Forex News

MUFG’s Lee Hardman notes the Pound is strengthening, with EUR/GBP near its year-to-date low and GBP/USD above 1.3350, as stronger UK labour data show rising payrolled employment and private sector wage growth in line with Bank of England projections. He argues this supports expectations for BoE rate hikes and a lower EUR/GBP trading range between 0.8200 and 0.8400.

BoE repricing supports stronger Pound

"The pound has continued to strengthen at the start of the European trading session resulting in EUR/GBP falling back towards yesterday’s year-to-date low of 0.8393 while cable has risen above 1.3350. The pound’s recent upward momentum has been reinforced this morning by the release this morning of stronger UK labour market data which revealed that payrolled employment increased by 13k in September."

"Overall, the stronger labour market data will encourage the BoE to begin hiking rates as soon as next month. Boe officials including Governor Bailey have clearly signalled recently that is becoming harder to look through higher energy price and leave rates on hold. Weak labour market conditions have been used to justify caution over tightening policy."

"We continue to expect the BoE to hike rates next month and deliver a second hike early next year. A view that is already well priced into the UK rate market which is anticipating even more tightening and has almost three hikes priced in by March of next year. Positive cyclical economic momentum in the UK remains favourable for a stronger pound as long as the government ‘s upcoming Budget doesn’t undermine confidence in the credibility of their fiscal consolidation plans."

"EUR/GBP is currently attempting to break into a new lower trading range between 0.8200 and 0.8400 that was last in place between September 2024 and April 2025."

"In addition, the labour market report revealed that private sector wage growth moved up to 3.0%Y/Y which was in line with the BoE’s projection. However, it was the first increase since 20024, and the BoE will be watching closely as we go into the pay settlement period for 2027."

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

Commerzbank’s Thu Lan Nguyen analyzes EUR/USD’s sharp decline since September, initially driven by broad US Dollar strength and later by Euro-specific concerns over France’s public finances. She argues that as long as German Bunds retain their safe-haven role, Euro downside should be limited, and projects EUR/USD recovering next year, with forecasts rising from 1.15 in December 2026 to 1.18 by December 2027.

Euro pressured but downside constrained

"EUR/USD has declined markedly since September. Initially, the move was driven by broad-based US dollar strength amid a more supportive interest rate outlook. Since early October, however, euro weakness has taken center stage, reflecting growing concerns over the sustainability of France’s public finances."

"That said, as long as German government bonds retain their safe-haven appeal, the euro’s downside should remain limited. With energy markets expected to ease and interest rate expectations to readjust, we see scope for EUR/USD to recover next year."

"EUR/USD fell to its lowest level since spring 2025 in mid-October. The downward move, which began in September, can be divided into two phases."

"We expect the US dollar to suffer more from such a correction than the euro, not least because lower energy prices should improve the economic outlook for the euro area by more than for the US. We therefore see further upside potential for EUR/USD next year."

"If, however, conditions in bond markets stabilize, we see scope for the single currency to recover in the short term. This is supported by the fact that, if necessary, the ECB has effective crisis-management tools at its disposal, such as the Transmission Protection Instrument (TPI)."

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

Standard Chartered economist Dan Pan expects the Bank of Canada (BoC) to keep its policy rate at 2.25% through end-2026 and 2027, despite market pricing for a much steeper tightening cycle. Pan argues that soft domestic demand, subdued core inflation and a weak labour market reduce the need for aggressive hikes, even if an October insurance move is delivered.

BoC seen holding despite market pressure

"We expect the BoC to stay put despite rising market pressure for rate hikes as early as this month Soft domestic demand and subdued core inflation show little risk of inflationary pressure broadening It is likely to be a close call given the BoC emphasises forward-looking inflation risks and policy setting Even with an October insurance hike, market pricing of the total tightening cycle is excessive, in our view."

"We now expect the Bank of Canada (BoC) to stay put at 2.25% until end-2026 and 2027 (versus a cut in 2026 and a hike in 2027 previously). High oil prices have lowered the likelihood of a near-term rate cut, but sustained economic slack and contained underlying inflation still make a case for the BoC to look through near-term energy price shocks."

"An October hike would be justified by caution, not necessity, in our view. BoC Governor Macklem’s comments since the September meeting emphasise forward-looking inflation risks and the central bank’s willingness to act early."

"While the BoC may deliver one or two hikes in early 2027 if core inflation picks up, we see no strong growth catalyst to justify the 100bps of rate hikes the market has priced in."

"A bullish investment outlook, driven by high commodity prices and AI adoption, could take time to lift growth, while the economy continues to struggle with lingering trade uncertainty."

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

• Gold falls toward $4,100 as rising energy prices keep inflation concerns elevated.
• Traders expect another Fed interest rate hike by December, keeping pressure on bullion.
• XAU/USD remains below its key daily SMAs, keeping the broader technical outlook bearish.

Gold (XAU/USD) drifts lower on Tuesday as rising Oil prices linked to tensions in the Middle East keep global inflation risks tilted to the upside, reinforcing expectations that interest rates will remain higher for longer. However, a softer US Dollar (USD) and lower US Treasury yields help contain the downside. At the time of writing, XAU/USD trades around $4,123, down 0.42% on the day.

West Texas Intermediate (WTI) Oil climbs above $100, reaching its highest level in more than a month as Houthi attacks on Saudi energy infrastructure and an increase in attacks on vessels in the Strait of Hormuz fuel concerns over supply disruptions.

Elevated energy prices remain a key source of inflation pressure since the war erupted in late February, prompting major central banks to raise interest rates this year and keeping markets alert to further tightening.

In the United States, September’s Consumer Price Index (CPI) and Producer Price Index (PPI) reports both came in hotter than expected, strengthening expectations that the Federal Reserve (Fed) could deliver another rate hike before year-end as it seeks to bring inflation back toward its 2% target.

These hawkish expectations could limit a deeper decline in the US Dollar and Treasury yields following their recent pullback. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.76, down 0.23% on the day, after approaching 103 last week, its highest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield stands near 5.08%, down from around 5.36% earlier this month.

However, traders widely expect the Fed to leave interest rates unchanged at its October 27-28 meeting, as policymakers appear cautious about delivering back-to-back increases following September’s 25-basis-point hike. The CME FedWatch Tool shows traders pricing in a 17% chance of a rate hike this month and a 92% chance of an increase in December.

Looking ahead, a light US economic calendar leaves Gold vulnerable to movements in Oil prices, the US Dollar and Treasury yields, with the hawkish Fed outlook acting as a strong headwind.

Technical analysis: XAU/USD remains rangebound below key daily SMAs

On the daily chart, XAU/USD maintains a pattern of lower highs and lower lows since peaking near $4,700 in late August, although prices remain largely trapped between $4,100 and $4,200 since the start of the month.

The metal trades below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs), which reinforces a capped tone despite some improvement in momentum, with the Relative Strength Index (RSI) hovering in the low-40s and the Moving Average Convergence Divergence (MACD) turning positive above the zero line.

On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,235 and the 50-day SMA at $4,321. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,517. On the downside, a sustained break below $4,100 could open the door toward the $4,000-$3,950 support zone.

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

United Overseas Bank’s (UOB) Quek Ser Leang notes AUD/USD outperformed on Monday, closing at 0.6980 after China’s stronger Q3 GDP print. Short term, the Australian Dollar is seen probing 0.7000, though a sustained break above this level and the major resistance at 0.7015 is deemed unlikely. Over coming weeks, UOB expects range-trading between 0.6915 and 0.7015 despite a bearish EMA crossover.

Australian Dollar faces nearby resistance

"24-HOUR VIEW: We expected AUD to “edge higher” yesterday, but we indicated that it “should stay within a 0.6940/0.6985 range.” However, AUD rose more than expected to 0.6993 before closing at 0.6980 (+0.51%). Upward momentum is increasing, albeit not significantly. Today, there is scope for AUD to test 0.7000. A clear break above this level is unlikely. The major resistance at 0.7015 is also unlikely to come into view. Support is at 0.6965, followed by 0.6950."

"1-3 WEEKS VIEW: Our update from yesterday (19 Oct, spot at 0.6965) remains valid. As highlighted, AUD “appears to have moved into a range-trading phase,” and “for the time being, we expect it to trade between 0.6915 and 0.7015.” "

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

• The British Pound strengthens following better-than-expected UK employment data.
• Markets price in a 95% probability of a BoE interest rate hike at the November 5 meeting.
• Expectations of further ECB tightening offer limited support to the Euro amid political uncertainty.

EUR/GBP loses 0.38% on Tuesday as stronger-than-expected UK labour market data lifts the Pound Sterling (GBP). At the time of writing, the cross trades around 0.8395, at levels last seen in May 2025.

Data released by the Office for National Statistics (ONS) shows employment rose by 102,000 in the three months to August, up from a gain of 67,000 in the previous period. The unemployment rate unexpectedly fell to 4.7%, its lowest level since July 2025. Meanwhile, regular earnings excluding bonuses increased by 3.7% YoY, above expectations of 3.6% and the previous reading, which was revised up to 3.6%.

The stronger labour market figures give the Bank of England (BoE) more room to address energy-driven inflation pressures stemming from the war in the Middle East. The central bank has kept interest rates unchanged at 3.75% so far this year.

Strategists at BBH note that “GBP is up against most major currencies” after UK August labor market data “reinforced the case for a BoE 25bps policy rate hike to 4.00% on November 5.” They point out that “the swaps curve implies 95% odds of a November BoE rate hike and 100bps of tightening in the next twelve months,” but caution that, “in our view, the BoE may not need to tighten as much as markets anticipate, which is a headwind for GBP.”

BBH argues that “the UK economy is operating below capacity, the policy rate is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive following the October 28 UK budget,” all of which suggest the central bank may ultimately deliver less tightening than is currently priced.

Meanwhile, the Euro (EUR) remains on the defensive as escalating social unrest across France, Italy and other European countries heightens concerns over fiscal stability and political uncertainty. On the monetary policy front, the European Central Bank (ECB) has raised interest rates twice this year to counter inflation pressures from higher Oil prices. Markets are pricing in further tightening as inflation remains above the central bank’s 2% target.

Economists at Commerzbank acknowledge that “core inflation in the euro area is currently rising only slowly,” but stress that a closer look at the data shows “high energy prices are already pushing up the prices of goods and services.” They argue that this indirect effect is set to strengthen, with “next year, this indirect effect… likely to intensify noticeably, causing the core rate to rise further.”

According to Commerzbank, “core inflation is expected to rise from its current level of 2.5% to over 3% by the fall of next year,” as companies that have been paying elevated energy costs “for more than half a year… are now increasingly passing these costs on.” Against this backdrop, the bank expects the ECB’s projections to move higher, noting that “based on our current forecasts, the ECB is likely to raise its expectations again in December. This supports our expectation of an ECB interest rate hike in December.”

• US private employers added an average of 18.50K jobs per week in early October.
• The loss of momentum in hiring remained unchanged.

Private-sector hiring in the US lost some traction in early October. According to the NER Pulse, the weekly companion to the ADP National Employment Report, companies added an average of 18.50K jobs per week in the four weeks ending October 3.

That marks a modest drop from the prior reading (24.75K), showing extra cooling in hiring.

Market reaction

The Greenback trades on the defensive on Tuesday, returning to the sub-102.00 region when gauged by the US Dollar Index (DXY). The move lower in the US Dollar comes in tandem with declining US Treasury yields across the curve and despite higher crude oil prices.

BBH’s Elias Haddad highlights that GBP is stronger against major currencies as UK August labor data bolster expectations for a 25 bps Bank of England (BoE) rate hike to 4.00% on November 5. Employment and unemployment figures beat the BoE’s projections, while wage growth suggests sticky services inflation. However, Haddad argues the BoE may not need to tighten as much as markets expect, posing a headwind for the Pound.

BoE tightening expectations lift Pound

"GBP is up against most major currencies. UK August labor market data reinforced the case for a BoE 25bps policy rate hike to 4.00% on November 5."

"In the three months to August, the employment rate increased +0.2ppt to 75.3% while the unemployment rate decreased -0.2ppt to 4.7%, suggesting more people are finding work. The unemployment rate is the lowest since July 2025 and tracking below the BoE’s Q3 projection of 5.0%."

"The policy-relevant private sector regular pay growth matched consensus and the BoE’s Q3 projection at 3.0% y/y vs. 2.9% in July. But wage growth also suggests services inflation will remain sticky well above the bank’s 2% target."

"The swaps curve implies 95% odds of a November BoE rate hike and 100bps of tightening in the next twelve months. In our view, the BoE may not need to tighten as much as markets anticipate, which is a headwind for GBP."

"The UK economy is operating below capacity, the policy rate is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive following the October 28 UK budget."

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

ING’s Frantisek Taborsky reports Hungary’s government has outlined a 2025 budget deficit target of 4.9% of GDP, down from 7.0–7.5%, relying on spending cuts, lower interest costs and new taxes. While the fiscal trajectory is seen positively, he warns positioning in Hungarian assets is crowded, leading to profit-taking and higher yields. ING remains structurally bullish but expects further correction.

Positioning risk versus fiscal improvement

"The Hungarian government yesterday presented a budget plan for next year with a deficit of 4.9% of GDP. The consolidation from this year’s 7.0-7.5% level would rely on cutting wasteful expenditure, reducing interest costs, reversing pre-election spending, and introducing new taxes. The 4.9% figure is in line with our expectations and roughly in line with market expectations."

"As we discussed here yesterday, the problem with the current narrative is crowded positioning. Although the market may be satisfied with Hungary’s direction, the trade has proven too heavy, and profit-taking has pushed yields higher, in some cases causing Hungary to underperform its CEE peers, which were also weighed down by global paying flows. Following the release of the budget proposal, EUR/HUF briefly tested new lows but ended the day essentially unchanged."

"Today also features a meeting of the National Bank of Hungary, which is likely to leave interest rates unchanged at 5.50%. Although the NBH has cited knowledge of the fiscal plan as a prerequisite for further rate cuts, we believe it is still too early for the central bank to lower rates further. Forward guidance today could be positive in the sense of pointing toward more rate cuts, but at the same time, the central bank should take into account higher global energy prices."

"Overall, we maintain our previous view that the trade is currently too crowded, and we would not be surprised by a more significant correction, given how strongly Hungarian bonds rallied ahead of the budget plan’s release. On the other hand, we remain bullish on the overall story, and we expect that, sooner or later, the market will begin to fade the higher yields."

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

• USD/CHF retraces Monday's gains and retreats below 0.8250 on Tuesday.
• The US Dollar struggles as investors brace for steady Fed interest rates after next week's Fed meeting.
• A break below 0.8225 would confirm a double top at the 0.8390 area.

The US Dollar (USD) retraces Monday’s gains against the Swiss Franc (CHF) on Tuesday, as investors brace for a Federal Reserve (Fed) pause next week, while concerns about a potential AI bubble add pressure on the Greenback. The USD/CHF retreats to session lows near 0.8440, after being capped at 0.8270, with the bottom of the monthly trading range, at the 0.8225 area, in focus for bears.

Investors are trimming US Dollar longs as they assume that the Fed will not hike interest rates at its October meeting, despite the overshoot inflation figures released in recent weeks. The CME’s FedWatch Tool shows an 82% chance that the US central bank stands pat on rates next week, up from 42% one month ago.

Beyond that, the increasing wariness about the profitability of the AI sector is providing an additional source of pressure on the Greenback on Tuesday. Analysts at MUFG highlight that foreign investors have purchased “USD 942 billion of US equities in the twelve months to July,” boosting demand for the US Dollar in FX markets. The bank's experts warn that “this dynamic also leaves the USD more exposed to a reversal if sentiment towards AI deteriorates.”

Data from Switzerland released earlier on Tuesday revealed that the trade surplus narrowed to CHF 1.309 billion in  September, from the upwardly revised CHF 4.185 billion in August, as the jump in imports offset a more moderate increase in exports. The impact of these figures on the CHF, however, was minimal.

Technical Analysis: A potential Double Top pattern is in the making

USD/CHF trades at 0.8244, with recent price action highlighting a moderate bearish trend. Four-hour charts show the Relative Strength Index (14) at 38.43, while the Moving Average Convergence Divergence (MACD) oscillator has turned marginally positive, which suggests that downside momentum is fading but not yet reversed decisively.

Bears are aiming for the support area at 0.8225, the October 2 and 16 lows, and also the neckline of a Double Top pattern just ahead of the 0.8400 level. This is a common figure for trend shifts and would boost sellers' confidence to test the September 16 and 22 lows around 0.8180. The Double Top's measured target is at the September 9 low, near 0.8070.

On the topside, bulls need to break the session high at 0.8270 to open the way toward a previous support-turned-resistance around 0.8315, ahead of the mentioned top at the 0,8390 area.

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