Forex News

• NZD/USD drops 0.77% to around 0.5570, breaking below 0.5580 to reach its lowest level since April 2025.
• US inflation accelerates to 3.7% in September, strengthening expectations of further Fed interest rate hikes.
• Rising US Treasury yields support the Greenback, adding pressure on the New Zealand Dollar.

NZD/USD extends its decline on Wednesday, losing 0.77% to trade around 0.5570 at the time of writing, its lowest level since April 2025. The pair broke below the 0.5580 support level, potentially ending the horizontal consolidation phase that has prevailed since the beginning of October. The sharp decline comes as higher-than-expected United States (US) inflation data boosts the US Dollar (USD) and reinforces expectations of further monetary tightening by the Federal Reserve (Fed).

The US Consumer Price Index (CPI), released by the Bureau of Labor Statistics (BLS) on Wednesday, showed annual inflation accelerating to 3.7% in September, up from 3.4% in August and exceeding market expectations. Core CPI, which excludes volatile food and energy prices, also rose to 2.6% YoY, compared with 2.4% previously.

On a monthly basis, headline and core inflation increased by 0.6% and 0.3%, respectively, highlighting persistent inflationary pressures in the US economy. These figures reinforce expectations that the Fed may need to maintain a restrictive monetary policy stance or raise interest rates further to bring inflation under control.

Following the release, markets increased the chance of a 25-basis-point (bps) Fed rate hike in October to 40%, compared with 22% the previous day. Investors also assign a 35% chance to another 25-bps increase in December.

The repricing of Fed interest rate expectations drives US Treasury yields sharply higher, providing additional support to the Greenback. The benchmark 10-year US Treasury yield climbed to 5.33%, compared with around 5.20% before the inflation report, representing a 13-basis-point increase. Higher US yields make Dollar-denominated assets more attractive, weighing on currencies such as the New Zealand Dollar (NZD).

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, advances 0.62% to around 102.85, its highest level since April 2025, reflecting broad-based demand for the US currency.

Against this backdrop, the New Zealand Dollar struggles to withstand the renewed strength of the Greenback. The widening interest rate differential in favor of the United States adds to downward pressure on NZD/USD, while the break below its recent consolidation range suggests that selling momentum could persist if US Dollar strength continues.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5571, extending its slide below the 0.5620 day open and holding beneath a tight cluster of the 100-period and 200-period simple moving averages (SMAs) near 0.5605, which reinforces a bearish near-term bias. The Relative Strength Index (14) at 23.0 sits in oversold territory, suggesting that while downside pressure dominates, the pair could be vulnerable to short-lived corrective rebounds rather than a sustained recovery while price remains capped under the hourly SMAs.

On the topside, immediate resistance is aligned at 0.5580, ahead of the 100- and 200-period SMAs around 0.5605, with further hurdles at 0.5630 and 0.5649 before a more distant barrier emerges at 0.5686 and the 0.5735 peak. On the downside, initial support is seen at 0.5540, where a break would reopen the bearish path and leave the pair exposed to fresh lows in the absence of any nearby structural floors on the hourly chart.

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

• Gold falls as stronger-than-expected US CPI data trigger renewed selling.
• Markets see a stronger case for another Fed interest rate hike as inflation remains well above the 2% target.
• The technical outlook remains bearish with XAU/USD trading below its 50-, 100-, and 200-day SMAs.

Gold (XAU/USD) extends its intraday decline on Wednesday after stronger-than-expected US inflation data lift the US Dollar (USD) and US Treasury yields. At the time of writing, XAU/USD trades around $4,084, down 1.83% on the day.

The September Consumer Price Index (CPI) rises 0.6% monthly, matching expectations and accelerating from August’s 0.4% increase. Annual headline inflation climbs to 3.7% from 3.4%, above the 3.6% forecast.

Core CPI, which excludes food and energy, increases 0.3% monthly, exceeding expectations of 0.2% and matching August’s pace. The annual core rate rises to 2.6% from 2.4%, also above the 2.5% forecast.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, climbs to around 102.85, its highest level since April 2025. US Treasury yields also rebound sharply following their recent weakness, with the benchmark 10-year yield rising roughly 10 basis points (bps) to 5.28%.

A stronger US Dollar makes bullion more expensive for overseas buyers, while higher yields increase the opportunity cost of holding the precious metal, which generates no income.

Higher energy prices linked to Middle East tensions remain a key driver of inflation. Persistent threats to Oil supplies raise the risk that elevated fuel costs will keep inflation above the Fed’s 2% target for longer.

Against this backdrop, the Fed is expected to maintain a restrictive monetary policy stance, with money markets increasing bets on three more interest rate hikes by the end of 2027. Traders now price in a 43% chance of a rate hike at the October 27-28 meeting, up from 22% before the CPI release, while the probability of a December hike stands near 95%, according to the CME FedWatch Tool.

New York Fed President John Williams said on Tuesday that it “may be appropriate to have one more rate hike” in 2026. However, he currently sees no need for further increases in 2027 and expects inflation to move toward the central bank’s 2% target next year.

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

XAU/USD extends its decline below the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) on the daily chart. Momentum is soft, with the Relative Strength Index (RSI) hovering near 38, and the Moving Average Convergence Divergence (MACD) indicator slightly negative, suggesting that sellers retain a modest edge despite the recent range-bound price action.

On the topside, initial resistance lies at the $4,200 psychological mark, followed by the 100-day SMA at $4,249 and the 50-day SMA at $4,336. A stronger recovery would face the $4,400 horizontal barrier ahead of the 200-day SMA at $4,525. On the downside, a sustained break below $4,100 could open the door toward the $4,000-$3,950 support zone.

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

• The US Dollar Index jumps 0.69% as headline US inflation accelerates to 3.7% in September.
• Core CPI rises to 2.6%, reinforcing concerns over persistent inflation.
• October Fed hike odds surge to 42%, lifting Treasury yields.

The US Dollar Index (DXY), which tracks the performance of the Greenback against a basket of six major currencies, surges over 0.69% on Wednesday as US inflation data trumps the Federal Reserve (Fed) rhetoric that no rate hikes are needed in 2027. The DXY is up 0.69% at 102.90, its highest level since April 2025.

DXY surges to 102.90 as accelerating inflation drives Treasury yields higher

The US Consumer Price Index (CPI) in September came in at 0.6% MoM, as expected, while rising to 3.7% YoY from 3.4%, above forecasts. Core CPI, which excludes volatile items like energy and food, rose 0.3% MoM, above projections, and rose from 2.4% to 2.6% in the twelve months to September, also higher than expected.

Surging gasoline and diesel prices, along with food prices, underpinned headline inflation. Core CPI increased due to higher costs for shelter, owner-equivalent rent, recreation, and education, as well as a jump in used-car and truck prices.

After the report, money markets increased the chances for a Fed rate hike at the October meeting. A day ago, the odds were close to 22%; at the time of writing, they surged to 42% and for 2027, investors are pricing in 54 basis points of tightening, according to Prime Terminal data.

US inflation data challenges remarks by New York Fed President John Williams on Tuesday, who said he sees another rate hike in 2026 and none in 2027.

US Treasury yields surged, with the 10-year T-note yielding 5.251%, up 3.5 basis points. Meanwhile, the 2-year Treasury yield, the most sensitive to changes in short-term interest rates, rose nearly 7 basis points to 4.865%.

What’s next for the US Dollar?

The economic docket will feature the Fed’s Beige Book, the release of the Producer Price Index (PPI), Retail Sales, Initial Jobless Claims, and further Fed speaking.

US Dollar Index Price Forecast: Technical outlook

In the daily chart, Dollar Index Spot trades at 102.87. The index holds a bullish near-term bias as price stands well above the 50/100/200-day simple moving average cluster near 100.25 and rides an ascending medium-term trend line that is being tested around the current level. A long-term upward trend line offering support around 101.84 sits just below price, while the Relative Strength Index (14) at 71.85 shows overbought conditions, hinting that the advance is stretched but still underpinned by strong momentum.

On the downside, immediate support is aligned with the medium-term rising trend line at 102.87, followed by the long-term ascending trend line around 101.84. A deeper pullback would target the key moving average floor near 100.25, where the 50-, 100- and 200-day simple moving averages cluster to reinforce broader bullish structure.

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

• Swiss Franc falls to its weakest level since May 2025 following the US inflation report.
• US Dollar and Treasury yields climb as traders raise October Fed rate-hike bets.
• The widening policy divergence between the Fed and SNB keeps the Swiss Franc on the defensive.

USD/CHF climbs to its highest level since May 2025 on Wednesday as hotter-than-expected US inflation data strengthen expectations of further Federal Reserve (Fed) interest rate hikes. The US Dollar (USD) rallies alongside a rebound in US Treasury yields, leaving the Swiss Franc (CHF) on the back foot. At the time of writing, the pair trades around 0.8390, up 0.77% on the day.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, rises toward 102.85, its strongest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield stands near 5.27% after briefly climbing above 5.30%, remaining well above its daily low of around 5.18%.

Data released by the US Bureau of Labor Statistics showed annual headline inflation rose to 3.7% in September, above the 3.6% forecast, while core inflation climbed to 2.6%, exceeding expectations of 2.5%. Monthly headline CPI increased 0.6%, in line with forecasts, while core CPI rose 0.3%, above the 0.2% expected.

Higher energy prices remain a major driver of headline inflation. With no sign of a near-term agreement between the US and Iran to reopen the Strait of Hormuz, and fighting between Saudi Arabia and Yemen’s Houthis adding to supply risks, energy-driven price pressure could persist for longer, complicating the Fed’s efforts to bring inflation back to its 2% target.

Traders now price in a 43% chance of a rate hike at the October 27-28 meeting, up from 22% before the CPI release, while the probability of a December hike stands near 95%, according to the CME FedWatch Tool.

The bar for a Swiss National Bank (SNB) rate hike appears relatively high. In its September assessment, the central bank forecast average inflation of 0.7% this year and 0.8% in both 2027 and 2028, remaining within its 0%-2% price stability range over the entire forecast horizon.

Traders now await US Producer Price Index (PPI) and retail sales figures due on Thursday. With few major releases scheduled on the Swiss economic calendar for the rest of this month, US data and shifts in Fed expectations are likely to remain the main drivers of USD/CHF in the near term.

TD Securities economists report that US CPI has surprised to the upside for a second month, with core CPI at 0.3% m/m and broad-based strength in goods and services. Supercore remains elevated, and the translation into core PCE is strong, lifting their estimate to 0.36% m/m. They see underlying market-based inflation as similarly firm, with further input from upcoming PPI.

Core CPI and supercore stay firm

"For a second consecutive report CPI inflation surprised to the upside, with the core accelerating to 0.3% m/m (0.335% unrounded). The gain in the core was broad-based, with both stronger services and goods inflation driving the beat. Headline CPI printed firm as expected at 0.6% (0.649% unrounded) as a 9% m/m spike in gasoline prices drove energy inflation."

"At 0.42% m/m, supercore inflation made no major progress in September. Services strength was concentrated in an unexpected surge in OER at 0.35% — the strongest m/m increase in five months — which lifted the core by 5 bps more than we were anticipating. Firmer hotel rates along with solid transportation & recreation prices also added to services inflation."

"The translation to core PCE was strong, pushing up our estimate to 0.36% m/m (3.1% y/y), from 0.23% before CPI. Our forecast for headline PCE stands at 0.53% (3.7% y/y). There is underlying strength in our forecast, with market-based core just as strong at 0.36%."

"Our supercore forecast also shows an acceleration to 0.41%. Our forecast also hinges on tomorrow's PPI, where healthcare, airfares, insurance, and legal services will be key."

"While our core PCE forecast is about as strong as CPI, it reflects a faster acceleration (from 0.25% in August PCE) than CPI did today."

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

Michael Wan at MUFG notes that a sharp sell-off in South Korean equities has boosted demand for South Korean Won downside protection. The KOSPI fell heavily, led by semiconductor names amid concerns over Chinese competition and AI capex sustainability. KRW risk reversals show investors paying more for protection, consistent with sizeable foreign equity outflows and related Won selling.

Equity weakness weighs on KRW

"In South Korea, the sharp sell-off in equities has driven a marked rise in demand for KRW downside protection, with the KOSPI extending its decline by 5.5% in yesterday’s trading session to the 6,035 level, as losses intensified across the semiconductor sector."

"Samsung Electronics and SK Hynix led the move lower amid renewed concerns over cheaper Chinese competition following reports of progress in memory-chip technology at China’s CXMT, weakness in US semiconductor stocks and broader questions over the sustainability of AI-related capital expenditure."

"The rise in KRW risk reversals shown suggests investors have responded by paying more for protection against won depreciation, consistent with the US$3.3bn of foreign equity outflows from South Korea yesterday, which generated underlying KRW selling as investors converted the proceeds into foreign currency."

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

• AUD/USD drops 0.34% to around 0.6960, reversing earlier gains as the US Dollar strengthens.
• US inflation accelerated to 3.7% in September, boosting expectations of further Fed interest rate hikes.
• Australian employment figures on Thursday could provide fresh direction for the Aussie.

AUD/USD reverses its earlier gains on Wednesday, falling 0.34% on the day to trade around 0.6960 at the time of writing. The pair retreats below the psychological 0.7000 level as stronger-than-expected United States (US) inflation data fuels a broad-based rally in the US Dollar (USD), putting renewed pressure on the Australian Dollar (AUD).

The US Consumer Price Index (CPI), released by the Bureau of Labor Statistics (BLS) on Wednesday, showed annual inflation accelerating to 3.7% in September, up from 3.4% in August and above market expectations. Core CPI, which excludes volatile food and energy prices, also rose to 2.6% YoY, compared with 2.4% previously.

On a monthly basis, headline and core inflation increased by 0.6% and 0.3%, respectively, highlighting persistent price pressures in the US economy. These figures reinforce expectations that the Federal Reserve (Fed) may need to maintain a restrictive monetary policy stance or raise interest rates further to bring inflation under control.

Following the release, markets increased the chance of a 25-basis-point (bps) Fed rate hike in October to 47%, compared with 22% the previous day. Investors also assign a 41% chance to another 25-bps increase in December, up from 18% a day earlier.

The repricing of Fed interest rate expectations drives US Treasury yields sharply higher, providing additional support to the Greenback. The benchmark 10-year US Treasury yield climbed near 5.33%, up from around 5.20% before the inflation report, making US Dollar-denominated assets more attractive to investors.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, advances 0.46% to around 102.70, reaching its highest level since April 2025. This broad-based Dollar strength weighs on AUD/USD, reversing the pair's earlier gains.

On the Australian side, investors turn their attention to Thursday's September employment report, which could influence expectations for the Reserve Bank of Australia's (RBA) monetary policy outlook.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.6964, keeping a bearish near-term tone as price holds beneath both the 100-period simple moving average (SMA) at 0.6974 and the 200-period SMA at 0.6968. The latest Relative Strength Index (14) reading at 33 suggests downside momentum is in play but edging toward oversold territory, hinting that while sellers remain in control, the pace of the decline could start to moderate rather than accelerate aggressively.

On the topside, initial resistance is offered by the 200-period SMA at 0.6968, followed by the 100-period SMA at 0.6974, with a stronger barrier at 0.6995 and then 0.7005. Further up, 0.7045, 0.7075, 0.7105 and 0.7140 form a wide cap that would need to be reclaimed to ease the broader bearish pressure. On the downside, immediate support appears at 0.6932, ahead of 0.6904 and 0.6883, where a break would open the way to a deeper slide, while a bounce from this cluster would merely signal consolidation within the prevailing downtrend.

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

• USD/CAD rises 0.50% as the US Dollar climbs following hotter-than-expected US inflation data.
• Rising US Treasury yields and Fed interest rate-hike expectations support the Greenback.
• Diverging Fed-BoC policy outlooks remain a key headwind for the Loonie.

USD/CAD climbs on Wednesday, reversing the previous day’s losses as the US Dollar (USD) rallies to a fresh year-to-date high following higher-than-expected US inflation data. At the time of writing, USD/CAD trades around 1.4287, up 0.50% on the day near 18-month highs.

The September Consumer Price Index (CPI) rose 0.6% monthly, matching expectations and picking up from August’s 0.4% increase. Annual headline inflation climbed to 3.7% from 3.4%, exceeding the 3.6% forecast.

Core CPI, which excludes food and energy, increased 0.3% monthly, above the 0.2% expected and unchanged from August. The annual core rate rose to 2.6% from 2.4%, also beating the 2.5% forecast.

The report gives the Federal Reserve (Fed) less reassurance that inflation is moving toward its 2% target, particularly as elevated Oil prices linked to Middle East tensions keep inflation risks tilted to the upside.

Traders now assign around a 50% chance of a rate hike at the Fed’s October 27-28 meeting, up from 22% before the release, while the probability of a December increase rises to 95%, according to the CME FedWatch Tool. Traders next look to US Producer Price Index (PPI) and retail sales figures due on Thursday.

Expectations of further Fed tightening after September’s 25-basis-point rate hike underpin broad demand for the US Dollar and keep US Treasury yields near multi-year highs. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, climbs toward 102.80, its strongest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield rises toward 5.30%, after falling below 5.20% earlier this week.

Recent Fed comments show policymakers remain concerned about inflation. Boston Fed President Susan Collins said on Tuesday she expects “inflation to stay above 2% due to high energy prices.” Collins added that the “future path of monetary policy in new year will depend on data.”

Fed rate-hike expectations remain a key headwind for the Canadian Dollar. The Bank of Canada (BoC) has kept interest rates unchanged at 2.25% so far this year, leaving US rates 150-175 basis points (bps) above the Canadian policy rate. Further Fed tightening could widen that gap, while underlying inflation is near its 2% target and a weakening labour market gives the BoC little reason to raise rates soon.

Geoff Yu at BNY Mellon expects the ECB to skip an October rate hike and possibly be done for the year, citing clear guidance on second‑round effects, emerging sovereign risks and French budget uncertainty. He argues that any balance‑sheet response, such as ending quantitative tightening or using the Transmission Protection Instrument, would effectively mark the end of rate‑based tightening as policy tools must not work at cross‑purposes.

Tightening cycle seen near its end

"The ECB will skip October and could be done for the year. The ECB remains vigilant, but its language on second-round effects points to a skip in October."

"Given the emergence of sovereign risk and uncertainty surrounding the French budget, we see a December hold as probable unless natural gas prices move closer to the “severe” inflation scenario in the ECB’s staff projections."

"With sovereign and corporate spreads in focus, the ECB has already faced questions over activating the “Transmission Protection Instrument,” created in 2022 to counter disorderly widening in Eurozone sovereign spreads."

"We don’t see this as necessary for now; an end to quantitative tightening (QT) is the more likely step if OAT-Bund spreads begin widening again."

"But if the ECB’s balance sheet is deployed, even in the name of “transmission protection,” an end to rate-based tightening won’t be far behind, lest balance sheet support and rate hikes work against each other."

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

UOB’s Ho Woei Chen highlights that strong external demand, particularly in technology and AI-related products, is underpinning China’s growth in 2026. Export and import growth have remained robust, widening the trade surplus. Despite softer domestic conditions, recent fiscal and monetary measures are expected to stabilise activity, with overall 2026 GDP growth likely at the lower end of the official 4.5-5.0% target range.

External demand offsets domestic softness

"China’s external trade remained robust in Sep. Global AI-related capex growth and higher prices continue to support strong two-way trade in technology products. Export growth accelerated to 36.3% y/y (Bloomberg est.: 25.7%; Aug: 25.0%) and imports rose 31.0% y/y (Bloomberg est.: 25.0%; Aug: 28.2%)."

"China's external trade remained a key growth driver, with exports and imports rising 21.3% and 27.5% in 9M26, respectively. The cumulative trade surplus widened to US$938.11 bn, up from US$870.37 bn during the same period last year. Given the robust trade data to-date and technology-related demand, we raise our 2026 forecasts for export growth to 23% (from 17.0%) and import growth to 26% (from 22.0%)."

"Trade with the US has improved since the voiding of US tariffs imposed under President Trump’s International Emergency Economic Powers Act (IEEPA) as well as the stabilisation of US-China trade relations since the May summit between President Trump and President Xi. The latest meeting in Sep renewed commitments from both countries to preserving stable bilateral relations. Both exports and imports with the US remained at double-digit growth pace in Sep."

"While the AI-driven export boom has sustained external sector momentum through Sep, softer domestic conditions continued to weigh on China’s growth outlook. The recent step up in fiscal and monetary measures are expected to stabilise economic conditions with 2026 growth likely at the lower end of the 4.5-5.0% official target range."

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