Forex News
- EUR/USD softens to around 1.1250 in Wednesday's early Asian session.
- France’s fiscal concerns and political uncertainty exert some selling pressure on the Euro.
- Expectations of another US rate hike this month diminished after last week’s US jobs data release.
The EUR/USD pair remains on the defensive near 1.1250 during the early Asian trading hours on Wednesday. The Euro (EUR) weakens against the US Dollar (USD) amid fears of France’s debt crisis. The Minutes of the Federal Open Market Committee (FOMC) will be in the spotlight later on Wednesday.
France’s Finance Minister said the government is willing to exercise special constitutional powers and circumvent Parliament to pass billions in spending cuts if negotiations stall over next year’s budget.
Worries about France’s ability to rein in its budget deficit and a sharp bond market selloff last week elevated fears of a potential sovereign debt crisis in the Eurozone. This, in turn, could drag the shared currency lower in the near term.
French Prime Minister Sébastien Lecornu's minority government announced plans last month for a €54bn savings drive to stave off a catastrophic downgrade or sovereign default. French debt has seen pressure mount as politicians struggle to curb the budget deficit ahead of a divisive election in 2027. The calling of a snap election in Spain also contributes to the Euro’s downside.
“Europe is taking the spotlight at the start of the week, as fiscal and political concerns hit the bloc,” said Kathleen Brooks, the research director at XTB. “France is the epicentre of the concerns; however, Spain is also set to get ready for an early election, which is adding to investor worries,” Kathleen added.
On the other hand, easing expectations for US Federal Reserve (Fed) rate hikes following softer US jobs data released last week could weigh on the Greenback and act as a tailwind for the major pair. Interest-rate swaps showed traders pricing in an almost 20% probability that the Fed will lift benchmark borrowing costs at its October gathering, according to the CME FedWatch tool.
Euro positioning highlights systematic short bias across tapes
According to TD Securities, current "CTA Positioning, EUR Futures" indicates that systematic traders remain materially short the Euro across a range of market scenarios. Their "CTA positioning est., EUR, downtape" contrasts with "CTA positioning est., EUR, flat tape" and "CTA positioning est., EUR, uptape," underscoring how exposure is calibrated to different price paths, while the "CTA positioning est., EUR, big uptape" scenario captures the potential for more pronounced position adjustments if Euro strength accelerates. TD Securities’ "CTA Positioning Estimate (rhs) EUR Futures" provides a consolidated view of these dynamics, mapping how CTA exposure in EUR futures may evolve as the underlying tape shifts from downside to upside conditions.
Fed’s Schmid flags AI-driven inflation and signals more short-rate tightening
Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score that is modestly above the 7.5/10 historical average, underscoring elevated concern about persistent price pressures. The emphasis that inflation is “frustrating” and must be fixed, alongside the assertion that AI is now one of the largest drivers of inflation and that the Fed still has work to do on the short rate despite higher long-term yields, reinforces a bias toward keeping policy restrictive for longer. The warning that Fed credibility is at stake in beating inflation further hardens the hawkish signal and suggests limited appetite for near-term easing in Dollar-sensitive markets.
The FXS Fed Sentiment Index rose by 0.34 points to 137.91, firmly in hawkish territory well above the neutral 100 threshold and consistent with the elevated FXS Speechtracker score. This incremental move higher confirms that recent Fed communication, including Schmid’s remarks, is being interpreted as reinforcing a higher-for-longer stance that should continue to underpin the Dollar against lower-yielding peers.
Technical Analysis: EUR/USD retains a negative outlook amid oversold conditions
In the daily chart, EUR/USD holds a bearish near-term bias as spot remains below the Bollinger Bands 20-period simple moving average and the 100-day simple moving average (SMA), keeping the broader trend capped despite the latest bounce from the lower Bollinger band. The Relative Strength Index (14) at 26.08 sits in oversold territory, hinting that while selling pressure dominates, the downside could be prone to corrective rebounds rather than a fresh impulsive slide.
On the topside, initial resistance is located at the Bollinger Bands middle line at 1.1405, with the 100-day SMA at 1.1500 reinforcing a broader supply zone ahead of the upper Bollinger band near 1.1640. On the downside, the lower Bollinger band at 1.1168 offers immediate support; a clear break beneath this level would expose further weakness, whereas holding above it would leave room for a consolidation phase below the clustered moving-average resistance overhead.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- The RBI is set to lift interest rates by 25 bps on Wednesday.
- Rising retail inflation in India has boosted hawkish RBI expectations.
- Market experts at MUFG bet against RBI interest rate hike expectations, see rates on hold.
The Reserve Bank of India (RBI) is set to announce its bi-monthly monetary policy decision on Wednesday at 10:00 AM IST (04:30 GMT), in a meeting where the central bank is expected to initiate an interest rate hike cycle after maintaining a status-quo so far this calendar year. According to the market consensus, the RBI will hike its key Repo Rate by 25 basis points (bps) to 5.5% from 5.25%.
Why is an RBI interest rate hike expected?
Analysts at Societe Generale have highlighted that “the pickup in services inflation is particularly important from a monetary policy perspective,” underscoring growing concern over the breadth of price pressures. They note that “with headline inflation above the median target for a third consecutive month and underlying inflation beginning to firm, the room to look through food-led price pressures is narrowing.”
In August, India’s retail Consumer Price Index (CPI) arrived at 4.82% Year-on-Year (YoY), the highest level seen under the current series starting in January 2025. However, it remained well inside the RBI’s 2%-6% tolerance band.
Against this backdrop, Societe Generale said that “we continue to believe that the RBI will initiate a mini rate-hike cycle, announcing a 25bp hike at its October meeting”. The bank has also not ruled out the possibility of an interest rate hike of 50 bps.
Contrary to Societe Generale, analysts at MUFG expect the RBI to maintain the status-quo again on Wednesday, but stress that a hiking cycle can be started from the December meeting.
MUFG/BTMU said in a note that they are “officially forecasting RBI to keep rates on hold,” but emphasise that “more importantly we have already been calling for the central bank to start its hiking cycle from December.” In their view, “it’s just a matter of time before policy rates move higher,” underscoring expectations for a near-term shift away from the current steady stance.
What happened in the last RBI meeting?
In the August policy meeting, RBI Governor Sanjay Malhotra said in the monetary policy statement that the Monetary Policy Committee (MPC) retains a 'neutral' stance on policy rates. Malhotra warned that ongoing Middle East tensions continue to remain a major barrier to the economy. “West Asia conflict continues to challenge the global economy. Crude oil prices, currencies, financial markets remain volatile,” Malhotra said.
On the inflation outlook, Malhotra highlighted that “Inflation is not getting broad based, expected to decline after peaking in Q3FY27.”
What answers will investors be looking for?
After the RBI monetary policy announcement, financial market participants would be keen to know how much further interest rates could rise if the bank keeps hiking. The impact of the RBI’s remarks on the monetary policy outlook would be significant for the Indian Rupee (INR), as the currency has remained notably under pressure due to consistent outflows of foreign investment from the Indian stock market and rallying global bond yields.
Analysts at Societe Generale expect the RBI to deliver two more rate hikes in the December and February meetings.
Moreover, investors would pay close attention to comments regarding the global sell-off and the domestic economic outlook.
How Could the RBI Decision Impact the INR?
With financial markets already pricing in a 25 bps interest rate hike by the RBI on Wednesday, the impact on the Indian Rupee could be limited. However, a surprise bigger interest rate hike of 50 bps could move the needle for the Indian currency, which has been an underperformer in the past few weeks.
In case the Indian central bank decides to leave key policy rates unchanged again, as projected by analysts at MUFG, the INR could face a vertical decline.
USD/INR Technical Outlook: Bullish bias as 20-day EMA slopes higher
On the daily chart, USD/INR trades around 96.40 at the time of writing, retaining a bullish near-term bias as spot holds above the 20-day Exponential Moving Average (EMA) at 95.91.
The EMA support under the price suggests the upswing remains intact, while the Relative Strength Index (14) near 67 hovers just below overbought territory, hinting at strong but potentially stretched upside momentum.
On the downside, immediate support is located at the 20-day EMA at 95.91, and a daily close below this level would signal waning bullish pressure and open the door to a deeper corrective pullback towards the September 23 low at 95.57. On the topside, the all-time high near 97.00 is the key hurdle.
Indian Rupee FAQs
The Indian Rupee (INR) is one of the most sensitive currencies to external factors. The price of Crude Oil (the country is highly dependent on imported Oil), the value of the US Dollar – most trade is conducted in USD – and the level of foreign investment, are all influential. Direct intervention by the Reserve Bank of India (RBI) in FX markets to keep the exchange rate stable, as well as the level of interest rates set by the RBI, are further major influencing factors on the Rupee.
The Reserve Bank of India (RBI) actively intervenes in forex markets to maintain a stable exchange rate, to help facilitate trade. In addition, the RBI tries to maintain the inflation rate at its 4% target by adjusting interest rates. Higher interest rates usually strengthen the Rupee. This is due to the role of the ‘carry trade’ in which investors borrow in countries with lower interest rates so as to place their money in countries’ offering relatively higher interest rates and profit from the difference.
Macroeconomic factors that influence the value of the Rupee include inflation, interest rates, the economic growth rate (GDP), the balance of trade, and inflows from foreign investment. A higher growth rate can lead to more overseas investment, pushing up demand for the Rupee. A less negative balance of trade will eventually lead to a stronger Rupee. Higher interest rates, especially real rates (interest rates less inflation) are also positive for the Rupee. A risk-on environment can lead to greater inflows of Foreign Direct and Indirect Investment (FDI and FII), which also benefit the Rupee.
Higher inflation, particularly, if it is comparatively higher than India’s peers, is generally negative for the currency as it reflects devaluation through oversupply. Inflation also increases the cost of exports, leading to more Rupees being sold to purchase foreign imports, which is Rupee-negative. At the same time, higher inflation usually leads to the Reserve Bank of India (RBI) raising interest rates and this can be positive for the Rupee, due to increased demand from international investors. The opposite effect is true of lower inflation.
US Vice President (VP) JD Vance said that Iran must reduce nuclear enrichment capacity to satisfy US demands and end the countries’ seven-month war, Reuters reported on Tuesday. Vance added that Washington remained open to an agreement but would require concrete Iranian nuclear concessions.
Earlier Tuesday, US President Donald Trump stated that it is now a matter of deciding how the US wants to "finish up" with Iran. Trump added that Iran's drone-making capacity will soon be gone.
Key quotes
Iran must meaningfully reduce enrichment capacity to end war.
Undecided about presidential run.
Unclear how Iran makes decisions.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is down 0.82% on the day at $89.20.
WTI Oil FAQs
WTI Oil is a type of Crude Oil sold on international markets. The WTI stands for West Texas Intermediate, one of three major types including Brent and Dubai Crude. WTI is also referred to as “light” and “sweet” because of its relatively low gravity and sulfur content respectively. It is considered a high quality Oil that is easily refined. It is sourced in the United States and distributed via the Cushing hub, which is considered “The Pipeline Crossroads of the World”. It is a benchmark for the Oil market and WTI price is frequently quoted in the media.
Like all assets, supply and demand are the key drivers of WTI Oil price. As such, global growth can be a driver of increased demand and vice versa for weak global growth. Political instability, wars, and sanctions can disrupt supply and impact prices. The decisions of OPEC, a group of major Oil-producing countries, is another key driver of price. The value of the US Dollar influences the price of WTI Crude Oil, since Oil is predominantly traded in US Dollars, thus a weaker US Dollar can make Oil more affordable and vice versa.
The weekly Oil inventory reports published by the American Petroleum Institute (API) and the Energy Information Agency (EIA) impact the price of WTI Oil. Changes in inventories reflect fluctuating supply and demand. If the data shows a drop in inventories it can indicate increased demand, pushing up Oil price. Higher inventories can reflect increased supply, pushing down prices. API’s report is published every Tuesday and EIA’s the day after. Their results are usually similar, falling within 1% of each other 75% of the time. The EIA data is considered more reliable, since it is a government agency.
OPEC (Organization of the Petroleum Exporting Countries) is a group of 12 Oil-producing nations who collectively decide production quotas for member countries at twice-yearly meetings. Their decisions often impact WTI Oil prices. When OPEC decides to lower quotas, it can tighten supply, pushing up Oil prices. When OPEC increases production, it has the opposite effect. OPEC+ refers to an expanded group that includes ten extra non-OPEC members, the most notable of which is Russia.
The Bank of Japan's (BoJ) new policymaker Ayano Sato said that she supports the idea of raising interest rates in several stages, Reuters reported on Tuesday.
Key quotes
Agrees on need for gradual interest rate adjustment.
No preset pace for interest rate increases.
Bank must set monetary policy independently while aligning with administration’s proactive fiscal policy.
Price risks tilt slightly higher on rising oil costs from Middle East conflict.
Market reaction
At the time of writing, the USD/JPY pair is up 0.21% on the day at 158.25.
BoJ’s Sato backs gradual tightening but rejects preset rate path
BoJ’s Sato’s speech score at 6.4/10 matches the speaker’s historic average, signaling a steady policy stance with a mild hawkish tilt. Agreement on the need for gradual interest rate adjustment, coupled with the rejection of a preset pace for hikes, suggests cautious normalization rather than aggressive tightening, which keeps the Yen supported but limits sharp repricing.
The emphasis on independent monetary policy, even while aligning with proactive fiscal measures, reinforces BoJ’s resolve to move away from ultra-easy settings when conditions allow. Noting that price risks tilt slightly higher on rising oil costs from Middle East conflict adds to the hawkish bias, as it underscores concern over upside inflation risks that could justify further gradual rate increases and underpin the Yen on dips.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
- GBP/JPY climbs to 210.00 as the BoJ gives no October hike signal.
- The UK's Bank Rate pays 2.50 points more than the BoJ's 1.25%.
- GBP/JPY has held roughly between 207.00 and 211.50 since early September.
210.00 has capped GBP/JPY three times since September 24, give or take a few pips, the latest on Tuesday. The cross trades just under it, in the upper part of a band that has contained it since early September.
The Pound gained as Treasury yields eased, while the Yen stayed flat because the Bank of Japan (BoJ) offered no fresh signal on October. BoJ Governor Ueda said the bank intends to keep lifting rates, which futures have translated as later rather than sooner.
The BoE and the BoJ could both hike this autumn and leave the gap unchanged
The UK's Bank Rate is 3.75% and the BoJ's rate is 1.25%, so holding Pounds instead of Yen earns 2.50 points a year before any move in the exchange rate. Futures price a Bank of England (BoE) hike on November 5 as likely and an October BoJ hike as unlikely, which points to a wider gap by mid-November. The gap is exactly twice the BoJ's whole rate.
Tokyo's Yen buying is aimed at the Dollar and lands on the Pound as well
Japan started buying Yen on July 30 with USD/JPY just under 164.00, and GBP/JPY traded through a range of more than 6.00 that day. That single session covered more ground than the cross has since early September. USD/JPY trades about six yen below that level, so the cross is a long way from the last trigger but not from the next warning.
Japan's August pay data is due at 23:30 GMT on Tuesday, and BoE Deputy Governor Lombardelli speaks on Thursday at 13:00 GMT, the two scheduled events on either side of the cross. A slower Japanese pay figure and a firmer Lombardelli would both point the same way, toward a wider gap.
Levels at the top of GBP/JPY's range
Resistance: 210.00 has capped three sessions since September 24, including Tuesday. Above it, the September 18 spike topped out just above 211.00, and the 200-day Exponential Moving Average (EMA) sits near 211.50.
Support: Tuesday's low, just above 208.50, is the first floor. 207.00 is the base of the range, with the September 30 low just under it.
Bias: Buyers hold the edge above 208.50 on a daily closing basis, aiming at 211.00 and then 211.50. The daily Stochastic Relative Strength Index (Stoch RSI) is near 77 and still rising, so a pause at 210.00 before a break would fit the call. A daily close below 207.50 ends it.
GBP/JPY daily chart
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- AUD/NZD slips back toward 1.2400 as Australian consumer sentiment falls to 80.4.
- Sentiment among those surveyed after the RBA hike fell to 67.2.
- The RBA's 4.60% cash rate sits 1.85 points above the RBNZ's 2.75%.
Australian consumer sentiment fell 4.7% to 80.4 in October, and the Reserve Bank of Australia (RBA) hike on September 29 did most of the damage. AUD/NZD trades just above 1.2400 on its first down day after a three-session climb from near 1.2300.
Westpac, which runs the survey, found sentiment of 86.9 among people asked before the decision and 67.2 among those asked after it, a level previously seen only during the early-1990s recession. The same bank still expects the RBA to hike again on November 3.
The RBNZ can narrow the gap six days before the RBA can widen it
The RBA's 4.60% cash rate, after its fourth hike of 2026, is the highest since 2011 and sits 1.85 points above the Reserve Bank of New Zealand's (RBNZ) 2.75%. That gap took AUD/NZD to just under 1.2500 on September 22, its highest since early 2013, and the Kiwi lost about 3% to the Aussie between late August and late September.
Money markets fully price an RBNZ hike by December, and the RBNZ decides on October 28, six days before the RBA meets on November 3. One RBNZ hike would cancel one of the RBA's four 2026 hikes in the gap until the RBA meets.
Australians expect 4.9% inflation, above the top of the RBA's 2%-3% band
The Australian Industry Group (AiG) index for August is out on Tuesday at 22:00 GMT, last at -3.5, and October consumer inflation expectations follow on Thursday at 00:00 GMT, last at 4.9%. RBNZ Governor Breman speaks the same day.
A reading above 4.9% would support a November 3 hike in the same week households told Westpac the last one hurt, and would push AUD/NZD back toward 1.2450. A softer one would leave the cross leaning on the RBNZ alone.
Aussie-Kiwi levels under 1.2500
Resistance: Monday's high, just above 1.2450, ended the three-session climb, and Tuesday's high came in just under it. 1.2500 hasn't traded since early 2013, and the September 22 peak sits just under it.
Support: 1.2400 held Tuesday's low. Below it, 1.2350, then 1.2300, where September 30 and October 1 both bottomed just above it.
Bias: The lean is lower below 1.2450, with 1.2350 the first objective and 1.2300 the second. The daily Stochastic Relative Strength Index (Stoch RSI) is near 23 and still falling from above 90 in mid-September, so momentum still points down. A daily close above 1.2500 ends the call.
AUD/NZD daily chart
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
- Gold price gains momentum to around $4,165 in Wednesday’s early Asian session.
- Easing bond yields and falling oil prices eased inflation and interest-rate worries.
- Traders brace for the FOMC Minutes for more clues about future monetary policy.
Gold price (XAU/USD) rises to near $4,165 during the early Asian session on Wednesday. The precious metal rebounds as long-dated Treasury yields eased from Monday’s multi-decade highs and oil prices fell. Traders await the Minutes of the Federal Open Market Committee (FOMC), which are due later on Wednesday.
The benchmark 10-year Treasury yield declines more than 2 basis points (bps) to 5.286% after reaching its highest level since April 2002 in the previous session. The 30-year Treasury yield fell to 5.661% after rising to levels not seen since May 2002. The 2-Year Treasury dropped more than 3 bps to 4.798%.
Lower bond yields and falling oil prices eased concerns over inflation and the prospect of further US Federal Reserve (Fed) rate hikes, supporting the yellow metal.
Traders are now pricing in roughly 79.5% odds that the Fed will keep rates unchanged at its October policy meeting, according to the CME FedWatch tool.
The FOMC Minutes will take center stage later on Wednesday. This report could help determine the central bank's future monetary policy after it raised interest rates last month for the first time in three years.
Gold steadies as US rate worries ease and ETF selling abates
Analysts at Commerzbank note that gold has “stabilised for the time being at around USD 4,150 per troy ounce,” as “concerns about a rapid interest rate rise in the US have eased somewhat recently.” They add that support is also coming from ETF investors who, “whilst they have not significantly increased their exposure recently, have at least not reduced it either,” helping to underpin prices. Looking further ahead, Commerzbank highlights that consultancy firm Metal Focus “is also optimistic and, in its annual publication, forecasts new record prices for 2027, based on what is likely to be a rise in investor interest in the medium term.”
Schmid flags AI-driven inflation, keeps Fed firmly hawkish
Fed’s Schmid delivers a notably hawkish tone, with an 8/10 FXS Speechtracker score standing modestly above the 7.5/10 historical average, underscoring a stronger-than-usual focus on inflation risks. The emphasis that the labor force “remains in a good place” alongside frustration with persistent inflation and a clear warning that AI is now “one of the largest drivers of inflation” frames price stability as the dominant policy priority. By stressing that the Fed’s credibility is at stake and that there is still work to do on the short rate despite higher long-term yields, the speech points to a bias toward keeping policy tight and potentially resisting premature easing that could weigh on the Dollar and support yields.
The FXS Fed Sentiment Index rises by 0.34 points to 137.91, reinforcing that the broader Fed communication backdrop remains firmly in hawkish territory well above the neutral 100 threshold. This incremental uptick, aligned with Schmid’s above-baseline hawkish score, signals that recent Fed rhetoric continues to lean toward restrictive policy, a backdrop typically supportive for the Dollar and consistent with elevated rate expectations.
Technical Analysis: Gold remains capped under the 100-day SMA
In the daily chart, XAU/USD remains under pressure as it holds below the 100-day simple moving average (SMA) and the Bollinger Bands’ middle line, keeping the near-term bias bearish despite the latest Relative Strength Index (RSI) reading at 40.69, which suggests only modest downside momentum rather than outright oversold conditions.
On the topside, initial resistance is clustered in the $4,265–4,270 area, where the Bollinger middle band and the 100-day SMA are likely to cap rebounds, ahead of a higher Bollinger upper band hurdle at $4,440. On the downside, immediate support emerges at the Bollinger lower band near $4,090, where a decisive break would open the door to a deeper corrective leg in the daily trend.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
- AUD/USD gains 0.14%, extending its winning streak to three days.
- US trade deficit widens to record levels against Mexico.
- Bullock’s dovish guidance contrasts with expectations for another Fed hike.
The Australian Dollar extends its rally to three consecutive days, up 0.14% on Tuesday, as the US Dollar behaves erratically ahead of the release of the Federal Reserve’s September meeting minutes on October 7. The AUD/USD trades at 0.6981, after hitting a low of 0.6961.
AUD/USD holds near 0.70 despite diverging RBA and Fed rate expectations
Wall Street ended Tuesday’s session in the green, with the S&P 500 reaching a record high. Oil prices edged lower, dragging the Greenback and US Treasury yields, even though France’s fiscal turmoil could trigger a reaction by fixed-income traders and push rates higher.
On the data front, the US trade deficit widened to $-105.6 billion in August, from $-92.8 billion in July, mostly due to a jump in crude oil imports, non-monetary Gold and capital goods. Looking into the data, the trade deficits widened against Mexico and Vietnam to record levels.
Other data showed that the ADP Employment Change 4-week average indicates the labour market is solid, at 23.75K, up from 22.5K. Ahead, market participants brace for the release of the FOMC’s last meeting minutes on October 7.
In Australia, the ANZ-Indeed Australian Job Ads increased 2.2% MoM in September, pushing the series 12.5% higher over the year. On October 7, traders are eyeing the release of the University of Melbourne's Consumer Inflation Expectations for October.
Aside from this, expectations are that AUD/USD may continue to trend lower, as Reserve Bank of Australia (RBA) Governor Bullock stated that she expects the bank's three rate increases could be enough to tame inflation. On the other hand, the Federal Reserve is expected to increase interest rates at least once towards the end of the year.
AUD/USD Price Forecast: Technical outlook
In the daily chart, AUD/USD trades around 0.6980, maintaining a bearish near-term bias as price holds beneath the clustered simple moving averages (SMA) from the Moving Average Triple at roughly 0.7090. The pair has slipped away from the recent 0.72 handle, and momentum has cooled, with the 14-period Relative Strength Index (RSI) hovering near 37, which hints at persistent downside pressure rather than outright oversold conditions.
On the topside, initial resistance is located at the Moving Average Triple SMA zone near 0.7090, followed by the horizontal barrier at 0.7198, while the longer-term downward trend line from 0.8015 stays well above as a broader cap. On the downside, immediate support is seen at the rising trend-line cluster around 0.6897, ahead of additional ascending trend-line floors near 0.6865 and 0.6833, with a deeper structural base emerging toward the 0.6673 area.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Australian Dollar Price Today
The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.29% | -0.30% | 0.21% | -0.34% | -0.13% | -0.43% | 0.18% | |
| EUR | 0.29% | -0.06% | 0.46% | -0.06% | 0.19% | -0.16% | 0.47% | |
| GBP | 0.30% | 0.06% | 0.55% | -0.02% | 0.23% | -0.09% | 0.55% | |
| JPY | -0.21% | -0.46% | -0.55% | -0.55% | -0.33% | -0.62% | -0.00% | |
| CAD | 0.34% | 0.06% | 0.02% | 0.55% | 0.22% | -0.10% | 0.54% | |
| AUD | 0.13% | -0.19% | -0.23% | 0.33% | -0.22% | -0.33% | 0.32% | |
| NZD | 0.43% | 0.16% | 0.09% | 0.62% | 0.10% | 0.33% | 0.65% | |
| CHF | -0.18% | -0.47% | -0.55% | 0.00% | -0.54% | -0.32% | -0.65% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).
- USD/JPY flatlines just above 158.00 through BoJ Governor Ueda's speech.
- Futures price a BoJ hike on October 30 at about 25%.
- IMF meetings in Bangkok run October 12-18, the next likely stage for Tokyo.
On Tuesday, Bank of Japan (BoJ) Governor Ueda gave his first major speech since the September 18 hike, and USD/JPY's whole range stayed inside Monday's. The pair trades just above 158.00, with futures still pricing about a 25% chance of a hike at the October 29-30 meeting.
Governor Ueda repeated that the BoJ will keep raising rates in line with the economy, prices and financial conditions, and said financial conditions are still accommodative. He added that if upside risks to prices outweigh downside risks to growth, even with the Middle East unclear, the board would need to thoroughly discuss the pros and cons of a hike. Discussing the pros and cons of a hike is what a rate meeting is for.
Tokyo calls reflation over, which means it wants a firmer Yen
Finance Minister Katayama said on October 2 that Prime Minister Takaichi's government agrees reflation is over, backing the BoJ as Tokyo pushes back on the weak Yen. Japan bought a record ¥11.73 trillion of Yen between April 30 and May 27 and stepped in again at the end of July, when the US Treasury joined it.
Both rounds came with USD/JPY well above where it trades now, so the warnings have more room to work than the money. The International Monetary Fund (IMF) and World Bank meetings run in Bangkok from October 12 to 18, so the next joint message from Tokyo and Washington already has a venue.
A smaller pay rise would hand the BoJ its case for waiting
Japan's August wage figures land on Tuesday at 23:30 GMT, with growth forecast at 3.7% YoY after 4.7%. Governor Ueda said after the September hike that recent wage data had been strong and that wage pressures were broadening, and the forecast has the next figure slowing by a full point.
The Federal Open Market Committee (FOMC) minutes on Wednesday at 18:00 GMT are the main US event for the pair. Minutes that lean toward another Fed hike would widen the rate gap the BoJ is trying to narrow, and push USD/JPY toward the top of its recent range.
Yen levels inside Monday's range
Resistance: No session since September 24 has traded above 158.50, and October 1 stopped just under it. 159.00 is the September 24 high.
Support: Monday's low, just under 157.50, is the first floor. Friday's low, just under 157.00, is the next.
Bias: Risk-reward tilts higher while daily closes hold above 157.50, targeting 158.50 first and 159.00 after. The daily Stochastic Relative Strength Index (Stoch RSI) is near 83 and has turned down above 80, so the push to 158.50 may need help from the minutes. A daily close below 157.00 ends the call.
USD/JPY daily chart
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- USD/MXN falls 0.55% after touching a two-day low.
- Mexico’s consumer confidence drops to 45.1 in September.
- Finance Minister Amador favors fixed-rate, long-term local borrowing.
The Mexican Peso stages a comeback against the US Dollar on Tuesday as the latter weakens amid profit-taking and lower US Treasury yields, with traders awaiting the release of the minutes of the Federal Reserve’s last meeting. The USD/MXN trades at 17.97, down 0.55%.
USD/MXN drops as Dollar profit-taking and upbeat risk sentiment favor the Peso
An upbeat market mood supported the emerging-market currency, as USD/MXN hit a two-day low of 17.91, the level last seen on September 29. This pushed the Greenback lower, as the US Dollar Index (DXY), which measures the performance of the American currency against six others, is at 101.84, down 0.25%.
The fall of US Treasury yields boosted the appetite for the Mexican currency, even though Mexico’s Consumer Confidence fell in September, for the first time since May, as revealed by INEGI. The seasonally adjusted indicator fell from 46.3 to 45.1 in September, indicating that Mexican households are trimming durable-goods spending.
Aside from this, the Mexican Finance Minister, Edgar Amador, said that the country will prioritize borrowing in local currency at fixed rates and long maturities to reduce exposure to interest and exchange rates. Speaking to lawmakers, he added that “79% of the debt will be denominated in local currency and mostly at fixed rates and long-term maturities.”
Ahead, Mexico’s economic docket will feature inflation data for September and the release of the Bank of Mexico (Banxico's) last meeting minutes.
In the US, the trade deficit widened in August, as revealed by the Commerce Department. However, market participants are eyeing the release of the FOMC minutes of the September meeting on October 7.
Recently, Federal Reserve officials crossed the wires, with the San Francisco Fed President Mary Daly saying she supported September’s rate hike and that additional rate hikes may be needed, depending on external shocks. Recently, Kansas City Fed Jeffrey Schmid commented that the labor market is solid and that the inflation fight has a “way to go.”
USD/MXN Price Forecast: Technical Outlook
In the daily chart, USD/MXN trades at 17.9710, maintaining a bullish near-term bias as spot holds well above the triple simple moving average cluster (50, 100, 200) around 17.2570. The pair is also comfortably above the horizontal support at 16.8866, keeping the broader rebound intact, while the Relative Strength Index (14) at 66.4 stays just shy of overbought territory, hinting that upside momentum remains firm but somewhat stretched.
On the topside, the next notable resistance comes from the broader downward trend-line structure, with the latest reference high around 18.1200 acting as the immediate cap for further gains. On the downside, initial support is seen at the triple SMA area near 17.26, ahead of the more significant horizontal floor at 16.89, and only a drop back below these levels would suggest that the current bullish phase is losing traction.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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