Forex News

• The Australian Dollar rises for the fourth consecutive day, reaching its highest level since late September.
• Hawkish comments from Australian central bank officials reinforce expectations of another interest rate hike.
• Geopolitical tensions and expectations of tighter monetary policy in the United States support the US Dollar but fail to halt the pair's advance.

AUD/USD extends its gains on Wednesday, rising 0.42% on the day to trade around 0.7025 at the time of writing. The pair records its fourth consecutive day of gains, reaching a fresh one-month high after rebounding from its lowest level since July, below 0.6900, last week. The Australian Dollar (AUD) benefits mainly from hawkish comments by several Reserve Bank of Australia (RBA) officials, which reinforce expectations of further monetary tightening.

RBA Assistant Governor Christopher Kent said on Monday that several factors suggest neutral interest rates are rising, both in Australia and globally. These comments fuel speculation that Australian monetary policy could remain restrictive for longer than previously expected.

On Wednesday, RBA Deputy Governor Andrew Hauser also warned that underlying inflation, measured by the trimmed mean, could exceed expectations in the third quarter. This prospect strengthens expectations of a potential interest rate hike at the next monetary policy meeting, scheduled for November 3.

The Australian Dollar also benefits from encouraging economic data from China, Australia's largest trading partner. China's third-quarter Gross Domestic Product (GDP) exceeds market expectations, easing concerns about growth in the world's second-largest economy and supporting the outlook for demand for Australian exports.

On the US side, the US Dollar (USD) benefits from several supportive factors but struggles to limit AUD/USD's advance. Hopes for a resumption of peace talks between the United States and Iran weigh on safe-haven demand, while persistent uncertainty in the Middle East continues to keep investors cautious.

Investors now await the release of preliminary global Purchasing Managers Index (PMI) data on Friday, ahead of next week's Federal Open Market Committee (FOMC) monetary policy meeting.

RBA hawkish shift lifts rate hike odds as Aussie Dollar support meets AI trade wobble

Analysts at MUFG note that the Australian rates market “has moved overnight to price in a higher probability of another RBA rate hike before the end of this year” following hawkish remarks from RBA Deputy Governor Andrew Hausner. Hausner warned that the inflation outlook now looks “materially worse” than the RBA’s August forecasts, highlighting that “we’re seeing higher AI prices, tech prices feeding through into CPI…and we’re having a boom in data centre construction here in Australia as well, so that’s upside too, and then on domestic capacity pressure.”

He also expressed concern that “inflation has been high for a very long time now, and we are beginning to see some signs that people in the community are not sure if we’re going to bring inflation back to target, or certainly not for an extended period.” According to MUFG, these hawkish comments have prompted market participants to “price in closer to a 50:50 probability of another RBA hike next month.”

MUFG adds that higher yields in Australia have “encouraged a stronger Australian Dollar this year,” even though it “has underperformed recently alongside the wobble for AI-related trades.”

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.7028. The pair holds above the 100-period simple moving average (SMA) at 0.6975 and the 200-period SMA at 0.6973, keeping the near-term bias constructive while it respects the rising trend-line support around 0.7018. The Relative Strength Index (14) near 60 suggests steady bullish momentum rather than overbought excess as price consolidates just under the immediate ceiling.

On the topside, initial resistance is aligned with the horizontal barrier at 0.7040, and a sustained break above this level would open the way for further intraday gains. On the downside, nearby support is clustered at the trend-line and horizontal levels at 0.7018 and 0.7014, ahead of secondary protection at 0.6994; below that, the 100-period and 200-period SMAs at 0.6975 and 0.6973 provide a deeper structural floor for the bullish setup.

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

• GBP/USD struggles below 1.3400 as geopolitical risks support the Dollar.
• UK inflation accelerates to 3.5%, driven by higher energy prices.
• November BoE hike odds reach 95% ahead of crucial Autumn Budget.

The Pound Sterling struggles to extend its gains against the US Dollar on Wednesday, even as inflation in the United Kingdom cemented the case for a Bank of England rate hike at the next meeting, while the Greenback recovers amid heightened geopolitical tensions. The GBP/USD hovers below 1.3400.

Sterling struggles as geopolitical tensions revive Dollar demand despite rising UK inflation

US economic data remains scarce on Wednesday, but market participants are getting some clues about US equities, which trade in the green, boosted by a surge in technology stocks sparked by AI hype. US Treasury yields hold firm, with the US 10-year T-note yield at 5.10%.

Geopolitics are also boosting the Greenback. Even though the news suggested a possible resolution on Tuesday, reports revealed that the Pakistani Army Chief met with Iranian officials in Tehran, where he presented a “compromise proposal,” while N12 news reported that he delivered the US a “final warning.” This means that if Iran does not agree to a peace deal, attacks would resume.

In the UK, the Consumer Price Index (CPI) rose from 3.1% to 3.5% YoY in September, according to the Office for National Statistics (ONS), primarily due to a surge in energy prices sparked by the Middle East conflict.

The data comes after the latest jobs report in the UK revealed a modest rise in wages, alongside other signs of labour market resilience.

Given the backdrop, traders had priced in a 95% chance of a quarter-percentage-point rate hike by the Bank of England in the November 5 meeting.

Attention now turns to British Finance Minister John Healey's first budget, due next week. Earlier this month, Healey said his budget would bolster Britain's resilience to the Iran war’s energy-price shock and give the country "a bit of breathing space."

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3387, holding a bearish near-term bias as it remains capped beneath the latest triple simple moving average at 1.3409 and the downward resistance trend line break at 1.3405. The pair trades under a broader cluster of structural barriers defined by the upward support trend line breaks at 1.3620 and 1.3805, while the Relative Strength Index (14) around 57 suggests recovering but still moderate bullish momentum that has yet to overcome the overhead supply.

On the topside, initial resistance is seen at the downward resistance trend line break near 1.3405, followed closely by the triple simple moving average at 1.3409; a daily close above this band would open the way toward the next resistance zone at the upward trend line break around 1.3620, ahead of 1.3805. On the downside, the former downward resistance trend line break at 1.3271 now acts as immediate support, and a move back below this level would reinforce the broader bearish tone and expose lower levels in the coming sessions.

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

James Smith at ING highlights that UK inflation pressures remain concentrated in energy, with food and services inflation surprisingly subdued. Headline inflation printed 3.5% in September and is expected to peak near 4% in winter, but measures of energy-intensive and core services inflation show little sign of broadening second-round effects from the Iran War-related energy shock.

Energy-driven but limited pass-through

"Seven months on from the start of the Iran War, and there’s still no sign that the UK’s inflation shock is broadening out beyond energy. Second-round effects are so far non-existent."

"Headline inflation was admittedly a tad above consensus at 3.5% in September, though in line with our forecast. What’s particularly eye-catching, though, is the month-on-month fall in food prices. This caps a remarkably benign period for food inflation. No doubt it will pick up into the winter, not least given the recent rise in natural gas prices. But all the models tell us we should be seeing some effect of the energy shock in food – and so far we aren’t."

"Partly as a result, our calculation of ‘energy intensive’ inflation has actually fallen this year and shows little-to-no sign of picking up. This remains the case even after stripping out last year's increases in water bills and car taxes, which would otherwise distort the picture. This gauge tracks inflation categories that are classed as having either ‘very high’ or ‘high’ energy intensity by the Office for National Statistics – and range from food to cafés."

"Services inflation also looks fairly well-behaved. The jump in the headline services CPI to 3.7% (from 3.4%) was exaggerated by airfares, which are notoriously volatile. Remove these jumpy categories, as well as those that are indexed, and the Bank of England’s preferred measure of ‘core services’ inflation is still relatively contained – albeit up slightly over the past few months. This echoes the calm picture of private-sector wage growth, which sits at 3.4% after accounting for compositional effects."

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

Geoff Yu highlights that Polish bonds are under-owned compared with Hungarian paper, with holdings having halved as Eurozone steepening and fiscal risks weighed on performance. He argues that potential fiscal reform and eventual Eurozone ambitions could be rewarded by lower borrowing costs, while real rates, NBP hawkishness and peaking inflation support an asymmetrical upside profile for Polish fixed income.

Under-owned Polish bonds offer upside

"This contrasts strongly with Poland, where bond holdings have halved, while Eurozone holdings have fallen to their lowest levels this year as broader yield-curve steepening and fiscal risks weigh on performance."

"Meanwhile, headline inflation in Poland is the highest in CEE y/y, but core inflation is surprisingly flat despite the high level of current household subsidies. Weak core inflation is contributing to a very conservative tightening path for the National Bank of Poland (NBP), but high headline inflation increases the risk of expectations becoming unanchored."

"Fiscal change in Poland offers favorable risk-reward. If Hungarian bonds continue to outperform, we see a case for the remaining non-Eurozone CEE economies to revisit their fiscal frameworks."

"Politically, this is difficult in Poland, but if Hungary’s experience makes an overwhelmingly positive financial case, a shift in the domestic narrative, coupled with low external holdings, could generate strong performance."

"We expect real rates, NBP hawkishness and peaking inflation to drive performance, with asymmetrical upside based on flows and holdings."

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

Danske Bank’s Danske Research Team outlines US political tail risks ahead of the 3 November midterm elections. Early voting is underway in over 40 states and prediction markets still favor Democrats retaining control of both chambers. The report focuses on Trump’s potential actions, including attempts to remove Fed Governor Cook, fiscal decisions, and use of emergency powers.

Trump actions and market risk scenarios

"With two weeks until the US midterm elections on 3 November, early voting has already opened in more than 40 states. Prediction markets are broadly unchanged since we published our Midterm update, 13 October. The prediction market Polymarket continues to see Democrats winning control of both chambers as the most likely outcome, with a 62.5% probability."

"Trump appears pressured to remove Cook before the new Senate takes office in early January, as a Democratic majority could block his Fed Board nominations even if he removed Cook later. We do not expect him to succeed before the new Congress takes office."

"Trump could try to interfere directly with voting on Election Day. Kalshi assigns a 13% probability to Trump declaring a national emergency before Election Day and a 29% probability before the end of 2026. However, such a declaration should not give the president power over elections, as these are managed at state level."

"An even more severe measure would be for Trump to invoke the Insurrection Act or declare martial law. The former could be used to deploy the military at polling stations, which Kalshi assigns a 17% probability before the end of 2026. Martial law would mean military authority replacing civilian government and would be even more extreme."

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

Nomura’s UK budget preview expects Chancellor Healey, at his first budget on 28 October, to allow fiscal headroom to fall to around £15bn. Following September public finance data, the cash deficit is no longer surprising to the upside. Nomura projects a £4bn overshoot in the 2026-27 financing requirement, funded equally by additional gilt and T-bill issuance.

Headwinds constrain fiscal flexibility

"At his first budget (12.30pm Wednesday 28 October) Chancellor Healey is likely to allow a fall in fiscal headroom to around £15bn. Following today’s September public finance data the cash deficit is no longer surprising to the upside. Still, we think a combination of a lower run-rate of NS&I inflows and the need for cost-of-living support over the winter will mean a £4bn overshoot of the financing requirement for 2026-27."

"We assume this will be met equally between more gilt (£2bn) and T-bill (£2bn) issuance relative to existing plans (which were for £246.2bn and £5bn, respectively)."

"The Chancellor has limited his wiggle room to fill the fiscal gap, having ruled out various tax rises (no income tax, VAT or national insurance tax rate rises as outlined in the 2024 Labour manifesto, with capital gains tax now added to that list). Behavioural effects may result from raising tax rates more on a lower tax base (vs. raising tax rates less on a wider base) to bring in the same revenue."

"Elsewhere, the focal point could be any decision by the Treasury to use the potential firepower of the public financial institutions to boost investment, though that will require private sector take-up, as well as government willingness to expand its programmes."

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

• Silver declines on Wednesday as rising Treasury yields and a stronger US Dollar weigh on precious metals.
• Higher Oil prices fuel inflation concerns and reinforce expectations of further monetary tightening by the Federal Reserve.
• Persistent tensions between the United States and Iran provide some safe-haven support, limiting the downside for Silver.

Silver (XAG/USD) declines on Wednesday, trading around $57.50, down 0.89% at the time of writing. The precious metal remains under pressure as rising United States (US) Treasury yields and a modest recovery in the US Dollar (USD) reduce the appeal of non-yielding assets. Meanwhile, higher Oil prices reinforce inflation concerns and expectations of further monetary tightening by the Federal Reserve (Fed).

The US Dollar is recovering from a nearly three-week low reached on Tuesday, supported by higher Treasury yields and growing expectations that the Fed will maintain a restrictive monetary policy stance. Higher borrowing costs tend to weigh on Silver, as the metal does not generate yields, making interest-bearing assets relatively more attractive to investors.

Oil prices are also contributing to the bearish environment for precious metals. Brent Crude rises by approximately 1.6% on Wednesday as uncertainty surrounding negotiations between Washington and Tehran raises concerns about prolonged disruptions to global energy supplies.

Diplomatic efforts to resolve the conflict remain unsuccessful despite renewed mediation attempts. Pakistan's Army Chief Asim Munir arrived in Tehran on Tuesday to facilitate discussions between the United States and Iran. However, negotiations reportedly encountered significant obstacles after Tehran refused to transfer its enriched nuclear material abroad.

US Secretary of State Marco Rubio acknowledged earlier this week that reaching a peace agreement with Iran remains extremely difficult, while reiterating Washington's intention to maintain economic pressure on Tehran. Iranian Foreign Minister Abbas Araghchi also indicated that the Strait of Hormuz would remain closed until the United States accepts Iran's conditions.

The continued disruption of this strategic shipping route raises concerns about global Oil supplies, supporting energy prices and increasing the risk of persistent inflation. These developments reinforce expectations that the Fed could raise interest rates again in December, creating additional headwinds for Silver.

According to the CME FedWatch tool, financial markets currently assign a near 90% chance to another interest rate increase in December. These expectations follow stronger-than-anticipated US inflation figures released last week, which have reinforced concerns about the persistence of price pressures.

Nevertheless, geopolitical uncertainty in the Middle East could limit Silver's losses by maintaining demand for safe-haven assets. The metal therefore faces conflicting influences, with geopolitical risks offering some support while higher yields and tighter monetary policy expectations weigh on prices.

Looking ahead, investors will focus on the Fed's monetary policy meeting scheduled for October 28, followed by the release of the US Personal Consumption Expenditures (PCE) Price Index on October 29. As the Fed's preferred inflation gauge, the report could provide further indications about the trajectory of US interest rates and influence the direction of Silver prices.

Geoff Yu at BNY Mellon argues that Hungary has become a positive fiscal outlier in CEE, front‑loading consolidation to pursue Eurozone entry by 2030. Ambitious deficit cuts, political willingness to spend capital on tough reforms, and alignment of monetary policy with euro-entry goals underpin a clear total return opportunity for Hungarian bonds, though the adjustment is described as austerity in all but name.

Budapest leads regional consolidation push

"Hungary has taken these risks to heart: its recent budget announcement, if implemented, would make the country a clear positive outlier in deficit reduction, with an explicit goal of euro entry. Markets have already rewarded Hungarian duration this year. If Budapest executes well, the rest of CEE may revisit their own frameworks, contributing to a comprehensive re-rating of regional duration."

"The new Hungarian government’s mandate stands apart, and the budget indicates that it is, in the Hungarian central bank’s own words, “front-loading” fiscal adjustment and spending political capital on arguably the toughest reforms."

"The total return opportunity for Hungarian assets is clear if the country enters ERM II by the government’s 2030 deadline. Other major reforms are needed, such as banking union entry and supervisory reforms, but we don’t see these steps as controversial or challenging."

"The plans Hungary announced this week are extremely ambitious but will impose a very high cost. The government is targeting a reduction in the budget deficit to 4.9% next year, a drop of around 2.5pp of GDP based on current estimates. This is austerity in all but name, something Hungary hasn’t tried in over a decade and certainly not voluntarily."

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

ING’s James Smith expects the Bank of England (BoE) to raise interest rates in November and February as a precaution against second-round inflation effects, even as evidence of broader spillovers from higher energy prices remains limited. With United Kingdom (UK) inflation forecast to briefly reach 4% this winter, Smith believes policymakers could become more confident by spring that inflation risks are contained, paving the way for rate cuts from November 2027 and into 2028.

BoE hikes then gradual policy reversal

"For the Bank of England, this poses a dilemma. While economic growth has been more resilient than feared, and the jobs market is stabilising, there’s very little evidence so far that the energy shock is spilling into other parts of the inflation basket. Nor is there much evidence that it will do so over the next few months."

"So when the Bank likely hikes rates in early November, it will be entirely for risk management reasons. The truth is it’s still early days and officials will want another few months of data before concluding that the storm has passed. In the meantime, headline inflation is likely to briefly peak at 4% this winter – something officials have historically argued tends to raise the risks of second-round effects."

"We’re less convinced. We expect hikes in both November and February, but by the spring, we think the Bank will be more confident in calling the ‘all clear’ on second-round effects."

"If we’re right, then we think the Bank can start cutting rates again by next November and into 2028."

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

Deutsche Bank anticipates around 25–30 policy measures in the Autumn Budget, with modest consolidation and backloaded tax increases. A higher bank surcharge, online marketplace VAT collection and dividend tax hikes are expected to lift receipts by about GBP 4bn by 2031/32. Temporary cost of living and business support will front-load spending, keeping net expenditure only slightly higher than Spring projections.

Tax, spending and consolidation path

"In short, we expect a modest amount of fiscal consolidation measures, amounting to GBP 6bn in 2029/30 (and reaching GBP 7.5bn by 2031/32) to offset slightly higher spending (GBP ~3bn in 2031/32). Big decisions on spending envelopes will likely be delayed, alongside higher defence spending and the Government’s key economic initiatives (such as the National Social Care service)."

"We expect near 20 policy measures on receipts to be announced at the Autumn Budget. In total, we expect temporary discounts on taxes to pull receipts lower (particularly in 2026/27 and 2027/28), before adding to the Chancellor’s coffers from 2028/29. By the end of the OBR’s forecast horizon, we expect tax receipts to raise an additional GBP 4.3bn."

"On the flip side, we see some giveaways – particularly as it relates to the cost of living and cost of doing business. Here, we think discounts on business rates for hospitality and other exposed sectors are a given – alongside an increase in threshold for small business rates relief (from GBP 12k to 18k). We also expect the Chancellor to cancel the Climate Change Levy indexation. And as already reported, we expect the Chancellor to exempt low-income pensioners out of income tax."

"In terms of total managed expenditure, we expect net spending to increase only in the first two fiscal years (by just around GBP 1bn) before turning broadly neutral through the back of the forecast horizon. This would see total managed expenditure pick up to just around GBP 1,700bn by 2031/32 – around GBP 30bn higher than projected in the Spring Statement."

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