Beyond the Charts Ep11: The Week Central Banks Moved Markets
11/5/2025, 2:42:47 PM
From dovish cuts to Powell’s shocking pivot, central banks ruled the week. Discover how institutions navigated the shifting landscape in Beyond the Charts, Ep. 11.
Last week ushered in a pivotal chapter in a period marked by uncertainty and data scarcity: the week that central banks took the wheel. Decisions made from Ottawa to Tokyo not only impacted market sentiment but also shaped volatility and set expectations for the coming months. With the U.S. government still in shutdown mode, traders shifted their focus to interest rate signals and inflation indicators for navigation.
So, what exactly happened? A mix defined by dovish cuts, cautious holds, and a single line from Jerome Powell that sent ripples through the financial world.
Tuesday: Confidence, But Not Conviction
The week commenced with a quiet start. While Monday was devoid of significant market-moving announcements, Tuesday's U.S. Consumer Confidence figures delivered a glimmer of hope.
The reading came in at 94.6, slightly above expectations, reflecting robust optimism regarding job stability and income. However, inflation fears still loomed large.
Market Reactions:
Consumer stocks rose by 0.3%
The S&P 500 increased by 0.4%
The USD edged up 0.1%
The atmosphere may not have been exuberant, but it established a foundation of cautious resilience as traders braced for the central bank announcements looming later in the week.
Wednesday: Canada Cuts Rates; Commodities Rally
Wednesday was particularly significant, as the Bank of Canada initiated a 25-basis-point rate cut, lowering the benchmark to 2.25%. This dovish stance aimed to bolster economic growth amid softening inflation signals, with hints that further cuts could follow if the labor market deteriorates.
Market Response:
The TSX increased by 0.5%
U.S. indices also recorded modest gains
The Canadian dollar weakened slightly, with USD/CAD rising 0.3%
The news didn’t stop there. U.S. crude oil inventories revealed a surprising 6.86-million-barrel shortage, indicating tight supply amid steady demand. This spurred a resurgence in energy stocks (up 1.2%), while traders rotated into equities, causing gold prices to dip by 0.4%.
The Fed’s Cut & Powell’s Curveball
As widely anticipated, the Federal Reserve cut rates by 25 basis points, citing inflation around 3% and a cooling labor market as key factors. The market reaction was initially celebratory, with risk assets surging and gold finding support.
However, during Powell's press briefing, one particular statement flipped the market's script: “A December cut is far from certain.” This moment shattered assumptions about consecutive easing moves, leading to a swift reversal in stocks, a rebound in the dollar, and increasing market volatility.
Key Takeaway:
Retail traders learned a valuable lesson: context is vital. As institutions interpreted Powell’s words as a cautious “pause” rather than a decisive pivot, the message became clear, lessons in trading often lie in understanding the underlying motives.
Thursday: Policy Patience Across the Globe
The wave of central bank announcements continued into Thursday:
Bank of Japan: Held rates steady at 0.5%, maintaining its dovish bias. The Nikkei index responded positively, rising by 0.4%.
Germany: Reported flat GDP alongside a slight CPI uptick to 0.3%, suggesting stability but lack of momentum.
European Central Bank (ECB): Kept rates unchanged at 2.15%, with President Christine Lagarde stressing a careful approach. She noted positive inflation progress but warned of potential tariff risks.
Markets embraced the ECB's stance, resulting in Euro stocks gaining 0.4%, gold ticked up by 0.3%, and the euro strengthened modestly. The overarching message resonated through major economies: "steady hands, flexible policy."
Friday: Inflation Eases, But Not Disappearing
On Friday, Eurozone CPI data indicated a gradual descent toward the ECB’s 2% target, landing at 2.1%. This pointed to ongoing disinflation, although core inflation remained persistent enough to maintain elevated rates for an extended period. In the U.S., the Chicago PMI improved slightly to 43.2, staying below the 50-expansion threshold, yet another indicator of sluggish manufacturing.
Market Recap:
Euro Stoxx rose by 0.2%
Gold had a slight uptick of 0.1%
Overall market volatility eased as investors digested the week’s news.
Institutional Lens: Insights for Traders
The events of last week underscore a critical message: monetary policy is currently the main driver of market dynamics. Institutions recalibrated expectations after Powell's cautious message:
Risk assets cooled following periods of exuberance.
The USD firmed up as traders adjusted rate-cut predictions.
Gold found stability once more, buoyed by safe-haven demand.
Actionable Lesson for Traders: Focus on understanding the motives behind central bank decisions rather than attempting to chase market moves blindly. Institutional traders adapt to the nuance in policy messaging, which dictates market movements far more than initial announcements.
Central banks are moving from a rescuer role into a more reflective period. Future cuts are not guaranteed; patience, and the ability to adapt, will be crucial.
Guidelines for Retail Traders:
Wait for Confirmation: Don’t rush toward speculation; let market signals confirm your trades.
Base Decisions on Fundamentals: Let economic indicators guide your strategies rather than conjecture.
Prioritize Capital Protection: Safeguarding your investments should always come first; opportunities will arise in due course.
As Beyond the Charts illustrated last week, the real edge lies not in predicting central bank decisions but in comprehending the motivations behind their moves. Understanding this dynamic can better position traders for the uncertainties ahead.
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