Forex News

• EUR/GBP falls to a fresh year-to-date low as French political and fiscal concerns weigh on the Euro.
• The British Pound finds support from growing expectations of a Bank of England rate hike.
• Traders await UK GDP and Eurozone inflation data for fresh clues on the monetary policy outlook.

EUR/GBP remains on the defensive on Monday, sliding to a fresh year-to-date low of 0.8445 as French political and fiscal concerns keep the Euro (EUR) under sustained pressure. At the time of writing, the cross trades around 0.8450, down 0.17% on the day.

France aims to bring its budget deficit down to 5% of GDP in 2027, with parliamentary debate on the plans expected to begin this week. However, securing support for large spending cuts could prove difficult in a divided parliament. With public debt approaching 119% of GDP, markets fear that failure to pass the measures could deepen concerns about France’s finances.

French fiscal concerns and the broader global bond sell-off have pushed French government bond yields higher, while the spread over Germany remains near multi-year highs. The resulting pressure on financing costs could weigh on Eurozone growth. Against this backdrop, the European Central Bank (ECB) faces a difficult balance between bringing inflation under control and protecting growth, as higher energy costs linked to the Middle East war keep price pressures elevated.

A Reuters poll published on Thursday shows that 70 of 73 economists expect the ECB to hold its deposit rate at 2.50% on October 29, while 64 of 73 anticipate a 25-basis-point hike in December.

Analysts at MUFG note that “negative developments in the euro zone have boosted the relative appeal of the pound,” reinforcing recent gains in EUR/GBP. They add that media reports suggest the Labour government is “well aware of challenging global bond market conditions ahead of this month’s budget scheduled for 28th October,” which is “encouraging them to play it safe as they seek to limit the risk of negative market reaction.” MUFG argues that such fiscal caution would be “a development that would help to ease downside risks for the pound.”

The British Pound (GBP) also benefits from growing bets on a Bank of England (BoE) rate hike before year-end after six consecutive holds, as higher energy costs keep inflation sticky above the central bank’s 2% target.

On the data front, Germany releases its final September inflation figures on Tuesday, followed by the UK’s August Gross Domestic Product (GDP) report on Thursday. The final Eurozone inflation reading for September is due on Friday. These releases, alongside comments from ECB and BoE officials throughout the week, could offer further clues on the outlook for interest rates on both sides.

• DXY breaks above 102.50 to its highest since April 2025 as Crude Oil rises.
• Russia hits six Ukrainian energy sites days after Trump's ceasefire claim.

US President Trump said on Friday that Russia and Ukraine had agreed to stop striking each other's energy sites, and Brent fell below $103 a barrel when markets reopened. Brent then climbed back as Russia kept striking Ukraine's energy facilities, six of them on Monday by Ukrainian President Zelenskyy's count. The Kremlin said the same day that ceasefire talks were still underway.

Europe and Japan import nearly all their Oil and pay for it in Dollars, so a dearer barrel means selling more Euros and Yen. The Euro and the Yen make up 71% of the Dollar Index and account for about three-quarters of its climb from the Monday low. The US cash bond market is shut for Columbus Day, so the 10-year Treasury yield hasn't moved from Friday's 5.24%.

Iran's Revolutionary Guards said on Monday they had set a third supertanker on fire in the Strait of Hormuz in two days. Brent reached just above $107, its highest in more than two weeks, on the claim, and the Dollar Index rose with it.

The index dropped to near 102.10 as Brent fell at the weekly open, then climbed in steps to just above 102.50, its highest since April 2025. The last step began on the tanker claim and carried on after Brent had levelled off, as the Euro slid further.

On the charts

The index is holding at its high, and every pullback since Monday's low has held above the previous one. It has gone through 102.50, the level that capped it on October 5, 7 and 8. The climb from the September 9 low is about 4% and follows four straight weekly gains.

DXY 5-minute chart

• Gold reverses earlier gains on Monday after buyers fail to hold above $4,200.
• A firm US Dollar and elevated Treasury yields limit Gold’s upside as attention turns to US inflation data due this week.
• Gold remains bearish below the Bollinger midline as it consolidates between $4,100 and $4,200.

Gold (XAU/USD) consolidates losses on Monday after reversing earlier gains as traders avoid taking large positions ahead of US inflation data due later this week, which could offer fresh cues on the Federal Reserve’s (Fed) next move. At the time of writing, XAU/USD trades around $4,163, retreating from an intraday high of $4,217 reached during Asian trading hours.

The metal has largely traded between $4,100 and $4,200 over the past two weeks, with neither bulls nor bears showing strong conviction. A firm US Dollar (USD) and elevated US Treasury yields keep the upside in check, while dip buyers remain active above the $4,000 psychological mark. Wednesday’s US Consumer Price Index (CPI) report could provide the catalyst needed to break this consolidation.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 102.57, its strongest level since April 2025. The US Treasury cash market is closed on Monday due to the Columbus Day holiday. The benchmark 10-year yield stands around 5.24%, below last week’s peak near 5.36%, its highest since 2002.

September’s headline CPI is expected to rise 0.6% MoM, accelerating from 0.4% in August. Annual inflation is forecast to climb to 3.7% from 3.4%. Core CPI, which excludes food and energy, is projected to increase 0.2% monthly from 0.3%, although the annual rate is expected to edge up to 2.5% from 2.4%.

The inflation data will arrive ahead of the Fed’s October 27-28 meeting, with the CME FedWatch Tool showing an 80% chance that interest rates will remain unchanged at 3.75%-4.00%

Higher energy prices remain a key driver of inflation following the outbreak of the Middle East war in late February. Regional tensions have flared again with Houthi attacks on Saudi Arabia’s King Khalid International Airport, while tanker incidents in the Strait of Hormuz over the weekend underline persistent risks to shipping and energy supplies.

The energy shock keeps the door open to another Fed rate hike before year-end as policymakers seek to return inflation to the 2% target. Against this backdrop, Gold remains vulnerable to downside risks. A hotter-than-expected CPI report could revive October rate-hike bets, lift the US Dollar and Treasury yields, and put the $4,100 range floor under pressure. Softer inflation could instead trigger a break above $4,200.

However, firm underlying demand could help cushion losses. According to the World Gold Council, central banks reported net purchases of 39 tonnes in August, while global Gold exchange-traded funds (ETFs) attracted $10 billion in September.

Technical analysis: XAU/USD remains bearish below the Bollinger midline

On the daily chart, XAU/USD holds a bearish near-term bias as it remains capped beneath the 20-day Simple Moving Average (SMA) from the Bollinger Bands around $4,225. The Relative Strength Index (RSI) at 43 hovers below the midline, hinting at subdued buying interest, while the Moving Average Convergence Divergence (MACD) recovers toward the zero line but stays marginally negative, suggesting that downside pressure is easing rather than reversing.

On the topside, initial resistance is located at the Bollinger midline near $4,225, followed by the upper band around $4,398, ahead of the more psychological hurdles at $4,500 and $4,700. On the downside, immediate support emerges at the lower Bollinger band around $4,052. A break below this level could expose the $4,000 psychological mark, followed by $3,950.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• GBP/USD slips 0.11% as Middle East tensions lift energy prices.
• BoE's Mann warns persistent inflation could fuel wage-price pressures.
• Markets price 90% odds of November BoE hike ahead of US CPI.

The Pound Sterling (GBP) retreats about 0.11% against the Greenback on Monday amid a scarce economic docket on both sides of the Atlantic, but geopolitics continue to drive price action amid developments in the Middle East and the prolongation of the Russia-Ukraine conflict. At the time of writing, GBP/USD trades at 1.3217 after peaking near 1.3261.

GBP/USD retreats from 1.3261 as geopolitical tensions overshadow growing BoE tightening expectations

Market mood has improved, even though Houthi attacks on Saudi Arabia and Tehran’s continuing to strike vessels in the Strait of Hormuz capped US equity futures advances and drove energy prices higher. Over the weekend, US President Donald Trump's rhetoric that Russia and Ukraine had agreed to a ceasefire of energy installations seems fragile after Moscow attacked a power plant.

Ukraine’s President Volodymyr Zelenskyy warned that strikes will continue if Russia’s offense against infrastructure persists. He added that he learned of the truce from the media, which Trump announced.

Beyond that, investors will focus on updates on inflationary pressures in the US. The release of the Consumer Price Index (CPI) on Wednesday, followed by the Producer Price Index (PPI) on Thursday, could pave the way for interest rate decisions. Along with this, speeches by Federal Reserve (Fed) policymakers will keep traders entertained before crucial economic data releases.

In the UK, Prime Minister Andy Burnham is sending mixed signals; he said he will work to secure a deal with the European Union on their future relationship.

Meanwhile, Bank of England (BoE) Monetary Policy Committee member Catherine Mann said UK inflation reaching near 4% by the end of the year could ignite a wage-price drift. She stated that embedded inflation threatens to deanchor inflation expectations over the long term, as services inflation is “significantly harder” to bring down without further rate hikes.

Prime Terminal indicates that market participants assign about a 90% probability that the BoE will raise rates at the upcoming meeting on November 5. They also anticipate a series of rate hikes in 2027, which would increase the base rate to 4.75% within a year, up from 3.75% now.

The UK economic docket will feature speeches by BoE officials, culminating in the Bank of England Governor Andrew Bailey appearance at the IMF and World Bank annual meetings.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3212, keeping a clear bearish near-term bias as spot holds well below the clustered resistance formed by the long-term simple moving averages around 1.3434 and the descending trend-line barriers at 1.3419 and 1.3291. The latest Relative Strength Index (14) reading around 37 stays below the neutral 50 line but away from oversold territory, which suggests persistent downside pressure rather than capitulation as the pair grinds lower beneath its former rising trend supports, now acting as overhead supply.

On the topside, initial resistance is seen near 1.3291 at the earlier descending trend-line break, ahead of a dense cap between roughly 1.3360 and 1.3434 where the reclaimed rising trend line and the higher downtrend barrier at 1.3419 converge with the broader simple moving average cluster. A stronger corrective recovery would need to clear that band and then 1.3606 to signal that bears are losing control, while failure to reclaim 1.3291 keeps the path of least resistance skewed to further weakness toward prior lows not yet visible in the current indicator set.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Societe Generale’s Kunal Kundu notes that India’s September Consumer Price Index (CPI) rose to 5.54% year-on-year, with food inflation at 7.74% and core inflation at 4.2%, signalling broadening price pressures. He highlights strengthening corporate pricing power, sticky services inflation and a negative ex-post real policy rate, arguing that the RBI’s recent 25bp hike likely marks the start of a broader tightening cycle.

Broadening inflation and tightening prospects

"Inflation has now risen every month since January and remained above the RBI’s 4% target for four consecutive months, confirming that the recent upturn is no longer merely a temporary food-price disturbance."

"More concerning, however, is the evidence that inflation is becoming increasingly broad-based."

"As corporate pricing behaviour adjusts, a growing proportion of accumulated costs is likely to be passed on to consumers, making inflation both broader and more persistent."

"Strong stronger cost pass-through and gradually rising services inflation increase the risk that elevated price pressures become embedded in household expectations and corporate price-setting behaviour."

"With the RBI projecting inflation at 6.0% in 3QFY27 and 5.7% in 4QFY27, the September print strengthens the case that the October rate increase marks the beginning, rather than the end, of the tightening cycle."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Commerzbank analysts highlight that Beijing’s new trade agreement with Brussels, alongside a US–China tariff framework, modestly improves China’s external backdrop. They note the PBoC’s USD/CNY fixing model points to a slightly stronger Yuan and that both USD-CNY and USD-CNH fell to 6.69 last week, as easing trade tensions reduce headwinds for China’s export sector and current account.

Sino‑EU deal and tariffs ease headwinds

"The trade detente, if formalised at the EU leaders' summit this week, would reduce one of the more significant external headwinds facing China's export-oriented manufacturing sector."

"Combined with the previously reported US-China agreement on a 30-for-30tariff reduction framework, the diplomatic backdrop is incrementally more supportive for Chinese trade flows heading into year-end."

"Markets will watch closely whether the EU safeguard mechanism, which reportedly remains the preferred enforcement tool, is structured in a way that preserves Chinese market access or functions as a de facto import cap."

"The outcome will have direct implications for China's current account trajectory and, by extension, the PBoC's tolerance for yuan appreciation."

"In FX, both USD-CNY and offshore USD-CNH fell 110 pips to 6.69 and fell 130 pips last week."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

• USD/CHF rebounds as US Dollar strength keeps the Swiss Franc under pressure.
• The technical outlook remains bullish above the 50-, 100- and 200-day SMAs.
• The RSI signals positive momentum, while a slightly negative MACD suggests some loss of upside strength.

USD/CHF starts the week on a positive note, snapping a two-day losing streak as broad US Dollar (USD) strength and a wide interest rate differential between the Federal Reserve (Fed) and the Swiss National Bank (SNB) keep the Swiss Franc (CHF) under persistent selling pressure. At the time of writing, the pair trades around 0.8333, hovering near levels last seen in May 2025.

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades around 102.45, holding close to last week’s peak of 102.53, its highest level since April 2025.

Traders now look ahead to September’s US Consumer Price Index (CPI) report on Wednesday, followed by the Producer Price Index (PPI) on Thursday. With no major Swiss economic releases scheduled this week, USD/CHF is likely to remain largely driven by US Dollar dynamics and shifting expectations surrounding the Fed’s interest rate outlook.

Technical analysis

On the daily chart, USD/CHF holds a constructive bullish bias as it remains comfortably above the 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 0.8167 and 0.7972. The Relative Strength Index (RSI) around 63 suggests positive but not extreme upside momentum, while the Moving Average Convergence Divergence (MACD) has slipped slightly into negative territory, hinting at a mild loss of short-term momentum rather than a clear bearish reversal.

On the topside, immediate resistance is located at the October 1 high of 0.8383, where a break higher would reopen the path for further gains. On the downside, initial support is seen at 0.8200, followed by the 50-day SMA at 0.8167. Further down, the 100-day SMA at 0.8102 is closely aligned with the 0.8100 psychological mark, followed by the 0.8000 level. The 200-day SMA at 0.7972 comes into focus on a deeper pullback, ahead of the 0.7900 support level.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

• The Australian Dollar retreats by 0.24% on Monday as the US Dollar recovers from early losses.
• The Federal Reserve's hawkish stance and renewed tensions involving Iran support demand for safe-haven assets.
• Investors await US inflation figures and a speech by Fed Chair Kevin Warsh for further monetary policy clues.

AUD/USD trades around 0.6965 on Monday, down 0.24% at the time of writing after giving up its earlier gains. The Australian Dollar (AUD) struggles to maintain its upward momentum against the US Dollar (USD), as persistent geopolitical tensions and expectations of further monetary tightening by the Federal Reserve (Fed) support the Greenback.

The US Dollar initially weakened at the start of the week, pressured by a pullback in US Treasury bond yields from multi-year highs. Optimism surrounding a potential energy agreement between Russia and Ukraine also helped ease concerns about global fuel shortages and inflationary pressures. However, the Greenback subsequently recovered as investors remained cautious about the monetary policy outlook and geopolitical developments.

The Fed's hawkish stance continues to provide underlying support for the US currency. Although investors have reduced their expectations of an interest rate increase at the late-October meeting, the possibility of a 25-basis-point rate hike in December remains on the table.

Geopolitical uncertainty is also limiting the Australian Dollar's recovery. Over the weekend, Yemen's Iran-backed Houthi movement intensified its attacks against Saudi Arabia, targeting Riyadh's King Khalid International Airport with missiles and drones. Meanwhile, US President Donald Trump raised the possibility of renewed military strikes against Iran, increasing concerns about a broader escalation in the Middle East.

These developments support demand for the US Dollar as a safe-haven currency, while weighing on the risk-sensitive Australian Dollar. The Aussie remains particularly vulnerable to shifts in global risk sentiment, especially when geopolitical tensions coincide with expectations of restrictive US monetary policy.

Looking ahead, investors are focusing on key US inflation releases scheduled for this week. The Producer Price Index (PPI) is due on Wednesday, followed by the Consumer Price Index (CPI) on Thursday. Stronger-than-expected inflation figures could reinforce expectations of further Fed tightening, potentially providing additional support for the US Dollar and increasing downward pressure on AUD/USD.

Market participants will also closely monitor Fed Chair Kevin Warsh's speech at the annual meetings of the International Monetary Fund (IMF) and World Bank in Bangkok on Friday. His remarks could offer further insights into the Fed's policy outlook and influence the direction of the US Dollar.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.6966, keeping a bearish intraday tone as it holds beneath the 100-hour simple moving average (SMA) at 0.6970 while only marginally above the 200-hour SMA near 0.6960. The Relative Strength Index (RSI) at 39 shows soft momentum on the downside, suggesting sellers retain the initiative as rebounds struggle to clear nearby moving average resistance.

On the topside, initial resistance is located at the 100-hour SMA at 0.6970, followed by the horizontal barriers at 0.6995 and 0.7005, with stronger caps then seen at 0.7045, 0.7075, 0.7105 and 0.7140. On the downside, immediate support emerges at 0.6932, ahead of 0.6904 and 0.6883, while a clean break below these levels would turn attention back to the 200-hour SMA around 0.6960 as the broader bearish structure develops.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Deutsche Bank’s Robin Winkler reviews Germany’s consensus outlook, where GDP growth is seen near 1% in 2027 before sliding towards 0% by 2030 as demographics weigh on potential growth. He argues this view assumes no meaningful AI-driven productivity gains for Germany, despite a strong global AI capex boom that currently underpins expectations for solid global and German growth.

AI scenarios challenge German growth path

"Germany's economic institutes are agreed on a strikingly neat outlook: GDP growth of around 1% in 2027, fading towards 0% by the end of the decade as demographics drag down potential growth. This projection may help keep reform pressure on the government, as a warning that the fiscal boost will eventually fizzle out without structural reforms. But reforms aside, we think this consensus is increasingly hard to square with an economic outlook dominated by AI, for better or worse."

"Start with the 1% growth expected in the near term. Alongside Germany's fiscal expansion, the cyclical recovery is premised on solid global growth, itself increasingly powered by the global AI capex boom. But the subsequent slowdown towards 0% assumes that productivity growth remains too weak to offset the accelerating demographic drag."

"Put together, the consensus implies a peculiar AI scenario: the technology is powerful enough to sustain a global investment and asset-price boom, but not powerful enough to deliver meaningful productivity gains in Germany by 2030. That is not impossible. Germany could be slow to capture the gains, or other headwinds could offset some of them."

"The alternative is that AI is simply not powerful enough to raise productivity growth noticeably. But then the global capex boom itself becomes more vulnerable next year. As new datacenters come onstream and onto balance sheets, investors will increasingly expect revenues commensurate with the scale of investment."

"In short, there are many plausible outcomes: productivity could be rising strongly by the end of the decade, or the investment bubble could burst next year, or both could happen. What is hard to imagine, however, is a happy continuation of today’s AI capex boom that ultimately produces no meaningful productivity gains at all."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

EUR/USD gives up earlier gains on Monday as the US Dollar (USD) remains firmly bid across the board, while French political and fiscal uncertainty weighs on the Euro (EUR). At the time of writing, the pair trades around 1.1178, retreating from an intraday high of 1.1217.

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades around 102.35, near levels last seen in April 2025. The Dollar’s strength keeps EUR/USD near 17-month lows as traders assess European fiscal risks and await US inflation data later this week.

Analysts at ING note that “EUR/USD is consolidating near 1.12, and support remains fragile” as ongoing French political and fiscal uncertainty continues to weigh on the single currency. They point out that French debt spreads “remain near their widest,” with Marine Le Pen's recent counter-budget proposal “raising more questions than it answered” and doing little to calm market nerves.

In theory, ING says, “the French government's budget proposal of €43bn in new savings will be debated in parliament this week,” but consensus is that this is likely to “make little progress,” even if the government might ultimately be able “to pass this budget by decree.” In that scenario, “protagonists in parliament might avoid trying to bring down the government, which would make the French debt crisis worse than it already is,” ING cautions.

At the same time, Middle East tensions keep inflation risks elevated on both sides of the Atlantic. Europe’s reliance on imported energy leaves its economy exposed to higher fuel costs, which squeeze household spending and business profits. This makes the ECB’s task harder, as it needs to contain inflation without putting too much pressure on growth.

The European Central Bank (ECB) has raised interest rates twice this year, lifting its deposit facility rate to 2.50%. With Eurozone inflation reaching 3.8% in September, well above the bank’s 2% target, expectations of another increase before year-end remain in place. A Reuters poll points to a pause at the October 29 meeting, followed by a 25-basis-point (bps) hike in December.

Meanwhile, the Federal Reserve (Fed) raised interest rates by 25 bps in September to 3.75%-4.00%, while most policymakers indicated that one more increase could be appropriate this year to support a timely return of inflation to the central bank’s 2% target.

Traders now look ahead to September’s US Consumer Price Index (CPI) report on Wednesday, followed by the Producer Price Index (PPI) on Thursday. The releases could reshape expectations ahead of the Fed’s October 27-28 meeting, with the CME FedWatch Tool showing around an 80% chance that the central bank will keep interest rates steady this month.