimulus. 
• US consumer-related stocks underperformed. This may reflect concerns that SNAP benefits could be temporarily withheld during the shutdown. The XRT Retail ETF is down 10.6% from its 12-month high — the steepest drawdown among S&P 500 sectors. With Walmart, Home Depot, and Lowe’s reporting next week, and the potential for a government reopening, a relief rebound is possible. 
• Traders also reacted sharply to tier-2 US data. The Challenger Job Cuts report showed a 175% rise in layoffs — not typically a major market mover — but it did spark debate over whether higher job cuts will flow through to ADP and jobless claims data once reporting resumes. 
• Fed Policy: Markets currently price a 67% chance of a December rate cut. However, recent comments from non-voting Fed members Hammack and Logan — both suggesting they wouldn’t have supported the October cut — hint at a higher bar for additional easing. The next wave of Tier 1 data, once government operations resume, will be critical for December expectations.
• Equities: The NAS100 and S&P500 pulled back to their 50-day moving averages last week but found solid buying support on Friday — possibly setting the stage for another leg higher. 
• FX: The USD Index (DXY) reversed lower after rejecting its 200-day MA (now 100.25). Softer US labour data drove a pullback in USD, with EURUSD bouncing from 1.1468, GBPUSD from 1.3009, and USDJPY sellers emerging at 154.15 — all key levels for traders to manage risk around. 
• AUDNZD: The pair has risen in 12 of the past 13 sessions. With RBA members Hauser and Jones speaking this week, and Australian employment data due Thursday, a mean reversion move could well be on the cards... 
• GBPUSD: Sterling traders face a busy week — jobs, wages, and Q3 GDP are due, followed by CPI next week and the UK budget on 26 November. GBP swaps currently imply a 65% chance of a BoE rate cut on 18 December. Incoming data could shift that pricing, influencing GBP direction. 
• Gold: Gold has reclaimed the $4000 level, trading within a short-term range between $3900 and $4063. A daily close above $4063 would strengthen the bullish case and potentially mark the start of another leg higher. 

Good luck to all.