Forex News
Brown Brothers Harriman’s Elias Haddad notes that a modest pullback in energy prices has eased the global bond sell-off and slowed the recent Dollar rally. However, he stresses that US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside. Upcoming US CPI and the University of Michigan survey will shape expectations for the October FOMC decision.
US growth and data underpin Dollar
"The modest pullback in energy prices eased the global bond sell-off and took some steam out of the USD rally. Nonetheless, US growth outperformance and strong foreign appetite for US securities keep USD risks skewed to the upside."
"Yesterday, Fed Governor Christopher Waller made the case for keeping the Summary of Economic Projection (SEP) ahead of the task force report expected by year-end. Waller noted the SEP give markets a sense of direction without locking the Fed into a preset path."
"Waller added he favors “additional hikes” if the economic data continue to come in as expected, but not necessarily “at consecutive meetings.” That leaves room for an October pause. Next week’s US September CPI report will help settle the October 28 FOMC hike or hold debate. Fed funds futures price in 20% probability of a back-to-back hike."
"The October University of Michigan consumer survey is on deck. The survey should continue to show that longer term inflation expectations remain anchored."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Rabobank strategists Molly Schwartz and Christian Lawrence note that the recent USD/CAD rally reflects broad US Dollar (USD) strength rather than specific Canadian Dollar (CAD) weakness, with the pair consolidating near 1.425 after failing to break 1.43. They expect policy divergence and a widening US-Canada rate differential to 200bp to push USD/CAD toward 1.45 over three months, before easing back toward 1.40 over a 12‑month horizon.
Rate differential seen driving pair higher
"After a spectacular CAD sell off which lasted the past month, from September 9 to October 5 USD/CAD is now trading sideways around 1.425, after failing to break above resistance at 1.43 on October 5, but still marking a dramatic retracement from September’s low of 1.373."
"Therefore, we are forecasting a marginally widening differential from 175bp now to 200bp by the end of this year, where we expect it to stay throughout 2026."
"We expect this policy divergence to push USD/CAD through the resistance trend line and make a run for 1.45."
"Given the widening differential, coupled with the potential for higher US yields post-US midterms, we see USD/CAD trading up to 1.45 on a three-month view."
"Therefore, despite weak economic activity, and a deteriorating trade dynamic with the US, the Canadian OIS curve is implying almost four more hikes from the Bank of Canada by September of next year."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- Gold gains ground but struggles to extend its recovery as the US Dollar and Treasury yields stabilise.
- Traders await US consumer sentiment and inflation expectations data during American trading hours.
- XAU/USD remains confined to the $4,100-$4,200 range, with key daily SMAs capping the upside.
Gold (XAU/USD) trades on the front foot on Friday but struggles to extend its advance as the US Dollar (USD) and US Treasury yields show signs of stabilisation following Thursday’s sharp pullback. At the time of writing, XAU/USD trades around $4,182, up 1.20% on the day, after testing the $4,200 mark, its highest level in a week.
The benchmark 10-year US Treasury yield fell by 11.9 basis points on Thursday, from 5.354% to 5.235%, taking some steam out of the US Dollar rally and helping bullion recover from the two-month lows touched earlier this week.
Strong demand at a US 30-year Treasury auction helped drive the retreat in yields. A pullback in Oil prices also eased pressure on bonds after US President Donald Trump said in a Truth Social post that the United States would not attack Iran before the November midterm elections. Trump's remarks followed earlier reports suggesting Washington was preparing for possible renewed strikes.
However, the downward pressure on the US Dollar and yields fades on Friday as the broader drivers of their recent strength remain intact. Oil prices remain elevated, keeping inflation risks in focus and reinforcing expectations of additional interest-rate hikes by the Federal Reserve (Fed).
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 102.19 after recovering from an intraday low of 101.92. Meanwhile, the 10-year Treasury yield edges back toward 5.25% after briefly falling to around 5.21%.
A firmer US Dollar, Treasury yields near multi-year highs and a hawkish Fed outlook remain major headwinds for Gold, even as central bank purchases and ETF inflows provide underlying support. Higher yields increase the opportunity cost of holding the non-yielding metal, while US Dollar strength makes it more expensive for overseas buyers.
According to the CME FedWatch Tool, traders widely expect the Fed to leave interest rates unchanged at 3.75%-4.00% at its October 27-28 meeting, while pricing in an 85% probability of a rate hike in December.
Recent Fed communication also keeps the door open to additional increases as officials seek to bring inflation back toward the central bank’s 2% target. St. Louis Fed President Alberto Musalem said on Thursday, “To bring inflation back to target, more monetary policy firming will be required.” Fed Governor Christopher Waller struck a similar tone, signalling “additional hikes” if economic data develop as expected.
On the US economic docket, traders now await the preliminary University of Michigan consumer sentiment report for October, alongside 1-year and 5-year inflation expectations.
Technical analysis: XAU/USD remains rangebound below key daily SMAs
XAU/USD remains largely confined to the $4,100-$4,200 range seen since the start of the month, while trading below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) on the daily chart. The dense overhead moving-average stack suggests rallies remain capped for now, while the Relative Strength Index (RSI) near 44 retains a mild bearish bias.
Meanwhile, the Moving Average Convergence Divergence (MACD) indicator remains negative but has been narrowing, suggesting that selling pressure is easing rather than reversing decisively.
On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,259 and the 50-day SMA at $4,334. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,529.
On the downside, initial support stands at $4,100. A sustained break below this level could open the door toward the $4,000-$3,950 support zone.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
- Canada's Unemployment Rate is expected to rise to 6.5% in September from 6.4% in August.
- The labour market faces its first full test since new US tariffs took effect in August.
- The Canadian Dollar remains under pressure ahead of the jobs report and the Bank of Canada's October meeting.
Statistics Canada will release its September Labour Force Survey on Friday, with markets anticipating a modest recovery in employment following August's sharp decline. The report takes on particular importance as it will be the first to fully reflect the impact of new United States (US) tariffs that took effect on August 22. These additional trade barriers could weigh on hiring, particularly in export-oriented industries, raising concerns about the resilience of the Canadian labour market.
According to Royal Bank of Canada (RBC), the new tariffs could have stalled the labour market's recovery without necessarily reversing it. The bank expects employment to increase by a modest 5K in September, while forecasting the Unemployment Rate to remain unchanged at 6.4%. Similarly, Canadian Imperial Bank of Commerce (CIBC) anticipates a modest increase of 5K jobs, warning that trade tensions could continue to weigh on manufacturing employment. The bank expects the Unemployment Rate to rise to 6.5%, in line with market consensus.
The employment figures could also influence expectations surrounding the Bank of Canada (BoC), which has maintained its policy rate at 2.25% since October 2025. The central bank is expected to remain cautious at its October 28 meeting, balancing signs of economic weakness against persistent inflationary pressures.
Indeed, Canada's headline Consumer Price Index (CPI) steadied at 3% YoY in August, remaining well above the BoC’s 2% target amid elevated energy prices. Against this backdrop, a stronger-than-expected employment report could revive speculation about a potential BoC interest rate hike, while another disappointing reading could reinforce expectations of a prolonged monetary policy pause.
What can we expect from the next Canadian jobs report?
Consensus among analysts sees Canada's Unemployment Rate rising to 6.5% in September, from 6.4% in August. Additionally, investors expect the economy to add around 7K jobs, partially reversing the substantial 41.7K decline recorded in the previous month.
It is worth recalling that Average Hourly Wages increased by 2% YoY in August, slowing from 3% in July and 3.7% in June, suggesting that wage inflation is gradually losing momentum.
Beyond the headline figures, market participants will pay particular attention to full-time employment, wage growth and the participation rate to assess whether the Canadian labour market is showing further signs of weakness.
When is the Canadian unemployment rate released, and how could it affect USD/CAD?
Statistics Canada will publish its September employment report on Friday at 12:30 GMT. A stronger-than-expected reading could provide some support to the Canadian Dollar (CAD), particularly if accompanied by resilient wage growth and a decline in unemployment.
Conversely, another disappointing employment report could weigh on the Loonie by reducing expectations of monetary tightening from the BoC.
USD/CAD remains in a consolidative phase near 1.4200 ahead of the release, with the pair's next directional move potentially influenced by the strength of Friday's labour market figures.
In the four-hour chart, USD/CAD maintains a constructive bullish bias while holding above the 100-period Simple Moving Average (SMA) at 1.4151 and the 200-period SMA at 1.4003. The clustering of horizontal supports between 1.4175 and 1.4200 reinforces a rising structure, even as the Relative Strength Index (RSI) near 45 hints at easing momentum after the recent advance.
On the topside, immediate resistance appears at 1.4232, ahead of 1.4270 and the recent cap near 1.4293. On the downside, initial support is seen at 1.4200, followed by 1.4175, with the 100-period SMA around 1.4151 and nearby horizontal levels at 1.4150 and 1.4133 forming a broader demand zone; deeper pullbacks would expose 1.4100 and then 1.4025 before the longer-term 200-period SMA at 1.4003.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Economic Indicator
Unemployment Rate
The Unemployment Rate, released by Statistics Canada, is the number of unemployed workers divided by the total civilian labor force as a percentage. It is a leading indicator for the Canadian Economy. If the rate is up, it indicates a lack of expansion within the Canadian labor market and a weakening of the Canadian economy. Generally, a decrease of the figure is seen as bullish for the Canadian Dollar (CAD), while an increase is seen as bearish.
Read more.Next release: Fri Oct 09, 2026 12:30
Frequency: Monthly
Consensus: 6.5%
Previous: 6.4%
Source: Statistics Canada
Canadian Dollar FAQs
The key factors driving the Canadian Dollar (CAD) are the level of interest rates set by the Bank of Canada (BoC), the price of Oil, Canada’s largest export, the health of its economy, inflation and the Trade Balance, which is the difference between the value of Canada’s exports versus its imports. Other factors include market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – with risk-on being CAD-positive. As its largest trading partner, the health of the US economy is also a key factor influencing the Canadian Dollar.
The Bank of Canada (BoC) has a significant influence on the Canadian Dollar by setting the level of interest rates that banks can lend to one another. This influences the level of interest rates for everyone. The main goal of the BoC is to maintain inflation at 1-3% by adjusting interest rates up or down. Relatively higher interest rates tend to be positive for the CAD. The Bank of Canada can also use quantitative easing and tightening to influence credit conditions, with the former CAD-negative and the latter CAD-positive.
The price of Oil is a key factor impacting the value of the Canadian Dollar. Petroleum is Canada’s biggest export, so Oil price tends to have an immediate impact on the CAD value. Generally, if Oil price rises CAD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Oil falls. Higher Oil prices also tend to result in a greater likelihood of a positive Trade Balance, which is also supportive of the CAD.
While inflation had always traditionally been thought of as a negative factor for a currency since it lowers the value of money, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Higher inflation tends to lead central banks to put up interest rates which attracts more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in Canada’s case is the Canadian Dollar.
Macroeconomic data releases gauge the health of the economy and can have an impact on the Canadian Dollar. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the CAD. A strong economy is good for the Canadian Dollar. Not only does it attract more foreign investment but it may encourage the Bank of Canada to put up interest rates, leading to a stronger currency. If economic data is weak, however, the CAD is likely to fall.
- Australian Dollar rises to near 0.6980 against the US Dollar amid a pullback in US bond yields.
- Market experts see this correction in US bond yields as temporary.
- The Fed is almost certain to deliver one more interest rate hike this year.
The Australian Dollar (AUD) is up 0.3% at around 0.6980 against the US Dollar (USD) during the European trading session on Friday. However, the pair is struggling to extend gains beyond 0.6990.
The Australian currency has been an outperformer on Friday as market sentiment remains risk-on due to a pullback in United States (US) Treasury Yields.
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 | 0.03% | -0.02% | 0.27% | 0.09% | -0.27% | -0.11% | -0.13% | |
| EUR | -0.03% | -0.04% | 0.25% | 0.05% | -0.29% | -0.10% | -0.17% | |
| GBP | 0.02% | 0.04% | 0.29% | 0.12% | -0.24% | -0.06% | -0.07% | |
| JPY | -0.27% | -0.25% | -0.29% | -0.18% | -0.54% | -0.37% | -0.38% | |
| CAD | -0.09% | -0.05% | -0.12% | 0.18% | -0.38% | -0.20% | -0.20% | |
| AUD | 0.27% | 0.29% | 0.24% | 0.54% | 0.38% | 0.18% | 0.19% | |
| NZD | 0.11% | 0.10% | 0.06% | 0.37% | 0.20% | -0.18% | -0.00% | |
| CHF | 0.13% | 0.17% | 0.07% | 0.38% | 0.20% | -0.19% | 0.00% |
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).
As of writing, S&P 500 futures are up 0.33% to near 7,800, reflecting string market mood. 10-year US bond yields are 0.42% higher to near 5.26%, but have corrected after failing extend the rally beyond 5.36%.
What is capping AUD’s upside?
The antipodean struggles to gain further as market experts see US bond Yields resuming the broader trend, with geopolitical tensions remaining intact.
Strategists at ING said in a note that Treasuries took a breather, but they stress that they "don’t see signs of a broader correction brewing." They highlight the geopolitical backdrop, noting that while US President Donald Trump has indicated the US "won’t attack Iran before the 3 November midterms," the oil market "is reluctant to price out the geopolitical premium that has kept prices above $100/bbl despite improved Gulf supply."
Going forward, the major trigger for US bond yields will be the US Consumer Price Index (CPI) data for September, which will be released on Wednesday. The data is expected to drive Federal Reserve’s (Fed) interest rate expectations significantly.
Currently, market participants are confident that the Fed will deliver one more interest rate hike this year.
AUD/USD Technical Analysis
In the daily chart, AUD/USD trades at 0.6978, keeping a bearish near-term tone as spot holds beneath the 20-period exponential moving average (EMA) at 0.7019. The pair has slipped below this short-term trend gauge, suggesting that rebounds are likely to be capped while downside pressure persists, with the Relative Strength Index (RSI) near 39 hinting at weak but not oversold momentum.
On the topside, initial resistance is located at the 20-day EMA around 0.7019, and a sustained break above this barrier would be needed to ease the prevailing downside bias. With no nearby technical supports highlighted by the current dataset, price action remains vulnerable to further slippage as long as AUD/USD trades under the EMA, leaving the bears in control of the short-term outlook.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- Gold hits session highs above $4,200 after bouncing from $4,066 lows earlier this week.
- Lower US Treasury yields are weighing on the US Dollar and providing support for precious metals.
- Hawkish comments by Fed officials are keeping US Dollar's dips limited so far.
Gold (XAU/USD) accelerates its recovery on Friday, favoured by a softer US Dollar, amid a moderate pullback in US yields. The XAU/USD pair has reached session highs just above $4,200 during the European session, from two-month lows at $4,066 on Wednesday, before easing to the $4,183 area at the time of writing.
US Treasury yields retreated on Thursday following the solid demand witnessed in a US 30-year Treasury bond auction. Investors’ willingness to buy US Government bonds despite the ballooning debt has calmed markets, flattening the US yield curve, and triggering a mild risk appetite that is hurting the safe-haven US Dollar.
Oil prices, however, remain at high levels, with the barrel of Brent crude still above the $100 level, pushing inflation higher, and urging central banks to tighten their borrowing costs. St. Louis Fed President Alberto Musalem endorsed this view earlier on Friday, affirming that “more monetary policy will be needed” to bring inflation to the 2% target, comments that are likely to limit US Dollar dips.
Technical Analysis: XAU/USD pierces the downtrend resistance from August's highs
XAU/USD trades at $4,187.01, holding an immediate bullish bias as it stands above the reclaimed downtrend resistance from August highs, although it is still testing the resistance area around $4,200, which has held bulls since late October.
Momentum supports the constructive tone, with the 4-hour Relative Strength Index (14) hovering near 60 and Moving Average Convergence Divergence (MACD) extending further into positive territory.
Gold bulls are likely to meet significant resistance between $4,190 and a support area, now turned resistance around $4, 240. A confirmation above this area would boost hopes of a deeper correction and bring the September 25 highs, at the $4,300 area, into play.
On the downside, first support is provided by the former trend-line break level around $4,170, before the mentioned two-month low, near $4,070. Further down, the $4,000 psychological area would come into focus.
(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.
United Overseas Bank (UOB) analysts Quek Ser Leang and Lee Sue Ann note that USD/CHF shows slightly increased downside momentum, with scope to test 0.8290 but limited odds of a sustained break lower. For the coming days, they maintain that USD/CHF has likely entered a range-trading phase between 0.8245 and 0.8365, while over the 1–3 month horizon they see the pair continuing to rebound but lacking strength to revisit the July peak.
Downside test within broader range
"24-HOUR VIEW: We stated yesterday that Wednesday’s “price action provides no fresh clues,” and we indicated that USD “could trade between 0.8310 and 0.8345.” USD then rose to 0.8346, dropped sharply to 0.8305 before settling at 0.8314 (-0.20%). The slight increase in downward momentum could lead to USD testing 0.8290. A continued decline below this level is unlikely. On the upside, resistance is at 0.8325, followed by 0.8345."
"1-3 WEEKS VIEW: In our most recent narrative from last Friday (02 Oct, spot at 0.8310), we highlighted that USD “has likely entered a range-trading phase between 0.8245 and 0.8365.” Although USD traded in a relatively quiet manner over the past couple of days, we will maintain our view for now."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- The Preliminary Michigan Consumer Sentiment Index is forecast to decline for a third consecutive month in October.
- Crude Oil prices picked up ahead of the release amid concerns of renewed Middle East tensions.
- The US Dollar Index maintains upward pressure near its 2026 peak in the 102.50 region ahead of the release.
The University of Michigan (UoM) will release the preliminary estimate of the United States (US) October Consumer Sentiment Index on Friday. The UoM report, which analyses US consumers’ feelings about their personal finances, business conditions, and purchasing plans, is expected to decline for a third consecutive month, as market analysts anticipate a reading of 47.6 following the 48.1 printed in September. The September reading was the second-lowest historical level, barely above the historic low of 44.8 posted in May.
Alongside headline Consumer Sentiment, the UoM releases 1-year and 5-year Consumer Inflation Expectations, currently at 4.6% and 3.4%, respectively. The Federal Reserve (Fed) vouches for inflation to remain around 2%, hence, the recent decision to tighten monetary policy by hiking the benchmark interest rate by 25 basis points (bps). Indeed, UoM’s report is nothing more than a reflection of consumers’ expectations of price pressures and is far from an official figure. Still, the numbers reflect American reality as the Middle East war pushes energy prices higher.
What to expect from October’s UoM Consumer Sentiment Index report?
The Middle East war has been the market’s main driver. What started as a conflict between Iran and Israel ended up being a regional crisis that includes the US. The blockage of the Strait of Hormuz resulted in Oil prices soaring to multi-year highs and resulting in outrageous energy-related inflation. The conflict, which started in February, has seen different stages, with hopes for a quick resolution fading as time goes by.
Investors remain distrustful despite crude Oil flows in the Persian Gulf returning to near pre-war levels. Oil prices are back up, with West Texas Intermediate (WTI) futures up roughly 5% on Thursday after US President Donald Trump said he no longer wants a deal with Iran, while discussing resuming large-scale military operations on Iran in the upcoming weeks.
His comments do little to build confidence among Americans seeing persistently elevated energy and food prices. Still, it’s worth mentioning that price pressures moved off their yearly peaks. The latest Personal Consumption Expenditures (PCE) Price Index rose a seasonally adjusted 3.4% in the year to August, down from the 4% posted earlier in the year. Core PCE during the same period rose 3%, still above the Fed’s goal but again easing from its 2026 peak.
The recent spike in Oil prices is likely to maintain inflation expectations elevated and hence, confidence subdued.
When will the UoM Consumer Sentiment Index be released, and how could it affect the US Dollar?
The University of Michigan will release the Consumer Sentiment Index and Consumer Inflation Expectations on Friday at 14:00 GMT. As previously noted, market players anticipate sentiment will continue to deteriorate in October. Ahead of the announcement, the US Dollar Index (DXY) holds well above the 102 mark, not far below this year’s peak achieved in October at 102.53.
Valeria Bednarik, Chief Analyst at FXStreet, notes: “The US Dollar (USD) benefits from both risk aversion amid fears of an escalation of the Middle East war and speculation that the Fed will have to hike interest rates again before the year ends. From a technical perspective, and according to the daily chart, the DXY is overbought but still bullish. The Relative Strength Index (RSI) indicator consolidates at extremes, yet off its recent peak. Furthermore, the index develops above all its moving averages, with the shorter 20-day Simple Moving Average (SMA) accelerating north after crossing above the longer 100-day and 200-day SMAs, usually a sign of building directional momentum.”
Bednarik adds: “The mentioned peak in the 102.50 region provides immediate resistance, with gains beyond it exposing the 103.00 threshold ahead of the 103.45 area. The weekly low at 101.76 is the first support level to watch, with additional declines exposing the 101.30 price zone. The closer the index approaches 101.00, the higher the chances buyers reappear.”
Economic Indicator
UoM 1-year Consumer Inflation Expectations
The University of Michigan's Inflation Expectations gauge captures how much consumers anticipate prices will change over the coming 12 months. It comes out in two rounds—a preliminary release that tends to pack a bigger punch, followed by a revised update two weeks later.
Read more.Next release: Fri Oct 09, 2026 14:00 (Prel)
Frequency: Monthly
Consensus: -
Previous: 4.6%
Source: University of Michigan
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
MUFG's Derek Halpenny highlights Europe's economic resilience following Germany's upward Gross Domestic Product (GDP) growth revisions but warns that potential European Union (EU) import restrictions and additional tariffs on Chinese goods could escalate trade tensions and weigh on the Euro (EUR). Meanwhile, continued Chinese Yuan (CNY) strength could put further downward pressure on EUR/CNY.
Euro steadies as China tensions grow
"Still, we continue to see evidence of economic resilience in Europe that could help stabilise the euro at these lower levels. The Economy Ministry in Germany yesterday revised up its GDP growth projection from 0.5% and 0.9% for this year and next to 1.3% and 1.1% respectively. Growth had been downgraded in response to the war but the new estimate for this year is above the 1.0% estimate at the start of the year underlining the level of resilience."
"There has been speculation that Europe is soon to respond with agreeing to a more flexible trade policy mechanism that would allow for easier implementation to counter against huge imports to Europe from China. An import cap could be agreed as well as additional tariffs that could see trade tensions rise and prompt retaliation from China. These talks could be the final opportunity to avoid increased tensions."
"An escalation into grater trade conflict could be another EUR negative factor."
"This mounting pressure looks to be encouraging China too allow renewed gains. Recent PBoC fixing in USD/CNY indicate a desire to keep CNY on a strengthening path despite the broader gains for the dollar. EUR/CNY is 10% lower from the January high and we see near-term scope for further declines."
"The continued CNY strength is helping isolate Asian currencies from the broader dollar gain. While the DXY has advanced 3.3% from the September low, the dollar against a basket of Asia FX is just 0.7% higher."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Societe Generale strategists note the National Bank of Romania (NBR) kept its policy rate at 6.50% and reinforced a hawkish stance as earlier inflation risks are now part of the baseline. Political conditions improved after PM-designate Luca Niculescu secured conditional backing from the Social Democrats, boosting hopes of a broad coalition. This optimism pushed EUR/RON below 5.35 and 10-year RONGB yields under 7.10%.
NBR hawkish and politics turn supportive
"In Romania, the NBR kept the policy rate on hold at 6.50% and reinforced its hawkish stance."
"Risks flagged in August (higher commodity prices, drought-related food inflation and RON depreciation) are now embedded in the baseline."
"The political outlook also improved after PM-designate Luca Niculescu received conditional backing from the Social Democrats, parliament’s largest party."
"Prospects of a return to a broad coalition with the Liberals and ethnic Hungarian party raised hopes of ending the deadlock weighing on fiscal consolidation and threatening the country’s IG rating."
"Optimism pushed EUR/RON below 5.35 and the 10y RONGB yield below 7.10%."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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