Understandably, October rate cut expectations took a hit after the GDP release. The probability of a cut fell from around 94% to below 88%. The US 2-year yield — the best proxy for Fed expectations — rebounded to 3.67%, its highest since early September. The dollar index rallied past its 100-DMA as Fed expectations were reassessed, while major US indices retreated from all-time highs but managed to recover part of the early losses. Dip buyers found a reason to step in — namely, the inflation component, which was more contained than feared, near 2%.

Still, sentiment in Asia is weak this morning, especially in tech-heavy indices. The Korean Kospi is down nearly 3% at the time of writing, while the Hang Seng is 0.65% lower. The Topix is the exception, hitting a fresh all-time high, certainly helped by a rapidly weakening yen. The USDJPY is flirting with 150, supported by a stronger US dollar, easing long-maturity JGB yields, and a softer yen after Tokyo CPI came in below expectations. To note: the USDJPY ends the week confirming a positive breakout above a key Fibonacci level, with the next bullish target near 151.65.

Back to US markets, the risk rally isn’t necessarily over. Today’s core PCE — the Fed’s preferred inflation gauge — is expected to show easing price pressures on a monthly basis. On a yearly basis, core PCE is expected to remain sticky near 3%. Yes, that’s above the Fed’s 2% target, but the Fed has been more tolerant of overshooting lately, pointing to downside risks to jobs. As such, data in line with expectations — or ideally softer — could revive risk appetite. A hotter print, though, would prolong the pause to the risk rally and reinforce the idea that the Fed may stay patient well into next year before cutting.

On FX, EURUSD slipped below its 50-DMA yesterday, extending its post-FOMC correction on the back of strong US GDP data. A failure to get dovish confirmation from PCE could deepen the downside. Cable fell to 1.3323 and looks set to test the 1.3130–1.3200 area, which includes the 200-DMA and the major 38.2% Fibonacci retracement of this year’s rally. That zone will be decisive: either the bullish trend holds, or we see a medium-term bearish reversal. Political unease and the looming Autumn Budget make sterling look less attractive in October, leaving the EURGBP comfortably supported in the next 4–6 weeks.

In metals, higher yields and a stronger dollar weighed on gold, as investors trimmed dovish Fed bets. Still, gold hasn’t broken down in any meaningful way. Inflation expectations remain anchored, geopolitical risks are simmering and central bank demand continues to underpin the metal. What’s also notable is that gold is holding near elevated levels despite rising real yields — a relationship that historically would have pressured it lower. That suggests gold is no longer just a hedge against rates, but a strategic allocation — an insurance against policy mistakes, market volatility and geopolitical flare-ups. So near-term, price action may stay choppy, but the broader trend remains intact. If today’s PCE shows easing inflation, gold could regain some ground as yields and the dollar soften.

If not, dips still look like buying opportunities, and many investors see the rally having much further to run.