Forex News

• EUR/GBP retreats to the 0.8370 area, a few pips above YTD lows of 0.8361.
• High Oil prices and ongoing concerns about France's debt are holding back Euro bulls.
• The pair should break above 0.8400 to confirm a bullish correction.

The Euro (EUR) has retraced previous gains against the British Pound (GBP) on Tuesday, weighed down by high Oil prices and the ongoing concerns about France’s fiscal health. The EUR/GBP pair flatlines just above 0.8370 after being rejected at the 0.8400 area on Monday, with the year-to-date low of 0.8361 at a short distance.

Investors, however, are wary of placing large bets ahead of monetary policy decisions from some of the world's major central banks this week. The European Central Bank (ECB) meets on Thursday and is expected to leave interest rates on hold, hinting at a hike in the coming months, as inflation remains well above target.

In the UK, the Bank of England (BoE) meets next week, and investors are nearly fully pricing in a 25-basis-point hike, after the upbeat Gross Domestic Product (GDP) and the hot consumer inflation figures released last week.

Analysts at ING argue that “Sterling is riding on the coat-tails of PM Andy Burnham's popularity,” and that “next week's UK budget looks unlikely to derail the recent EUR/GBP break below 0.8400.” Looking ahead, “the euro still has plenty of room to drop on French politics; EUR/GBP can stay offered in a 0.8360-0,8430 range for the time being,” says the bank in a note.

Technical Analysis: Bears have lost momentum, but bulls remain absent

EUR/GBP trades at 0.8375, consolidating losses a few pips above year-to-date lows. Momentum indicators on 4-hour charts show fading bearish pressure as the Relative Strength Index (14) holds around 40 and the Moving Average Convergence Divergence (MACD) pops up to positive levels, although bulls are still absent.

Bulls would need to breach the 0.8400 area (October 21 and Monday's high) to confirm a bullish reaction and shift the focus towards the October 19 and 20 highs near 0.8430. Further up, bulls would meet a stronger cap at the 0.8480-0.8490 area (October 8, 9 and 15 highs)

On the downside, immediate support is located at the May 2025 low of 0.8355. Below here, bears might feel attracted by the April 2025 floor, at 0.8315.

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

• USD/JPY extends upside to near 157.80 as the Japanese Yen underperforms.
• Both the Fed and the BoJ are expected to hold interest rates steady this week.
• The BoJ is expected to hike interest rates in the December policy meeting.

The Japanese Yen (JPY) continues to underperforms its peers amid caution ahead of the Bank of Japan’s (BoJ) monetary policy announcement on Friday. In the European trade on Tuesday, the US Dollar (USD) is up 0.22% at around 157.80 against the Japanese currency.

BoJ seen on hold on Friday as market prices in December hike and firmer Yen support

Analysts at Brown Brothers Harriman (BBH) note that the Bank of Japan is "widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again." They highlight Governor Kazuo Ueda’s cautious tone, recalling that "in September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

On the monetary policy outlook, BBH points out that market pricing has turned more hawkish, with "the swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months.”

Before the BoJ’s monetary policy decision, the major trigger for the USD/JPY pair will be Federal Reserve’s (Fed) monetary policy announcement on Wednesday. According to the CME FedWatch tool, the Fed is almost certain to leave interest rates unchanged in the 3.75%-4.00% range. Investors will pay close attention to commentary regarding the inflation and the economic outlook.

As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.16% higher to near 102.20.

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 157.86. The pair holds above the 9-period exponential moving average (EMA) at 157.69, keeping a mildly bullish near-term bias as price is supported by this short-term trend indicator. The Relative Strength Index (14) around 51 suggests neutral-to-positive momentum, hinting that buyers retain a modest advantage while avoiding overbought conditions.

On the downside, immediate support is seen at the 9-period EMA at 157.69, which guards the current advance and would need to give way to signal a deeper corrective move. With no nearby technical resistance levels identified in the latest dataset, the pair appears biased to extend gains as long as it holds above this moving average, though fresh highs would likely attract closer scrutiny of momentum for signs of fatigue.

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

Here is what you need to know on Tuesday, October 27:

Markets adopt a cautious stance on Tuesday following Monday's choppy action. The US Dollar (USD) stays resilient against its peers even though the benchmark 10-year US Treasury bond yield stays below 5%. The US economic calendar will feature Durable Goods Orders and New Home Sales data for September, alongside regional manufacturing surveys and the Conference Board's Consumer Confidence Index data for October. Additionally, the Federal Open Market Committee's (FOMC) two-day policy meeting will get under way late Tuesday.

The USD Index closed in positive territory on Monday but struggled to gather bullish momentum as the bullish action seen in Wall Street, amid falling crude Oil prices, pointed to an improving market mood. Early Tuesday, US stock index futures trade marginally lower, while the USD Index clings to small gains above 102.00.

After losing about 2% on Monday, the barrel of West Texas Intermediate (WTI) trades marginally higher on the day. The Saudi-led coalition said early Tuesday that air defences intercepted and destroyed four drones launched by the Houthis towards the southern region of Saudi Arabia, as per Reuters.

Fed seen on hold in October as BNY shifts focus to December tightening risks

Strategists at BNY Markets align with prevailing market expectations, stating that "in line with the market, we don’t foresee a rate hike at the October FOMC tomorrow and prefer to place our expectations for further tightening on the December meeting." They argue that, "based on Fed commentary and a steady, if sticky, inflation outlook, we don’t think the weight of the Committee will fall on the hawkish side."

Japanese Finance Minister Satsuki Katayama said on Tuesday that the government is prepared to take decisive steps in the foreign exchange market, reiterating that officials will closely monitor market moves with heightened urgency. After rising 0.4% on Monday, USD/JPY continues to push higher and was last seen rising 0.2% on the day at 157.80.

GBP/USD lost about 0.3% on Monday and closed the second consecutive trading day in negative territory. The pair stays on the back foot early Tuesday and trades below 1.3330. On Wednesday, the August Budget announcement from the UK, which will contain economic forecasts prepared by the Office for Budget Responsibility (OBR), will be scrutinized by market participants.

Commerzbank’s Michael Pfister cautions that the forthcoming UK budget under Prime Minister Andy Burnham is “unlikely to result in major progress,” noting that Burnham has “recently announced that significant changes would only occur following a potential re-election.” Nevertheless, Pfister argues that “market participants are likely to be relieved that the presentation of the new budget is proceeding relatively calmly,” reinforcing the sense that the Pound could be supported by a more measured fiscal communication strategy.

EUR/USD stays under bearish pressure for the fourth straight trading day on Tuesday and declines toward 1.1150 in the early European session.

Gold continues to move sideways at around $4,000 early Tuesday after posting small gains on Monday.

AUD/USD closed in the red on Monday but managed to stabilize above 0.7000. In the early trading hours of the Asian session on Wednesday, September Consumer Price Index (CPI) data from Australia could ramp up the pair's volatility.

National Bank of Canada (NBC) strategist Kyle Dahms analyzes recent Canadian Dollar (CAD) volatility, noting modestly positive correlation with WTI but stronger links to Gold and two-year yield spreads. He argues that expectations of a Bank of Canada (BoC) hike versus a Federal Reserve hold have narrowed Canada’s yield disadvantage. However, he remains cautious on the Canadian Dollar through year-end given risks from commodities, rates and trade tensions.

Loonie recovery tied to rate spreads

"The Canadian dollar has whipsawed in recent months as rising oil prices competed with shifting interest rate differentials against the U.S., and volatility in gold prices."

"In our view, the narrowing rate gap offers a more convincing explanation for the recent recovery."

"Expectations of a Bank of Canada hike this Wednesday, alongside a Federal Reserve hold, have accompanied a narrowing of Canada’s yield disadvantage and a partial reversal of the loonie’s earlier losses."

"With a Canadian hike already substantially anticipated, further support may depend more on guidance about subsequent moves than on the decision itself."

"More durable appreciation, in our view, will require an easing of trade tensions and a sustained narrowing of Canada’s yield disadvantage."

"We therefore remain cautious on the Canadian dollar through year-end."

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

• Gold struggles to build on the overnight gains as the USD attracts buyers for the third straight day.
• Fed hike bets, rebounding US bond yields and geopolitical risks continue to underpin the USD.
• The downside for the XAU/USD pair seems limited as traders await the crucial FOMC decision.

Gold (XAU/USD) remains depressed heading into Tuesday’s European session, with bearish traders looking to extend the slide further below the $4,000 psychological mark amid a broadly firmer US Dollar (USD). The precious metal, however, holds above a three-month low touched on Monday, as traders refrain from placing aggressive directional bets and opt to wait for the outcome of the two-day FOMC policy meeting on Wednesday.

Federal Reserve (Fed) officials recently signaled that there is no urgency to raise interest rates. Traders, however, are still pricing in over an 80% chance that the US central bank will raise borrowing costs again at the December policy meeting. Moreover, inflation fears stemming from elevated energy prices underpin prospects for further Fed tightening. Hence, the focus will remain glued to the accompanying policy statement and Fed Chair Kevin Warsh's comments during the post-meeting press conference in the absence of updated economic projections.

Apart from this, the release of the Advance US Q3 GDP and the Personal Consumption Expenditures (PCE) Price Index will be looked upon for more cues about the Fed's future policy path. The outlook, in turn, will play a key role in influencing the US Dollar (USD) price dynamics and provide some meaningful impetus to the non-yielding Gold. Heading into the key central bank event and data risks, a modest recovery in US bond yields, following the recent decline to a three-week low, along with Middle East jitters, underpins the safe-haven buck.

The geopolitical risk premium remains in play amid stalled US-Iran talks and renewed attacks by Iran-aligned Houthis on Saudi Arabia. In fact, Houthis said on Monday they had ‌attacked Saudi Arabia's East-West crude oil pumping stations and Riyadh airport. Adding to this, Lebanese armed group Hezbollah is reportedly preparing for a ​possible resumption of hostilities with Israel, dampening hopes of immediate stability in the region. This, in turn, favors USD bulls and suggests that the path of least resistance for gold remains to the downside.

XAU/USD 4-hour chart

Technical Analysis

The commodity maintains a bearish near-term tone following the recent breakdown through a short-term trading range. Moreover, the precious metal holds well below the 200-period Simple Moving Average (SMA) on the 4-hour chart, at $4,198.08, which acts as the primary cap on the upside. Meanwhile, the Moving Average Convergence Divergence (MACD) indicator shows the line above zero and advancing, and the Relative Strength Index (RSI) has recovered toward the mid-30s from oversold territory. Slight improvement in momentum indicators only hints at a corrective bounce rather than a clear shift in trend.

That said, acceptance below $4,000 is needed to back the case for deeper losses. On the topside, initial resistance is defined by the trading range breakpoint, around the $4,065-$4,075 region. This is followed by the $4,100 mark, above which the XAU/USD pair could aim to test the 200-period SMA and reclaim the $4,200 round figure. A sustained strength above this barrier would ease the prevailing downside bias and open the way for a more meaningful recovery.

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

• GBP/USD drifts lower to around 1.3335 in Tuesday’s early European session.
• New Chancellor of the Exchequer John Healey will release his first budget on Wednesday.
• Traders await the Fed rate decision on Wednesday, with no change in rates expected.

The GBP/USD pair declines to near 1.3335 during the early European trading hours on Tuesday. Traders prefer to wait on the sidelines and avoid taking big positions ahead of the UK Autumn Budget and US Federal Reserve (Fed) interest rate decision on Wednesday.

UK new Finance Minister John Healey will deliver his first budget on Wednesday against a backdrop of rising global borrowing costs and high energy prices due to the Iran war. Healey can make public finances less fragile by deflating ballooning health and disability benefits and introducing tax reforms to address complexity and perverse incentives.

The new Chancellor of the Exchequer also needs to increase revenue. Raising all income tax rates by one percentage point could generate approximately £11 billion annually by the 2029–30 financial year to cover the gap in defense spending.

"It's hard to be immune in an environment where global bond yields are going higher, but among major developed markets, the UK is looking like one of the cleanest dirty shirts out there," said Guillermo Felices, PGIM's global investment strategist.

The Fed raised rates by 25 basis points (bps) to a range of 3.75% to 4% in its September policy meeting, its first hike since 2023. The US central bank is likely to leave interest rates unchanged at the conclusion of its October policy meeting on Wednesday.

Markets are now pricing in only 10.5% odds that the Fed will lift rates on Wednesday, although elevated energy prices are still prompting bets on a hike before year-end.

Pound support builds as BoE shift and calmer UK budget reassure markets

Analysts at Commerzbank argue that the Bank of England’s long-standing attempt to “ride out the energy price shock – partly to avoid stifling the real economy too severely” is nearing an inflection point. They note that “the combination of rising inflation, a slight improvement in the labour market, and fairly strong growth figures this year is likely to lead to a change of heart next week,” with “a first interest rate hike… basically fully priced in, and the market [expecting] a further three rises by the middle of next year.” This anticipated policy shift “has supported the pound in recent weeks.”

Commerzbank highlights that inflation dynamics are increasingly driven by energy, with “the four direct energy components in the inflation index now account[ing] for almost one percentage point of the year-on-year total.” Combined with “highly energy-dependent components, the 2% target has in fact already been practically reached.” Yet, as “the less energy-intensive components (primarily services) continue to contribute significantly… inflation has recently drifted further away from the target,” underscoring the BoE’s dilemma.

Against this backdrop, the presentation of Prime Minister Andy Burnham’s new budget is seen as another stabilising factor. Commerzbank cautions that “while this is unlikely to result in major progress (Burnham recently announced that significant changes would only occur following a potential re-election), market participants are likely to be relieved that the presentation of the new budget is proceeding relatively calmly.” Together, the prospect of BoE tightening, improving labour trends, firmer inflation and more resilient UK government bonds are helping to underpin the Pound.

Greene flags stalled wage disinflation, keeping GBP rate cut hopes in check

Greene’s speech score of 7.4/10 matches the historic average on FXS Speechtracker, signaling a consistent tone but with a distinctly hawkish tilt versus recent market expectations for the Pound. Emphasis that wage disinflation has stalled at levels above those consistent with 2% inflation, alongside a belief that policy should proactively lean against second-round inflation risks, reinforces resistance to near-term rate cuts.

Forward-looking pay growth closer to 3.5%, surprising economic resilience, and signs that labor market slack may have peaked all support Greene’s view that the risk of second-round effects is greater than previously thought. For GBP, this combination of stalled wage disinflation and resilient activity is likely to underpin yields and keep downside limited, especially against currencies where wage and demand dynamics look softer.

Technical Analysis: GBP/USD maintains a mildly bearish bias below the 100-day SMA

In the daily chart, GBP/USD maintains a mildly bearish near-term bias as it holds beneath the 100-day simple moving average (SMA). Price is trading above the 20-day Bollinger middle band, suggesting some underlying demand within the broader corrective structure, while the upper Bollinger band marks the top of the current volatility envelope. The Relative Strength Index (14) at 50.6 is neutral, hinting that directional momentum is balanced and that further downside or consolidation is possible while the pair remains capped under the 100-day SMA.

On the topside, initial resistance is located at the 100-day SMA around 1.3390, with the 20-day Bollinger upper band near 1.3420 acting as the next barrier if buyers attempt a rebound. On the downside, immediate support is seen at the 20-day Bollinger middle band at 1.3285, ahead of a more significant structural floor near the lower Bollinger band at roughly 1.3150, where a deeper pullback would be expected to attract demand.

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

Commerzbank’s Michael Pfister highlights that the British Pound’s (GBP) key event is the new United Kingdom (UK) budget under Prime Minister Andy Burnham, with markets relieved by the calmer approach to fiscal messaging. Recent labour market and inflation data strengthen expectations of an imminent Bank of England (BoE) rate hike, already largely priced in, while UK government bonds trading closer to German than French debt have also supported the Pound.

Pound supported by rates and bonds

"While this is unlikely to result in major progress (Burnham recently announced that significant changes would only occur following a potential re-election), market participants are likely to be relieved that the presentation of the new budget is proceeding relatively calmly."

"Labour market figures for August, published on Tuesday, showed a sharp fall in the unemployment rate (from 4.9% to 4.7%). At the same time, job creation in September was stronger than anticipated: rather than a loss of 8,000 jobs, 13,000 were created."

"Although the Bank of England has long tried to ride out the energy price shock - partly to avoid stifling the real economy too severely - the combination of rising inflation, a slight improvement in the labour market, and fairly strong growth figures this year is likely to lead to a change of heart next week. A first interest rate hike is basically fully priced in, and the market expects a further three rises by the middle of next year. This has supported the pound in recent weeks."

"However, the pound has also recently been helped by the fact that, despite concerns about a European sovereign debt crisis, UK government bonds have been trading more like German ones than French ones. This has not generally been the case in the recent past, when UK government bonds normally suffered some of the heaviest losses. It seems that market participants are also giving the new UK government the benefit of the doubt here, which is consequently benefiting the pound."

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

• Indonesian Rupiah risks grow from fiscal commitments, rising inflation, and elevated oil prices.
• Bank Indonesia maintains market intervention to manage currency volatility within tolerance limits.
• Singapore gas export cuts and Fed rate expectations drive further USD/IDR upside potential.

USD/IDR halts its four-day winning streak, trading around 18,170 during Asian hours on Tuesday. The pair pulled back after reaching a nearly five-month high of 18,216 on Monday. However, the Indonesian Rupiah (IDR) continues to face downside risks due to growing fiscal concerns. These pressures stem from elevated global oil prices alongside costly government initiatives, including a proposal to offer free education from primary school through university, which threatens to add to budget strains already burdened by free school meal programs. Furthermore, inflation risks are mounting after September figures accelerated to a three-month high of 3.28%, driven primarily by rising food prices linked to El Niño.

Bank Indonesia (BI) has reaffirmed its policy stance. BI Governor Destry Damayanti stated that the central bank will maintain its intervention strategy despite heightened volatility surrounding escalating tensions in the Middle East. Describing recent exchange rate movements as typical market dynamics, BI confirmed it remains active in the market, with another official noting that Rupiah fluctuations stay manageable and well within the central bank's tolerance limits.

Geopolitical and economic friction is surfacing between Indonesia and Singapore. Indonesia’s foreign ministry announced it will host Singapore's top diplomat on Tuesday amid simmering tensions over recurring haze from Indonesian wildfires and Jakarta’s recent decision to cut gas exports. Jakarta reduced pipelined gas to Singapore by roughly 8% starting Saturday to safeguard domestic supplies—a move following warnings from Indonesia's energy minister to review export contracts with uncooperative partners.

The USD/IDR pair may see further upside as the US Dollar (USD) gains strength from cautious market sentiment ahead of the US Federal Reserve's policy decision on Wednesday. Financial markets broadly expect the Fed to hold interest rates steady at its October meeting before potentially considering another hike in December. According to the CME FedWatch Tool, markets are currently pricing in an 89.5% probability of a rate pause in October and an 82.3% chance of a rate increase in December.

Dollar seen resilient to US midterms but longer-term risks linger

Thu Lan Nguyen at Commerzbank argues that the upcoming US midterm elections are "likely to be less relevant for USD exchange rates in the short term than the looming shift in power in Congress might suggest." She adds that "the structural political risks facing the Dollar would remain," underscoring that any change in congressional control does little to alter the longer-term vulnerabilities embedded in the US political backdrop.

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that EUR/USD failed to hold its recent range, slipping to 1.1172 and reinforcing a short-term downside bias. Intraday, the pair is seen drifting toward 1.1150, with 1.1135 considered a lower but less likely target. On a 1–3 week horizon, downward momentum is tentatively building, with potential tests of 1.1135 while resistance is capped near 1.1220.

Tentative bearish momentum emerging

"24-HOUR VIEW: We indicated yesterday that EUR “could trade between 1.1185 and 1.1230.” The subsequent price movements did not unfold as expected. EUR rose to 1.1226 before declining to a low of 1.1172. Given the increasing downward momentum, the bias for EUR is tilted to the downside toward 1.1150. The next support at 1.1135 is likely out of reach for now. Resistance is at 1.1190, followed by 1.1205."

"1-3 WEEKS VIEW: We have been expecting EUR to trade in a range since the middle of the month. In our most recent narrative from last Thursday (22 Oct, spot at 1.1230), we stated that “the price movements still appear to be part of a range-trading phase, but a narrower 1.1170/1.1270 range is likely sufficient to contain EUR for now.” Yesterday, EUR fell to a low of 1.1172. There has been a tentative buildup in downward momentum, and from here, EUR could edge lower, potentially testing 1.1135. To sustain the downward momentum, EUR must hold below the ‘strong resistance’ level, now at 1.1220."

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

• The British Pound faces selling pressure against its peers ahead of UK Autumn Forecast Statement.
• According to FT, UK Chancellor Healey will unveil plans of GBP 20bn investment over the next five years.
• The BoJ is expected to remain on the gradual policy tightening path.

The British Pound (GBP) underperforms its major currency peers, except the Japanese Yen (JPY), on Tuesday. Against the Japanese currency, the Pound Sterling is up 0.18% to near 210.30.

The British currency faces pressure ahead of the United Kingdom (UK) Autumn Forecast Statement on Wednesday.

UK budget leaks point to larger GBP investment push via PuFins

Economists at Deutsche Bank note that their baseline assumption had been for the Chancellor to “tap into the fiscal rule flexibilities, using financial transactions via public financial institutions (the so-called PuFins), to boost investment spending via a two-stage approach: a GBP 8bn expansion in the coming Autumn Budget, followed by an equal increase in the Spending Review due next year.” However, they point out that “headlines from the FT over the weekend… suggest that Chancellor Healey will do more in the Autumn Budget, adding around GBP 20bn in investment over the next five years.”

Deutsche Bank adds that, “taking into account the slightly higher savings from HMRC, we project a near GBP 10bn increase per annum over the back half of the OBR’s forecast horizon, leaving the government’s gross financing requirement at just over GBP 250bn at the end of the forecast horizon (2030/31).” Using the OBR’s own modelling, they estimate that “using the OBR’s multipliers, we estimate that projected financial transactions could result in a 0.5% boost to GDP by 2031/32.”

With the scale of investment spending now expected to be larger than previously assumed, Deutsche Bank argues that “with investment spending now primed to be bigger than expected, one large tail risk for Budget Day has been removed with markets likely to adjust to the news ahead of the 28th of October.”

On the monetary policy front, financial markets are confident that the Bank of England (BoE) will hike interest rates by 25 basis points (bps) to 4% in the November policy meeting.

Meanwhile, the Japanese Yen underperforms even as market experts see the Bank of Japan (BoJ) remaining on the gradual monetary tightening path.

Japan inflation and wage ambitions bolster BoJ normalisation bets

Analysts at MUFG/BTMU highlight that domestic developments are "reinforcing expectations for gradual BoJ policy normalisation," pointing to a clear firming in underlying price pressures. Japan’s core inflation, excluding fresh food and energy, "accelerated to 2.4%yoy in September from 1.9% in August," while labour-market dynamics are underpinned by Rengo’s ambition of "wage increases of around 6% in 2027." Against this backdrop, MUFG/BTMU note that "markets are pricing one to two BoJ rate hikes over the next 12 months," underscoring a measured but increasingly credible tightening path.

In the policy meeting later this week, the BoJ is expected to hold interest rates steady at 1.25%.