Forex News

TD Securities’ FX team, led by Jayati Bharadwaj and Howard Du, expects the US Dollar (USD) to see a modest relief selloff into year-end, with weaker-than-expected payrolls potentially accelerating the decline. The team forecasts October job growth of 40k following September’s 29k increase, while noting that FX options markets are already positioning for further USD weakness.

Dollar seen retracing into year-end

"After a sharp rally since September, our base case has been for the USD to see a modest relief selloff into year-end, similar to how the USD had performed following the 2018 US midterm election."

"FX options market also appears to have already started to position for a weaker USD into year-end."

"A lower-than-consensus payrolls number could provide an additional catalyst for the USD retracement to take shape."

"We expect October NFP to remain subdued at 40k after job gains moderated to 29k in September."

"Despite the subdued, below-consensus print, our forecast would be within the range of breakeven job gains and result in an increase in the three-month moving average."

"With underlying activity in the economy robust and inflation risks still prominent, a hike in December is likely."

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

• Gold gains as Democrats’ victory fuels fiscal concerns and revives demand for the metal.
• Expectations of another Fed rate hike in December could limit further gains.
• XAU/USD faces immediate resistance at the 20-day SMA near $4,074, while the RSI recovers toward the neutral level.

Gold (XAU/USD) maintains a bullish bias during American trading hours on Wednesday as traders digest the US midterm election results. At the time of writing, XAU/USD trades around $4,038, up nearly 3.0% on the day.

The metal rallied sharply earlier in the day after Democrats secured control of both houses of Congress, setting the stage for political gridlock in Washington. The election outcome means the Trump administration will need Democratic support to pass new legislation, approve spending packages, introduce further tax cuts or raise the debt ceiling.

The resulting political and fiscal uncertainty has revived the metal’s safe-haven appeal while weighing on the US Dollar, making bullion cheaper for buyers holding other currencies.

US economic data offers some support to the Greenback. The ADP report showed private-sector employment rose by 86K in October, beating the 69K forecast, while September’s gain was revised down to 86K from 90K. Meanwhile, the ISM Services Purchasing Managers Index (PMI) eased to 54.5 from 54.9, missing expectations of 54.8 but remaining comfortably above the 50 threshold that signals expansion.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.45, down 0.40% on the day, after touching an intraday low of 101.21, its lowest level since September 30.

Gold rebound comes as US fiscal risks rise but Fed path seen unchanged

The Yellow metal may struggle to sustain its rebound as ongoing tensions in the Middle East keep energy prices high and inflation risks elevated, leaving markets positioned for additional interest rate hikes by the Federal Reserve (Fed) and other major central banks. Higher borrowing costs weigh on the non-yielding metal by increasing the opportunity cost of holding it.

Traders price in an 82% chance of a December rate hike, according to the CME FedWatch Tool. The prospect of further tightening could also cushion the US Dollar’s decline.

Attention now turns to upcoming US employment data for fresh clues on the Fed’s policy outlook, with weekly Initial Jobless Claims due on Thursday and Nonfarm Payrolls (NFP) on Friday.

Technical Analysis: XAU/USD approaches mid-Bollinger Band

On the daily chart, XAU/USD remains mildly bearish in the near term as price holds below the 20-day simple moving average (SMA) middle Bollinger band at $4,074. The pair also faces overhead resistance at the upper Bollinger band near $4,253, suggesting rallies remain capped while momentum stays mixed, with the Relative Strength Index (RSI) recovering to 46 in neutral territory and the Moving Average Convergence Divergence (MACD) indicator negative but stabilizing.

On the downside, immediate support emerges at the $4,000 psychological level, followed by the lower Bollinger Band near $3,894 and the yearly low of $3,870 touched last week. On the topside, a close back above the mid-Bollinger band at $4,074 would ease downside pressure, though stronger resistance waits at the upper band near $4,253 and then the broader structural barrier at $4,400.

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

Rabobank’s RaboResearch team, including Molly Schwartz and Christian Lawrence, expects Banxico to keep its overnight rate at 6.50% on November 5 and through 2027, even as the Federal Reserve is seen hiking. They highlight that a narrowing interest rate differential has already weakened the Mexican Peso, and further divergence from the Fed could pressure USD/MXN higher while inflation remains contained in core components.

Peso sensitivity to rate divergence

"We expect Banxico to hold the overnight policy rate at 6.50% at the November 5 meeting, in line with both market pricing implied expectations and the median expectation of Bloomberg surveyed analysts. At the September 24 meeting, the Bank adjusted its Statement tangibly to give it more flexibility to diverge from the 6.50% rate it had been previously holding."

"Heath also acknowledged some of the challenges that arise should Banxico diverge from the Fed, primarily how it would impact the peso. Indeed, the peso materially weakened in the aftermath of that September meeting, with USD/MXN soaring from sub-17 levels, to almost reaching 19, a move that was compounded by rising 3-month implied volatility. This was a move that was driven primarily by the perception that we will see further narrowing of the interest rate differential."

"In such a scenario, a weaker peso could fuel inflation further in Mexico, but given that inflation in Mexico is moderately contained (in core goods and services), the economy can probably afford to digest a weaker peso. Meanwhile, a stronger peso puts downward external demand for Mexican agricultural exports, which would weigh on an already sluggish economy."

"Despite the prevailing risks to inflation in Mexico, market sentiment is currently skewed in favor of Banxico cuts in the short term, with several Bloomberg surveyed analysts forecasting a cut at this meeting, to bring the policy rate to 6.25%. However, we believe volatile headline CPI inflation and the continued risks to energy leave the Bank reluctant to hike at this juncture, and we maintain our forecast for a hold at 6.50%."

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

• EUR/USD climbs above 1.1200 as US midterm election results weigh on the US Dollar.
• The pair forms a potential double bottom near 1.1100, with buyers testing neckline resistance at 1.1250-1.1270.
• RSI and MACD signal improving momentum, though the longer-term SMAs remain overhead.

EUR/USD attracts fresh buyers on Wednesday as the US midterm election results rattle the US Dollar (USD), helping the Euro (EUR) reclaim 1.1200. The technical picture also improves, suggesting bulls are regaining a foothold after the pair touched 1.1104 last week, its lowest level since May 2025. At the time of writing, EUR/USD trades around 1.1257, up more than 0.50% on the day.

On the daily chart, EUR/USD has formed a potential double bottom near 1.1100, with the latest advance testing the neckline at 1.1250–1.1270. The pair has also climbed above the 21-day Simple Moving Average (SMA) at 1.1196, giving buyers some short-term control, although it remains below the 100-day and 200-day SMAs.

Momentum is improving, with the Relative Strength Index (RSI 14) near 52 and the Moving Average Convergence Divergence (MACD) turning positive and extending above its signal line. These signals support the recovery, but a broader bullish reversal remains unconfirmed while price holds below the longer-term averages.

A sustained break above the neckline would confirm the double-bottom pattern and open the way toward 1.1350, where previous support could now act as resistance. Further hurdles stand at the 100-day SMA at 1.1421 and the 200-day SMA at 1.1548. A break above these averages would weaken the broader bearish outlook.

On the downside, the 1.1200 mark offers initial support alongside the 21-day SMA. A break below this area would weaken the recovery and bring the 1.1100 base back into focus. A sustained move below that base would invalidate the double-bottom setup and leave EUR/USD vulnerable to further losses.

Standard Chartered’s Christopher Graham notes Euro area GDP growth excluding Ireland has slowed steadily since Q4-2025 while inflation continues to rise, increasing stagflation risks though not yet meeting that definition. He highlights higher energy prices and lagged ECB tightening as key headwinds and expects another 25bps hike in December, with inflation starting to fall early next year.

Growth slowdown and inflation dilemma

"Eurostat data released this morning showed euro area headline inflation rising to 4.0% y/y in October, above our expectation of 3.8%. This signals upside risks to the European Central Bank’s (ECB’s) September projection of 3.6% average inflation in Q4."

"Stripping Ireland out, euro area GDP growth was a more modest 0.2%, and, crucially, growth momentum has been falling steadily since Q4-2025."

"The combination of weakening growth momentum (using euro area ex Ireland data) and still-rising inflation creates a growing policy dilemma for the ECB. Inflation dynamics (and the risk of second-round effects) will likely dominate for now, underpinning our expectation of another 25bps hike at the December meeting."

"Stagflation is not our base case; we expect growth to remain positive and inflation to begin falling early next year."

"But the direction of travel is that way, and the forces that could produce stagflation in coming quarters are apparent: higher energy prices that are squeezing real income and weighing on corporate profit margins; ECB monetary tightening operating with lagged effects on household and corporate borrowing costs; and tighter financial conditions weighing on broader activity."

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

ING analysts James Knightley, Carsten Brzeski, Padhraic Garvey, Lynn Song and Chris Turner note that the Dollar has softened after the Democratic sweep in US midterms, though losses have been pared with Nasdaq futures stabilizing. They highlight support from a resilient US economy and at least one more Federal Reserve rate hike, but see scope for further Dollar weakness into 2027 if political frictions and a possible government shutdown intensify.

Dollar reacts to Democratic midterm win

"The dollar is softer on the outcome, though it has recovered from its lows seen in early Asia when a sharp fall in Nasdaq futures was warning of a larger re-pricing of the tech story."

"Limiting a larger dollar correction on this news is probably a still-resilient US economy and at least one more rate hike from the Federal Reserve."

"The dollar could see a little more weakness into 2027, however, if an emboldened Democratic Party takes greater issue with Republican policy, including deregulation and the AI build-out."

"And the potential for a prolonged government shutdown in mid-2027 adds to the case for a weaker dollar next summer."

"Overall, we retain a bias towards the 10-year yield heading towards 5.25%."

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

Societe Generale’s Michelle Lam assesses recent Chinese policy moves to support China equities following the latest correction. She highlights expanded use of the SFISF, cheaper and more permanent buyback relending, and informal IPO curbs. The report argues these measures mainly reinforce a policy floor and limit downside, but do little to generate sustained upside for China equities.

Policy support reinforces market floor

"Chinese policymakers have stepped up efforts to stabilise the stock market following the recent correction. Taken together, the latest measures could provide an additional RMB100bn through the Securities, Funds and Insurance Companies Swap Facility (SFISF), alongside potentially RMB200bn or more of additional demand for share-buyback and shareholding-increase loans at a cheaper interest rate."

"The latest measures provide additional liquidity and help prevent a correction from becoming self-reinforcing. However, the experience since these facilities were introduced in late 2024 suggests they have not been very effective. This is perhaps why equity market reaction remains underwhelming."

"Second, liquidity is not the main constraint on Chinese equities. Lower financing costs can make buying shares more attractive, but they cannot fully offset concerns over earnings growth, margin compression, subdued domestic demand and broader macro uncertainty. Nor can they by themselves resolve the underlying profitability challenges facing parts of the corporate sector."

"The direction is clear: the authorities want to strengthen the policy floor under the market. But the measures are more effective at limiting downside than generating sustained upside."

"Their strongest effect may therefore come through signalling: repeated intervention demonstrates policymakers' willingness to step in when markets come under significant pressure, strengthening investors' perception of a policy floor."

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

Commerzbank’s Norman Liebke expects the Central Bank of Brazil to pause its rate-cutting cycle at 13.75% amid fiscal and inflation concerns after Lula’s re-election. He notes unanchored inflation expectations but argues this is only a pause, with further cuts likely next year. Liebke sees scope for lower rates and anticipates the Brazilian Real will appreciate over the medium term.

BCB pause before further easing

"This evening at 10:30 pm Central European Time, the Central Bank of Brazil (BCB) will announce its interest-rate decision. A large majority of respondents to the Bloomberg survey expect the BCB to pause its rate-cutting cycle. According to the BCB’s weekly survey, analysts now expect only one further 25-basis-point rate cut by year-end, compared with three cuts previously. "

"This is mainly due to heightened fiscal concerns and inflation risks following President Lula’s surprise re-election. Inflation expectations through 2029 have risen and remain above the 3% inflation target."

"The BCB’s more cautious communication also points to a pause. At its previous meeting, it already stressed the need for a cautious approach to monetary policy given the high level of uncertainty and unanchored inflation expectations, while indicating that it would closely monitor further developments."

"Following the election, the BCB is therefore likely to wait and see how developments unfold, particularly regarding fiscal policy announcements and inflation expectations."

"Overall, the Brazilian real should benefit, which is why we expect the BRL to appreciate over the medium term and maintain our forecast."

"However, this is more likely to mark a pause than the end of the rate-cutting cycle. Further rate cuts are likely to follow by next year at the latest. With the policy rate at 13.75% and inflation at 4.6%, the BCB still has scope to lower rates further from their currently restrictive level, which would also narrow the interest-rate differential versus the USD."

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

• The Canadian Dollar gains as US midterm results trigger fresh selling in the US Dollar.
• USD/CAD falls to seven-week lows, while Macklem’s hawkish remarks support the Loonie.
• US ADP employment beats expectations, with attention turning to the ISM Services PMI.

The Canadian Dollar (CAD) gains around 0.50% against the US Dollar (USD) on Wednesday, pushing USD/CAD to seven-week lows as the Greenback faces fresh selling pressure following the US midterm election results. At the time of writing, the pair trades around 1.3933.

The Dollar comes under pressure as Democrats’ sweep of the House and Senate leaves Congress and the White House controlled by opposing parties. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.30, its lowest level since September 30.

Meanwhile, Oil prices also eased on Tuesday as traders weighed whether a Democratic-controlled Congress could put greater pressure on Trump to end the war with Iran.

Economists at ING argue that the US midterm outcome marks a clear inflection point for policy-making in Washington, with a Democrat-controlled Congress now expected to “stifle President Trump’s domestic agenda in his final two years in power.”

In their view, the new balance of power implies that “spending and tax proposals, as with most domestic legislation, will likely be gridlocked,” effectively shutting the door on any fresh fiscal push. However, ING cautions that the absence of new stimulus does not equate to fiscal consolidation, stressing that “while we won’t see any further fiscal expansion, large fiscal deficits and deteriorating debt dynamics will continue.”

Even so, resilient US economic growth and a hawkish Federal Reserve (Fed) outlook could limit further US Dollar losses in the near term. Inflation risks from the Middle East energy shock continue to support expectations of further rate hikes.

On the data front, US private-sector employment rose by 86K in October, according to ADP, beating expectations of 69K. September’s gain was revised down to 86K from 90K.

Attention now turns to October’s ISM Services PMI, due later during American trading hours, for further clues on the health of the US economy.

On the Canadian side, hawkish remarks from Bank of Canada (BoC) Governor Tiff Macklem lend additional support to the Loonie. During his parliamentary appearance on Tuesday, Macklem said “further rate hikes may be needed,” but stressed that decisions would be taken “meeting by meeting” amid elevated uncertainty.

Geoff Yu at BNY stresses that Eurozone growth is not broad-based and that looming French fiscal consolidation could reshape ECB expectations. While Germany anchors the recovery, manufacturing in France and Italy is slipping, and political uncertainty weighs on French PMIs. Stronger-than-expected fiscal tightening could sap domestic demand and force a reassessment of Eurozone policy and Euro valuations.

Uneven PMIs and budget pressures

"Eurozone expansion isn’t broad based. There is plenty to cheer for in the latest PMI releases. However, the S&P Global report also warns that “growth is by no means broad-based, with manufacturers in France and Italy in particular continuing to struggle, the former suffering the additional stress of domestic political uncertainty.”"

"French PMIs have hovered around 50 for most of the year, so a small contraction doesn’t signal a serious turn in the cycle. Italian manufacturing worries us more: it’s starting to slip from its Q2 highs, with S&P Global warning of fading optimism “amid faster falls in output and new orders.” Given their size, a prolonged deterioration in Italy and France would weigh on Eurozone aggregates and may prompt greater ECB recalibration."

"The main candidates in next year’s French presidential election will also commit to consolidation. Some, such as Marine Le Pen, have already called for ECB support in the process. That implies balance-sheet expansion, which would undermine the euro."

"Stronger-than-expected fiscal tightening across the Eurozone could yet sap domestic demand and force policy expectations to adjust."

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