Forex News
- USD/CAD gains traction to around 1.4010 in Monday’s early European session.
- The Bank of Canada is set to raise rates to 2.50% on Wednesday.
- Markets price in around a 90.6% chance that the Fed will hold rates steady at its October policy meeting.
The USD/CAD pair trades with mild gains near 1.4010 during the early European trading hours on Monday. A decline in crude oil prices weighs on the commodity-linked Canadian Dollar (CAD) against the US Dollar (USD). Traders brace for the US Federal Reserve (Fed) and Bank of Canada (BoC) interest rate decisions later on Wednesday.
Oil prices fall on Monday after a report that Qatari mediators were in Tehran on Sunday as part of an effort to de-escalate regional tensions in coordination with the US. It is worth noting that Canada is a major oil-exporting country, and low crude oil prices generally have a negative impact on the Loonie.
"Concerns over renewed military hostilities in the Middle East, which drove much of last week’s crude rally, have eased this morning, but the reprieve may prove temporary," said Vandana Hari, founder of oil market analysis provider Vanda Insights.
The BoC is likely to raise its overnight rate by 25 basis points (bps) to 2.50% at its October policy meeting on Wednesday and follow with one more hike by the end of March to pre-empt any further rise in inflation expectations, according to a majority of economists polled by Reuters.
A cautious tone from Fed officials could undermine the Greenback against the CAD. Fed Chair Kevin Warsh said on October 16 that he would not prejudge future rate decisions.
New York Fed President John Williams said that one additional rate increase this year could be appropriate. Meanwhile, Fed Vice Chair Philip Jefferson and Governor Christopher Waller stated that there was no need to rush further hikes. According to the CME FedWatch tool, the chance of no change in rates at the October meeting now stands at 90.6%.
Canada sentiment improves but tariffs, inflation and borrowing costs cloud outlook
Analysts at Rabobank highlight that recent gains in Canadian confidence are being driven in part by financial markets and the labour backdrop, with “much of the improvement in the CSCE indicator” attributed to an improved outlook for financial markets and “confidence in the labor market.” However, they caution that the underlying growth picture remains fragile. In their view, “US tariffs pose a risk to Canadian manufacturing and could reverse some of the improvement in the goods-producing sector,” while “investment in Canada has had a weak post-pandemic recovery, and elevated trade tensions continue to weigh on businesses’ capital expenditures and hiring plans.”
On the inflation front, Rabobank notes that “consumer short- and medium-term inflation expectations have recently converged with climbing five-year expectations to a level which remains well above the Bank of Canada’s 2% target,” underscoring persistent price pressures. Against that backdrop, the bank warns that “higher borrowing costs would only add to the strain on households already facing elevated prices, rather than materially improving the cost of living for Canadian consumers,” suggesting limited scope for tighter policy without exacerbating existing household stress.
Warsh flags investment surge and AI focus but avoids pre-committing on rates
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10 and reflecting a cautious, data-dependent tone. The remark about being “over-scarred from the global financial crisis” underscores a lingering bias toward risk management even as Warsh highlights structural growth and an investment surge driven by “good policies,” while refusing to pre-judge upcoming FOMC decisions. The emphasis on AI as a near-term demand-side force and a tool to strengthen data confidence adds a forward-looking, structurally hawkish flavor, but without explicit guidance on the path for the Dollar.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.51, signaling that the speech leaves the broader policy narrative firmly in hawkish territory despite the slightly softer FXS Speechtracker score. With the index well above 100 and Warsh stressing price stability, investment strength, and financial stability risks, markets are likely to see the Dollar supported by expectations that the Fed remains inclined toward tighter policy unless data materially disappoints.
Technical Analysis: USD/CAD remains capped under the 100-day SMA
In the daily chart, USD/CAD holds a bearish near-term bias as it remains below the 100-day simple moving average (SMA) and the Bollinger middle band, keeping price capped within the lower half of the recent volatility envelope. The Relative Strength Index (14) at 39 is drifting below the neutral 50 line, which reinforces a soft downside tone rather than outright oversold conditions.
On the topside, initial resistance is located at the 100-day SMA near 1.4045, followed by the Bollinger middle band at 1.4170, while the Bollinger upper band at 1.4355 marks a broader bullish threshold. On the downside, immediate support emerges at the Bollinger lower band around 1.3985, and a sustained break beneath this level would likely extend the corrective phase toward lower daily lows.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
Here is what you need to know on Monday, October 26:
There seems to be a positive shift in risk mood at the beginning of the week as crude Oil prices edge lower. The European economic calendar will feature business sentiment data from Germany on Monday. Later in the week, all attention will be on policy meetings of major economies' central banks, including the Reserve Bank of New Zealand (RBNZ), the Bank of Canada (BoC), the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of Japan (BoJ).
Yemen's Houthis said on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh, Reuters reported. This move came hours after the kingdom announced that flights had resumed despite repeated attacks by Houthis. Meanwhile, United States (US) President Donald Trump has ruled out immediate military action against Iran, saying “there will not be a strike today,” as per Aljazeera. Following the previous week's sharp upsurge, crude Oil prices opened with a bearish gap and the barrel of West Texas Intermediate (WTI) was last seen losing more than 2% on a daily basis.
Reflecting the improving market sentiment, US stock index futures rise about 0.2% on a daily basis, while the US Dollar (USD) Index trades marginally lower near 101.70. Finally, the benchmark 10-year US Treasury bond yield stays in negative territory below 5% after posting losses for the third consecutive week.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.14% | -0.02% | 0.11% | 0.05% | 0.12% | 0.00% | -0.14% | |
| EUR | 0.14% | 0.16% | 0.23% | 0.18% | 0.26% | 0.17% | 0.00% | |
| GBP | 0.02% | -0.16% | 0.06% | 0.04% | 0.10% | 0.00% | -0.16% | |
| JPY | -0.11% | -0.23% | -0.06% | -0.04% | 0.01% | -0.10% | -0.25% | |
| CAD | -0.05% | -0.18% | -0.04% | 0.04% | 0.05% | -0.03% | -0.18% | |
| AUD | -0.12% | -0.26% | -0.10% | -0.01% | -0.05% | -0.10% | -0.25% | |
| NZD | -0.00% | -0.17% | -0.01% | 0.10% | 0.03% | 0.10% | -0.14% | |
| CHF | 0.14% | -0.00% | 0.16% | 0.25% | 0.18% | 0.25% | 0.14% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
FOMC patience in October seen boosting odds of December Fed hike
According to TD Securities, the Federal Open Market Committee (FOMC) is likely to "keep rates on hold this week despite rising inflation risks," with analysts judging that while "the chance of a surprise hike is higher than normal," policymakers are still expected to "prioritize patience and wait until December." In their view, "a hold in October will make a December hike all the more likely," particularly after the "upside surprise in September CPI," which underscores that "inflation risks are still pertinent." TD Securities adds that "the evolution of inflation data will determine the extent and pace of hikes later in the cycle," suggesting that incoming price figures will be crucial in shaping the Fed’s next steps.
EUR/USD fluctuates in a narrow range above 1.1200 after closing the previous week marginally lower.
GBP/USD registered marginal losses on Friday but managed to post gains for the second consecutive week. The pair stays quiet on Monday and moves sideways below 1.3400.
USD/JPY clings to small gains near 157.00 in the European morning on Monday after falling about 0.7% last week.
Gold lost nearly 4% in the previous week before stabilizing slightly above $4,000 on Monday.
Gold demand from ETFs and central banks faces another test near $4000
TD Securities analysts noted that we continue to see "strong physical demand from ETFs and central banks," even as Gold remains under pressure from systematic selling. The bank argues that prices "drifting back toward the $4000/oz level yet again will be another test if these flows can offset near-term systematic flows," underscoring the importance of official and investment demand in counterbalancing CTA-driven weakness.
AUD/USD stays in a consolidation phase above 0.7000 after rising more than 1% last week. In the early trading hours of the Asian session on Wednesday, September inflation data from Australia could ramp up the pair's volatility.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann keep a constructive stance on GBP/USD, noting recent price action remains range-bound but within an overall positive bias. Intraday, the pair is seen trading between 1.3355 and 1.3400, while on a 1–3 week horizon they still see room for gains toward 1.3440, barring a break below 1.3340 support.
Pound-Dollar retains mild bullish bias
"24-HOUR VIEW: Following last Thursday’s price action, we indicated on Friday that “there has been no clear shift in either downward or upward momentum,” and we expected GBP “to trade between 1.3360 and 1.3420.” GBP subsequently traded within a range of 1.3362/1.3407. The current price movements still appear to be part of a range-trading phase, likely between 1.3355 and 1.3400."
"1-3 WEEKS VIEW: We have been holding a positive GBP view since the middle of the month. In our most recent narrative from last Wednesday (21 Oct, spot at 1.3375), we highlighted that “there is scope for GBP to rise to 1.3440 next.” While GBP subsequently rose to a high of 1.3418, it has not been able to make much headway on the upside. That said, only a breach of 1.3340 (‘strong support’ level previously at 1.3330) would mean 1.3440 is not coming into view"
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Commerzbank’s Thu Lan Nguyen notes that EUR/USD has remained relatively stable as both the Euro and US Dollar have weakened broadly against other currencies. However, rising oil prices and stronger Euro-area inflation expectations pose downside risks, while demand for German bonds helps explain why French fiscal concerns have not exerted greater pressure on the currency.
Euro resilience faces inflation and fiscal risks
"A look at our currency indices, however, shows that both currencies have indeed moved, namely lower. But as the euro and the dollar have weakened broadly in tandem, EUR/USD has remained relatively stable."
"Higher oil prices in particular should put greater pressure on the euro, as their impact on both inflation and economic activity in the euro area is more pronounced and, on balance, negative for the currency."
"At the same time, short-term inflation expectations have risen more strongly in the euro area than in the US. In other words, higher inflation expectations are currently not being offset by a corresponding shift in relative interest-rate expectations. This is, in principle, a negative signal for the euro."
"German government bond yields fell noticeably last week. This suggests that many investors simply sold French government bonds and bought Bunds instead. Such a portfolio shift within the euro area does not require investors to change their EUR exposure and therefore does not necessarily have an impact on the exchange rate."
"Against this backdrop, it is hardly surprising that the euro has so far not come under greater pressure, at least against the US dollar. But as we already saw at the end of September, sentiment in the euro area can turn quickly. So it is far too early to sound the all clear..."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold gains some positive traction, snapping a two-day losing streak to a three-month low.
- Declining US bond yields cap the attempted USD recovery and lend support to the bullion.
- XAU/USD bulls seem cautious ahead of this week’s central bank events and the key US data.
Gold (XAU/USD) stages a modest recovery from the vicinity of a three-month low, trading above the $4,000 psychological mark through Monday’s Asian session amid a softer US Dollar (USD). US President Donald Trump has ruled out immediate military action against Iran, triggering a modest pullback in crude oil prices. Furthermore, Federal Reserve (Fed) officials have signaled no urgency to raise interest rates immediately. Adding to this, the recent sharp pullback in US bond yields from multi-year highs keeps a lid on the attempted USD recovery from a three-week low and offers some support to the commodity. The precious metal, for now, seems to have snapped a two-day losing streak to a three-month trough, touched on Friday, though the upside potential seems limited.
S&P Global's flash US Manufacturing Purchasing Managers' Index (PMI) rose to 56 in October, hitting a 53-month high and beating estimates for a reading of 55.6. Meanwhile, the Services PMI matched forecasts and stood at 57.9, compared to 58.8 in September, while the Composite Output Index slipped to 57.6 from a five-year high of 58.4 in the previous month. Additional details revealed that the output price index moved up to 59.8, its highest reading since August 2022, suggesting that inflation could increase further and remain persistently high in the coming months. This comes on top of inflationary concerns stemming from elevated energy prices and underpins prospects for additional Fed tightening, which could keep a lid on any meaningful upside for the non-yielding Gold. .
In fact, crude oil prices jumped to the highest level since September 16 amid supply concerns driven by attacks in Saudi Arabia and tensions involving Iran. In the latest developments, the Iran-backed Houthis in Yemen vowed on Sunday that they will keep attacking Saudi Arabia's King Khalid Airport in Riyadh. Moreover, the stalled US-Iran talks keep the geopolitical risk premium firmly in play and could limit deeper losses for the safe-haven Greenback, warranting some caution before placing aggressive bullish bets on gold. Traders might also opt to move to the sidelines ahead of this week's key central bank events and important US macro releases – the Advance Q3 GDP report and the Personal Consumption Expenditures (PCE) Price Index on Thursday.
The focus, however, will be on the outcome of the two-day FOMC policy meeting on Wednesday. In the absence of updated economic projections, traders will closely scrutinize the accompanying rate statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference for more cues on the future policy path, which will influence the near-term USD price dynamics. Meanwhile, the Reserve Bank of New Zealand (RBNZ), the European Central Bank (ECB) and the Bank of Japan (BoJ) are also scheduled to announce their rate decisions this week. This might further infuse volatility around the Gold price. Nevertheless, the aforementioned fundamental backdrop warrants some caution before confirming that the XAU/USD pair has bottomed out.
XAU/USD 4-hour chart
Technical Analysis
The precious metal maintains a bearish near-term tone following last week's breakdown through a short-term trading range support near the $4,100 mark. Moreover, the recent repeated failures to conquer the 100-period Exponential Moving Average (EMA) validate the negative outlook, suggesting that the attempted recovery remains corrective within a broader downside bias.
Hence, any subsequent move up is more likely to be sold into and remain capped near the $4,100 support-turned-resistance. The next hurdle is clustered around the 100-period EMA at $4,135.95. The XAU/USD pair would need a sustained move above the said barrier for any shift to a more constructive outlook and additional gains toward reclaiming the $4,200 mark.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions. The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.
- GBP/USD surrenders early gains and flattens at around 1.3373 as the US Dollar rebounds slightly.
- The Fed is expected to leave interest rates steady on Wednesday.
- Investors expect the BoE to tighten monetary policy conditions next week.
The British Pound (GBP) gives back its early gains and flattens at around 1.3373 against the US Dollar (USD) during the European trading session on Monday. The GBP/USD pair flattens as the US Dollar recovers some of its early losses.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades marginally lower to near 101.70.
This week, investors will pay close attention to the Federal Reserve’s (Fed) monetary policy announcement on Wednesday. The Fed is almost certain to leave interest rates unchanged in the 3.75%-4.00% range, according to the CME FedWatch tool. The tool also shows that the United States (US) central bank will raise them in the December meeting.
Apart from the Fed’s policy, investors will also focus on the preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index data for September, which are scheduled for Thursday. The US economy is expected to have grown at an annualized pace of 3.2%, faster than the previous reading of 2.2%.
On GBP front, the major trigger will be the Bank of England’s (BoE) monetary policy announcement next week. The BoE is highly anticipated to hike interest rates by 25 basis points (bps) to 4%.
GBP/USD Technical Analysis
In the daily chart, GBP/USD trades at 1.3370. The pair holds above the 20-day exponential moving average (EMA) at 1.3323, which suggests a mildly constructive near-term tone as buyers defend the recent recovery. The Relative Strength Index (RSI) at 54.8 stands in neutral-to-positive territory, hinting that momentum remains supportive without yet reaching overbought conditions.
On the downside, immediate support is seen at the 20-day EMA near 1.3323, where a break would likely soften the bullish bias and expose deeper pullbacks. Looking up, the previous week high near 1.3420 is the immediate hurdle; a decisive break above that would open the door for further updie towards 1.3500.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Fed Interest Rate Decision
The Federal Reserve (Fed) deliberates on monetary policy and makes a decision on interest rates at eight pre-scheduled meetings per year. It has two mandates: to keep inflation at 2%, and to maintain full employment. Its main tool for achieving this is by setting interest rates – both at which it lends to banks and banks lend to each other. If it decides to hike rates, the US Dollar (USD) tends to strengthen as it attracts more foreign capital inflows. If it cuts rates, it tends to weaken the USD as capital drains out to countries offering higher returns. If rates are left unchanged, attention turns to the tone of the Federal Open Market Committee (FOMC) statement, and whether it is hawkish (expectant of higher future interest rates), or dovish (expectant of lower future rates).
Read more.Next release: Wed Oct 28, 2026 18:00
Frequency: Irregular
Consensus: 4%
Previous: 4%
Source: Federal Reserve
- The Indian Rupee trades with caution against the US Dollar at the start of the Fed’s policy week.
- Investors expect the Fed to leave interest rates unchanged in the 3.75%-4.00% range.
- Elevated oil prices continue to keep the Indian currency under pressure.
The Indian Rupee (INR) holds on to Friday’s losses against the US Dollar (USD) at the start of the week. The USD/INR pair ticks up to near 95.00 as the Indian currency faces pressure due to elevated oil prices.
On Monday, the MCX Crude Oil contract expiring on November 19 opens gap down almost 2% to near Rs. 9,612, but is close to its recent highs of Rs. 9,828 posted on Friday.
Currencies from economies, such as India, which rely heavily on oil imports to meet its energy demands, tend to underperform in a high oil-price environment.
What is keeping oil prices elevated?
According to TD Securities, crude prices remain biased higher in the near term, with analysts warning that “we expect crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated.” They note that “recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,” reinforcing the geopolitical premium embedded in current pricing.
US Dollar trades lower at start of Fed week
The US Dollar trades lower at the start of the week amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, and preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data for September on Thursday.
Analysts at Royal Bank of Canada expect the Fed to keep policy steady at this week’s meeting, with the “Fed expected to hold the fed funds target range unchanged on Wednesday after hiking for the first time since 2023 in September.” While the September move marked a resumption of tightening, RBC notes that “FOMC members continue to signal that more hikes will follow, but comments after the last decision suggest a gradual approach.” In terms of the projected path, the bank reiterates that “we expect two 25-basis-point rate hikes ahead before the end of Q1 2027.”
Other than the Fed’s monetary policy and key economic data releases, investors will pay close attention to Q3 earnings of hyperscalers, including Amazon, Alphabet and Microsoft.
The impact of guidance from hyperscalers regarding their spending plans on Artificial Intelligence (AI) infrastructure would be significant on the US Dollar and US Treasury Yields. In past quarters, hyperscalers issued a substantial amount of debt to fund their AI spending plans, which had resulted in a significant jump in US bond yields.
The guidance on AI spending plans would also have a significant impact on the Indian Rupee, given India is known as anti-AI trade in global markets.
USD/INR Technical Analysis
In the daily chart, USD/INR trades at 94.9455, maintaining a bearish near-term bias as spot holds beneath the 20-day exponential moving average (EMA) at 95.3456. The pair has retreated sharply from the recent 96.80 area, and the EMA now acts as an immediate cap on any recovery attempts, while the Relative Strength Index (RSI) around 39 suggests weak but stabilizing downside momentum after probing oversold territory earlier in the month.
On the topside, initial resistance is located at the 20-day EMA at 95.3456, and a daily close above this barrier would help alleviate current selling pressure and open the way to higher levels. On the downside, momentum support is indicated by the RSI at 39.62; a sustained drop in the oscillator toward the 30 zone would reinforce the bearish tone and expose the pair to further losses below the 95 handle.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
- EUR/USD gathers strength to around 1.1220 in Monday’s early Asian session.
- The cross keeps a negative tone below the 100-day, with bearish RSI momentum.
- The first upside barrier emerges at 1.1270; 1.1185 acts as an initial support level for the pair.
The EUR/USD pair holds positive ground near 1.1220 during the early European trading hours on Monday. The US Dollar (USD) softens against the Euro (EUR) as US Treasury bond yields drop in extended rally. All eyes will be on the US Federal Reserve (Fed) and the European Central Bank (ECB) interest rate decisions later this week.
The 10-year US Treasury yield fell to 4.97% in the previous session, while the 30-year bond yield was at 5.299%, hovering near one-month lows. "For the time being, it seems to point to the US bond market being in the driving seat for broader dollar performance," said Ray Attrill, head of FX strategy at National Australia Bank.
Many analysts anticipate the Fed to hold interest rates steady just days before the midterm elections. Markets are now pricing in nearly 90.6% odds that the Fed will keep rates on hold at its upcoming October meeting on Wednesday, according to the CME FedWatch tool, with a 79.4% probability that the US central bank will lift interest rates in December.
On the other hand, concerns about growing unrest in France and the country's worsening budget problems could weigh on the shared currency in the near term.
Traders await the ECB interest rate decision on Thursday, with no change in rates expected. Traders will scrutinize any hint of the rate outlook after ECB President Christine Lagarde said in late September that a moderate policy response to inflation was appropriate.
Warsh flags investment surge and AI focus but avoids pre-committing on Fed path
Fed Chair Warsh’s speech scores 5.6/10 on the FXS Speechtracker, modestly softer relative to the historical average of 6.1/10, reflecting a cautious tone despite upbeat references to structural growth and an investment surge. The remark about being “over-scarred from the global financial crisis” underscores a lingering bias toward risk management and financial stability, even as Warsh highlights policy-driven investment strength and refuses to prejudge upcoming October and December meetings. Emphasis on AI’s demand-side impact, data confidence, and the November field hearing signals a forward-looking stance, but the lack of explicit guidance keeps the overall tone balanced rather than overtly hawkish.
The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a level of 127.51, indicating that the speech did not materially shift perceived policy bias. With the index firmly above 100, the Fed remains in hawkish territory, and the stable reading suggests Warsh’s comments largely reinforced the existing policy narrative captured by the FXS Speechtracker.
Technical Analysis: EUR/USD retains a bearish tone under the 100-day SMA
In the daily chart, EUR/USD keeps a bearish near-term tone as spot holds beneath the 100-day simple moving average (SMA) and below the upper Bollinger band. Price is flirting with the Bollinger middle band, which sits just above the market and acts as immediate overhead resistance, while the 14-day Relative Strength Index around 40 suggests weak, still-bearish momentum rather than an outright oversold condition.
On the topside, initial resistance level is located at the October 16 high of 1.1270, en route to the upper boundary of Bollinger band at 1.1315. Sustained trading above this level could pave the way to the 100-day SMA at 1.1450, where a break would be needed to ease the broader downside pressure.
On the downside, the October 23 low of 1.1185 offers the first support level, followed by the lower limit of Bollinger band around 1.1138. A clear move beneath this floor would open the path toward the 1.1100 psychological level.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/USD continues its struggle to make it through the 100-day SMA resistance.
- US bond yields undermine the USD, supporting spot prices amid RBA hike bets.
- The focus remains on Australia’s CPI report, Fed decision and key US macro data.
The AUD/USD pair retreats slightly from a one-month high, touched earlier this Monday, though it lacks follow-through and holds above the 0.7000 psychological mark through the Asian session.
The Australian Dollar (AUD) continues to draw some support from rising market expectations for another interest rate hike by the Reserve Bank of Australia (RBA) at its upcoming November policy meeting. The bets were lifted by recent hawkish comments from RBA Assistant Governor Sarah Hunter, saying that inflation has not yet been brought fully under control and that interest rates may need to rise further amid the risk of overseas price pressures becoming entrenched in the economy.
The US Dollar (USD), on the other hand, struggles to capitalize on Friday's modest recovery from a three-week low amid hopes of de-escalation of tensions in the Middle East and a further decline in US bond yields. This, in turn, might continue to act as a tailwind for the AUD/USD pair. Bulls, however, seem hesitant and opt to wait for the release of the latest Australian consumer inflation figures and the outcome of the highly anticipated two-day FOMC monetary policy meeting on Wednesday.
Traders will further take cues from the release of the Advance US Q3 GDP report and the US Personal Consumption Expenditures (PCE) Price Index on Thursday for more cues about the Federal Reserve's (Fed) future policy path, which will drive the USD. In the meantime, geopolitical uncertainties could support the safe-haven buck and cap the AUD/USD pair, making it prudent to wait for a move beyond the 100-day Simple Moving Average (SMA) before positioning for an extension of a short-term uptrend.
AUD/USD daily chart
Technical Analysis
The AUD/USD pair keeps a capped bias beneath the 100-day Simple Moving Average (SMA) at 0.7033 and has now slipped back below the mid-range Fibonacci retracements. The 50.0% level at 0.7065 and the 61.8% level at 0.7105 could act as overhead barriers, while initial support emerges at the 38.2% Fibo. retracement at 0.7025. Further demand is expected near the 23.6% level at 0.6976 and the broader structural floor around the Fibonacci anchor at 0.6896.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
- Fed expected to hold rates steady in October before a potential December hike, lowering dollar demand.
- Markets anticipate a 90.6% chance of an October pause while awaiting key US PCE and GDP data.
- Dollar weakens as immediate US-Iran strike risks abate, though geopolitical uncertainty persists after upcoming elections.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is losing ground after registering gains in the previous day and trading near 101.70 during Asian hours on Monday.
The Greenback is facing downward pressure due to market expectations surrounding the Federal Reserve’s upcoming policy path. Financial markets anticipate that the Fed will hold interest rates steady in October before potentially pursuing another rate hike in December. According to the CME FedWatch Tool, market pricing reflects a 90.6% probability of a rate pause at the October 27–28 policy meeting, alongside a 79.7% chance of a rate increase in December.
Brown Brothers Harriman’s Elias Haddad notes that the FOMC is widely expected to leave policy unchanged this week, with the Fed funds target range “steady at 3.75-4.00% after raising rates 25bps in September.” He points out that “calls for patience from several key Fed officials support a pause,” while the futures market “imply only 10% odds of a hike this week, with a December 9 rate increase virtually fully priced in.” Against a backdrop of firm US data and persistent inflation pressures, Haddad argues this stance continues to underpin the Dollar.
Investors are closely monitoring key US economic releases scheduled for this week, specifically the Personal Consumption Expenditures (PCE) inflation data and preliminary third-quarter GDP figures, to gauge future rate moves.
Simultaneously, the US Dollar is struggling as safe-haven demand eases following recent comments from US President Donald Trump. Citing reports from Al Jazeera, President Trump ruled out immediate military action against Iran, clarifying that "there will not be a strike today."
Despite this temporary pause, market anxiety remains elevated over the risk of strikes resuming after this week’s Israeli elections and next week’s US midterm elections. Intelligence reports indicate that Iran is prepared to retaliate by targeting key regional sites in Israel and the United Arab Emirates should military operations restart.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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