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On Friday, Kansas City Fed President Jeffrey Schmid said he supported the rate hike, as “recent data suggest inflation trending above 3%.” Schmid added that tightening policy is a step toward achieving the Fed’s 2% goal and that inflation has broadened across a set of goods and services and that the economy is performing well.

Key highlights:

I supported rate hike, recent data suggest inflation trending above 3%.

Rate hike was a step towards returning to the 2% target.

Current inflation problem not just about energy. Price growth has been 'hot' across a broad set of goods and services.

High inflation a sign supply and demand are out of balance.

Outside of inflation, the economy is performing well.

Labor market appears in balance and economic growth solid.

• GBP/USD surrenders gains despite stronger-than-expected UK Retail Sales.
• Saudi supply concerns revive inflation risks across global markets.
• Fed-BoE rate differential keeps broader pressure tilted toward Sterling.

The Pound Sterling retraces after reaching a daily high of 1.3375 on upbeat UK data, as headlines suggest that an oil supply shock has sent crude prices higher and reignited investors' fears of high inflation. The GBP/USD trades at 1.3356, down 0.03%.

Sterling fades as renewed energy fears overshadow resilient UK consumer spending

Recently, a Bloomberg article titled “Saudis give European Oil buyers no supplies for next month” is an indication that Oil prices are poised to remain elevated, despite registering losses in the day, with West Texas Intermediate (WTI) trading at $97.34, down 3.80%.

Data from the US revealed that Industrial Production was unchanged from July to August, at 0% MoM, below July’s 0.2% print and missing estimates for a 0.3% expansion.

The report comes after Fed Chair Kevin Warsh noted that the economy remains resilient, justifying the US central bank's decision on Wednesday to raise rates by 25 basis points to the 3.75%-4% range.

Following the Fed’s decision, money markets seem confident that the Fed could hike once more in October, with the odds standing at 55%, according to Prime Terminal.

In the meantime, Sterling’s was boosted by the jump of UK Retail Sales of 0.5% MoM in August, exceeding estimates for a -0.2% contraction. The data revealed that consumer spending remains solid. The data can prompt the Bank of England (BoE) to act and raise rates, given the UK’s status as a net energy importer, as the bank acknowledged that inflation risks are tilted to the upside, in part due to the US-Iran conflict.

Money market traders currently assign about a 65% likelihood of a rate hike in November and expect approximately four 25-basis-point increases by the end of next year.

Despite this, the interest rate differential between the US and the UK favors the Greenback, as it has widened after both central banks' September meetings.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3363, maintaining a bearish near-term bias as spot holds beneath the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 1.3481 and under the descending trend-line resistance coming in near 1.3455. The latest reading of the 14-day Relative Strength Index at 31.9 sits just above oversold territory, hinting that while selling pressure dominates, the downside could begin to lose momentum if bears fail to extend the move much below the recent lows.

On the downside, immediate structural support is located at the prior descending trend-line break around 1.3345, which now acts as a nearby floor and would be at risk on a fresh push lower. On the topside, initial resistance is seen at the downward-sloping trend line near 1.3455, followed by the dense SMA cluster around 1.3481 and the broken rising trend lines at 1.3488 and 1.3701, levels that would need to be decisively reclaimed to shift the broader technical tone away from the current bearish configuration.

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

• Gold loses momentum after nearing $4,400 as the hawkish Fed outlook supports the US Dollar.
• Middle East developments and Fed commentary could drive the metal’s next move.
• XAU/USD holds below the Bollinger middle band at $4,422, while momentum indicators point to consolidation.

Gold (XAU/USD) loses momentum after nearing the $4,400 level on Friday as the Federal Reserve’s hawkish policy outlook keeps the US Dollar firmly supported, while a rebound in Oil prices and US Treasury yields adds pressure on the metal. At the time of writing, XAU/USD trades around $4,354, up 0.29% on the day.

It has been a volatile week for Gold. The Fed raised interest rates by 25 basis points (bps) to the 3.75%-4.00% range on Wednesday, delivering its first increase since 2023. The decision pushed the US Dollar and Treasury yields higher, pushing Gold to a more-than-one-month low of $4,235. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.40 near seven-week highs.

However, the post-Fed pressure was offset by falling Oil prices, which eased after reports that Saudi Arabia is rerouting some exports and working to repair its East-West pipeline, which was damaged in an attack last week. The pipeline lets Saudi Oil reach the Red Sea without passing through the Strait of Hormuz.

What could be Gold’s path ahead?

The Fed signalled that additional rate increases could come as policymakers remain committed to bringing inflation back to the central bank’s 2% target. The updated dot plot shows that 16 of 18 officials expect at least one more rate hike this year. The median policy-rate forecast stands at 4.1% for both 2026 and 2027, suggesting that officials do not expect to cut rates next year.

Higher borrowing costs increase the opportunity cost of holding non-yielding assets such as Gold. Traders currently see around a 55% chance of another increase at the October meeting, according to the CME FedWatch Tool.

At the same time, energy-related inflation risks remain a key concern. West Texas Intermediate Oil trades around $97.20 after recovering from an intraday low of $94.63, as heavily restricted traffic through the Strait of Hormuz offsets positive developments around Saudi supply.

These risks are keeping US Treasury yields elevated, with the earlier pullback proving limited. The benchmark 10-year yield trades around 5.00%, up over 1% on the day and not far from the 2007 high of 5.04% touched earlier this week.

As a result, Gold faces a challenging backdrop. A stronger recovery may require a deeper fall in Oil prices, lower Treasury yields or a shift in Fed rate expectations. Even so, central-bank buying, strong investment demand and steady inflows into Gold-backed exchange-traded funds should support the metal over the longer term.

What to watch next week?

The US economic calendar is relatively light next week, but several Fed officials are scheduled to speak. Their comments could offer fresh clues about whether another rate increase is likely in October. Middle East developments will also remain in focus. Reuters reported that US President Donald Trump is expected to meet leaders or foreign ministers from Gulf Cooperation Council countries on the sidelines of the United Nations General Assembly on Tuesday.

Technical analysis: XAU/USD consolidates below Bollinger middle band

On the daily chart, XAU/USD trades under the Bollinger Bands 20-period Simple Moving Average (SMA) at $4,422, keeping the near-term tone mildly bearish. Momentum is mixed; the negative Moving Average Convergence Divergence (MACD) reading and a subdued Average Directional Index (ADX) at 16 hint that upside attempts are losing strength, with the neutral Relative Strength Index (RSI) around 51 suggesting consolidation rather than a strong directional move.

On the topside, initial resistance aligns with the Bollinger middle band at $4,422, followed by the psychological horizontal barrier at $4,500 and then the Bollinger upper band near $4,654. On the downside, immediate support emerges around the Bollinger lower band at $4,189, ahead of the more significant horizontal base at $4,000, where a deeper retracement would be expected to attract stronger dip-buying interest.

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

• The US Dollar climbs to a seven-week high as the hawkish Fed outlook and rising Treasury yields support the Greenback.
• Technically, DXY holds above all major daily SMAs, keeping the bullish bias intact.
• The 61.8% Fibonacci level at 100.46 acts as immediate resistance, with RSI nearing overbought territory.

The US Dollar Index (DXY) climbs to a fresh seven-week high on Friday, supported by the Federal Reserve’s (Fed) hawkish interest rate hike on Wednesday. At the time of writing, the index trades around 100.40 and is on track to register a weekly gain of more than 1%.

Meanwhile, US Treasury yields rebound sharply, lending additional support to the Greenback, largely driven by firm Oil prices and persistent concerns over energy-related inflation. The benchmark 10-year yield trades around 5.00%, up over 1% on the day and not far from the 2007 high of 5.04% touched earlier this week.

UOB shifts to modestly hawkish Fed view, putting medium-term bearish USD bias at risk

Analysts at UOB Group note that their previously articulated stance in the “4Q26 quarterly report” — where a “medium-term bearish USD bias is contingent on an extended Fed rate pause through the remainder of 2026” — is now being reassessed in light of the latest FOMC developments. The bank stresses that, “like the markets, we do not think this is a ‘one-and-done hike’ from the Fed, and as per previous rate hike cycles, the Fed usually does not stop at one.” At the same time, they caution that “we do not believe this is the start of a long series of hikes.”

Instead, UOB now “expect two additional hikes, in Dec 2026 and 1Q 2027, thereafter on hold for rest of 2027 as the inflation fades in a more durable fashion in the later part of 2027 as the most likely course of action.” In their view, this shift implies that “as we now expect two further Fed rate hikes, the narrowing of US rate differentials relative to G-10 peers – which have been weighing on the DXY since late 2024 – is likely to reverse and underpin the DXY going forward.”

The bank also highlights important constraints and risks around the policy path. They have “ruled out a back-to-back rate hike in the Oct FOMC, due to its proximity to the mid-term elections (3 Nov).” Nevertheless, UOB emphasizes that “we continue to keep in mind the risks of further policy tightening if the inflation trajectory is made more persistent by the combination of higher energy prices, trade tariffs and AI-related factors.”

Technical analysis

In the daily chart, Dollar Index Spot holds a constructive bullish bias as it remains above the 50-, 100- and 200-day Simple Moving Averages (SMAs) clustered between roughly 99.16 and 99.91.

Price is hovering just under the 61.8% Fibonacci retracement at 100.46, which acts as an immediate pivot resistance, while the Relative Strength Index (RSI) near 64 leans toward overbought and the Moving Average Convergence Divergence (MACD) stays positive, hinting that upside momentum is still in play but becoming stretched.

On the topside, initial resistance is located at the 61.8% retracement at 100.46, followed by the 78.6% Fibonacci level at 100.98, ahead of the recent swing high near 101.64.

On the downside, first support appears at the 50.0% retracement at 100.10, then at the 50-day SMA at 99.91 and the 100-day SMA at 99.86, with deeper levels seen at the 38.2% retracement at 99.74 and 23.6% retracement at 99.29, before the 200-day SMA at 99.16 and the 98.56 structural low.

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

ING economist Charlotte de Montpellier expects the Swiss National Bank to keep its policy rate at 0% next Thursday and over the coming quarters, as Swiss growth has surprised on the upside but inflation remains subdued. She highlights that stronger GDP and a slightly weaker Swiss Franc do not yet pose an inflation threat, allowing continued accommodative policy.

SNB stance supports strong Franc

"We expect the Swiss National Bank to keep its policy rate at 0% next Thursday and to remain on hold over the coming quarters."

"Even so, the economy is clearly performing better than anticipated a few months ago. We have raised our forecast for GDP growth to an average of 1.9% in 2026, while we expect growth of 1.6% in 2027. The stronger outlook reflects the solid performance recorded in the first half of the year, somewhat more favourable international demand and the recent slight weakening of the Swiss franc."

"Overall, there is little to suggest that the SNB needs to change its policy rate. We expect it to leave the rate unchanged at 0% on Thursday and to remain on hold over the coming quarters, particularly if, as we expect, global energy prices eventually decline."

"The SNB is therefore likely to continue to stand out from other central banks by maintaining a much more accommodative monetary policy stance. This divergence reflects Switzerland’s domestic inflation environment, which remains unusually benign thanks in large part to a currency that is still strong."

"All in all, we expect the SNB to leave its policy rate at 0% and to retain its targeted approach to foreign exchange intervention. As long as domestic inflation remains subdued and the franc stays strong, albeit without appreciating excessively, the SNB can continue to run a significantly more accommodative monetary policy stance than most other central banks."

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

Brown Brothers Harriman’s (BBH) Elias Haddad notes GBP/USD is holding just above recent lows as UK August retail sales beat expectations, reversing July’s decline and firming market pricing for a November Bank of England (BoE) rate hike. However, Haddad argues the BoE may not need as much tightening as implied by swaps, leaving Pound vulnerable to a dovish repricing.

Pound exposed to BoE repricing

"GBP/USD is consolidating just above yesterday’s lows of 1.3336. UK August retail sales surprised to the upside, reversing July’s decline. Total retail sales volumes increased 0.5% m/m (consensus: -0.2%) vs. -0.5% in July. Excluding automotive fuel, retail sales were up 0.6% (consensus: -0.2%) vs. -0.9% in July."

"The data firmed up odds of a 25bps BoE rate hike in November to as much 90% from 83%. Still, BoE Governor Andrew Bailey flagged yesterday that a rate hike hinges on whether “the Middle East persists for an extended period, as appears to be the case, and the risk of second-round effects emerging increases.”"

"The swaps curve continues to imply about 100bps of BoE rate hikes in the next twelve months to 4.75%. In our view, the BoE may not need to tighten as much as markets expect. The UK economy is already operating below capacity, Bank Rate at 3.75% is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive.

"Bottom line, GBP remains vulnerable to a dovish BoE repricing."

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

• USD/CAD advances around 1.4000, supported by a firmer US Dollar following the Fed’s interest rate hike.
• The rebound in Oil prices supports the Canadian Dollar and limits the pair’s upside.
• US Treasury yields rise as inflation risks fuel expectations of further interest rate hikes.

USD/CAD edges higher on Friday, trading around 1.4000 at the time of writing, up 0.10% on the day. The US Dollar (USD) remains supported by expectations of further interest rate hikes from the Federal Reserve (Fed), while the rebound in US Treasury yields adds to the Greenback’s appeal.

The Fed raised its benchmark interest rate by 25 basis points (bps) on Wednesday to a range of 3.75%-4%, delivering its first rate hike since 2023. The decision came as rising energy prices keep inflation risks elevated and encourage the US central bank to maintain a restrictive monetary policy stance.

The latest interest rate projections reinforce this outlook. Sixteen of the 18 Fed officials expect at least one additional rate hike this year, suggesting that borrowing costs could remain elevated for an extended period.

Investors now see around a 55% chance of another 25 bps rate increase at the October meeting, according to the CME FedWatch tool. The repricing of the US monetary policy outlook also supports US Treasury yields. The benchmark 10-year yield rebounds to around 4.98%, approaching the 5.04% peak reached on Tuesday, its highest level since 2007.

Against this backdrop, the US Dollar maintains positive momentum. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades above 100.50, around its highest level in seven weeks.

On the Canadian side, the rebound in Oil prices provides some support to the Canadian Dollar (CAD), limiting gains in USD/CAD. West Texas Intermediate (WTI) Oil recovers to around $97.30 at the time of press, after hitting an intraday low of $94.63.

Persistent tensions in the Middle East continue to keep energy supply risks elevated. Concerns are particularly focused on the Strait of Hormuz, while the prospect of renewed escalation between the United States (US) and Iran maintains a geopolitical risk premium in Oil prices.

CAD hovers near 1.40 as wider US–Canada spreads weigh ahead BoC remarks

Strategists at Scotiabank note that the Canadian Dollar is “flirting with the 1.40 level in early trade Friday, with the currency down very slightly on the day,” with “minor losses” reflecting “the bullish USD undertone overall rather than anything CAD-specific.” They add that “broader risk appetite looks a little soft, with European stocks lower while US equity futures are slightly positive.”

Scotiabank points out that “crude oil prices are lower on the day also but wider US/Canada front-end spreads are the biggest drag on the currency.” The team judges that “spot does remain somewhat overvalued relative to our fair value estimate (1.3910),” and cautions that, “at the margin, the weaker CAD is unhelpful for the BoC as it considers building inflation risks.”

Looking ahead, Scotiabank highlights that “Governor Macklem is speaking on Monday in Halifax and may reiterate concerns about intensifying upside risks to inflation.” In their view, “strengthening bets on tighter BoC policy before year end would provide some anchoring for the CAD.”

USD/CAD technical analysis

In the one-hour chart, USD/CAD trades at 1.4007, maintaining a constructive bullish tone as it holds above the 100-period simple moving average (SMA) near 1.3951 and the 200-period SMA around 1.3886. The pair is pressing the upper end of the recent range, with initial overhead supply emerging at the horizontal resistance at 1.4015, while the Relative Strength Index (14) around 63 suggests firm but not yet overextended upside momentum.

On the downside, immediate support appears at 1.3974, ahead of a cluster of underlying demand formed by the 100-period SMA at 1.3951 and the horizontal level at 1.3945, with deeper structural support located at the 200-period SMA near 1.3886. On the topside, a break above the first barrier at 1.4015 would open the path toward the next resistance at 1.4030, where buyers may start to lose traction if momentum fails to strengthen further.

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

Scotiabank strategists Shaun Osborne and Eric Theoret note the Canadian Dollar (CAD) remains under pressure near 1.40 against the Dollar, reflecting a firm USD tone and wider US–Canada front-end spreads. Spot is seen as somewhat overvalued versus fair value, while upcoming remarks from Bank of Canada (BoC) Governor Macklem could reinforce inflation concerns and support expectations for tighter policy, offering some medium-term anchoring for the CAD.

CAD pinned near key 1.40 level

"The CAD is flirting with the 1.40 level in early trade Friday, with the currency down very slightly on the day. Minor losses reflect the bullish USD undertone overall rather than anything CAD-specific. Broader risk appetite looks a little soft, with European stocks lower while US equity futures are slightly positive."

"Crude oil prices are lower on the day also but wider US/Canada front-end spreads are the biggest drag on the currency. Spot does remain somewhat overvalued relative to our fair value estimate (1.3910). At the margin, the weaker CAD is unhelpful for the BoC as it considers building inflation risks."

"Governor Macklem is speaking on Monday in Halifax and may reiterate concerns about intensifying upside risks to inflation. Strengthening bets on tighter BoC policy before year end would provide some anchoring for the CAD."

"Bullish—The USD continues to pressure the 50% retracement resistance of the June/August slide in the USD at 1.3990. USD bullish trend momentum on the intraday and daily oscillators supports the positive USD undertone and a sustained push through 1.40 would bolster the outlook for additional gains towards 1.4050/1.4125. Support has shifted higher to 1.3940/50."

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

Nathan Janzen at Royal Bank of Canada (RBC) notes that markets are focused on whether the Bank of Canada (BoC) will raise rates in October after the Federal Reserve’s (Fed) move. He highlights Governor Macklem’s upcoming speech and stresses policymakers’ focus on inflation passthrough from higher energy prices. RBC’s base case is for gradual hikes starting in early 2027, though risks are shifting toward earlier tightening.

Policy focus on inflation passthrough

"Bank of Canada Governor Tiff Macklem is scheduled to speak on “economic developments” on Monday in Halifax, which could provide some additional guidance ahead of its interest rate decision on Oct. 28."

"On the central bank calendar, attention has turned to whether the BoC will hike interest rates later in October after the Federal Reserve raised rates for the first time since 2023 this week."

"At its last meeting, the BoC flagged concerns about broader inflation implications from higher energy prices."

"Meeting minutes, however, clarified that policymakers are more focused on passthrough to general inflation than on elevated oil prices themselves, which the central bank cannot influence."

"Risks to this forecast are tilting toward earlier hikes."

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

Nordea’s team sees the European Central Bank delivering two more 25bp rate hikes, in December and March 2027, despite more aggressive market pricing. They note higher energy costs and Middle East risks but still view a gradual, quarterly hiking path as consistent with current data and ECB communication, while acknowledging upside risks towards faster tightening.

Gradual but upward ECB rate path

"Financial market pricing has increased rapidly lately and has already risen considerably above our own baseline forecast of two further 25bp rate hikes from the ECB, one in December and the other in March 2027. Rapidly climbing energy prices have been a big driver of rate expectations, and uncertainty over what will happen in the Middle East in the coming months remains elevated."

"That said, we continue to think that our forecast constitutes a reasonable baseline for the ECB, as it remains closely aligned with both recent developments in economic data and the signals coming from the central bank itself."

"So while the central bank does not want to commit to any particular rate path, most paths still point upwards. However, there was no urgency in the communication and really nothing that would suggest a faster pace of rate hikes than the quarterly pace the ECB has now assumed."

"We do expect to see broader price pressures emerge gradually, as well as some second-round effects, but the picture so far remains consistent with a gradual rise in interest rates."

"Given the renewed escalation of the war in the Middle East and another notable increase in gas prices in particular, risks to our baseline have tilted towards faster rate hikes, including a move as early as the next meeting in October."

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