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Rabobank strategists Bas van Geffen and Elwin de Groot highlight that sharply higher Oil and natural gas forecasts will lift headline Eurozone inflation by about 0.5 percentage points in 2026 and 2027. They now see inflation peaking around 4.4% year-on-year in early 2027, with core inflation only modestly higher, and expect sluggish disinflation to keep the ECB deposit rate near 2.50% until at least 2028.

Higher energy lifts headline inflation

"These revisions have a significant impact on our inflation forecasts. Based on these higher prices for oil products and natural gas, our inflation models predict 0.5 percentage point stronger headline inflation across this year and next."

"We now expect inflation to peak at 4.4% y/y in January and February, after which base effects should gradually lessen the impact of energy prices on the inflation rate. This takes our inflation forecasts to 3.1% for 2026 and 3.5% for 2027."

"Whereas we revised our headline inflation forecast significantly, we only see 0.1pp higher core inflation. This is mostly due to the direct and indirect effects of higher energy prices, as well as the assumption that the war in the Middle East will lead to somewhat higher supply chain pressures in coming months."

"If economic activity stays resilient through the fourth quarter and energy inflation remains high, employees could demand higher pay increases to compensate for the loss of purchasing power. With inflation likely to peak around 4.5% early next year, that risk is non-negligible."

"Having said that, we do believe that core inflation will be sluggish on the way down. We therefore think that the ECB will leave the deposit facility rate at the upper end of the neutral range for some time, and rate cuts below 2.50% will probably not happen before 2028."

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

Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is posting a small gain versus the US Dollar (USD) as EUR/USD extends Thursday’s modest recovery and attempts to stabilize after the latest FOMC meeting. Relative policy expectations between the European Central Bank (ECB) and Fed are seen as stabilizing, with ECB policymakers remaining hawkish amid energy-linked inflation concerns and growth, while German PPI surprised to the upside.

Euro attempts post-FOMC base

"The EUR is entering Friday’s NA session with a fractional gain vs. the USD as it builds on Thursday’s modest recovery and attempts stabilization in the aftermath of this week’s FOMC."

"The outlook for relative central bank policy looks to be stabilizing as market participants assess the near-term risk of tightening from the ECB, as policymakers remain overwhelmingly hawkish tying their views to both energy-related inflation concerns as well as growth. Fundamental releases have been limited to stronger than expected German PPI."

"The EUR’s momentum indicators remain bearish but look to be stabilizing just above oversold levels suggesting limited additional weakness from current levels."

"EUR/USD short-term technicals: Bearish/neutral—the latest stabilization in spot is encouraging as we note short-term support at 1.1450 and see limited resistance ahead of the mid-1.15s."

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

• Silver advances on Friday, but elevated Treasury yields and hawkish Fed expectations could limit gains.
• XAG/USD trades above the 50-day and 100-day SMAs, keeping the near-term bias constructive.
• Momentum indicators show a mild bullish bias, with RSI holding above the neutral level.

Silver (XAG/USD) trades on the front foot on Friday as the US Dollar reverses its intraday gains, with traders booking profits following the Greenback’s strong weekly advance. At the time of writing, XAG/USD trades around $66.76, its highest level since September 10, and is on track to end the week more than 3% higher.

However, the metal could struggle to extend its gains as US Treasury yields stay elevated and the Federal Reserve (Fed) signals that additional tightening may be needed after raising rates by 25 basis points on Wednesday to help bring inflation back to its 2% target.

Technical Analysis

On the daily chart, XAG/USD preserves a constructive near-term tone as price holds above the 50-day Simple Moving Average (SMA) and the 100-day SMA. This positioning suggests the metal is supported by the medium-term trend even as the 200-day SMA at $73.18 remains a distant topside barrier.

The Relative Strength Index (RSI) at 55 leans mildly bullish without overbought signals, while the Moving Average Convergence Divergence (MACD) indicator stays slightly negative, hinting that upside momentum is improving but not yet decisive amid a low Average Directional Index (ADX) reading of 12 that points to a weak trend environment.

On the downside, immediate support is aligned with the 100-day SMA at $66, followed by the 50-day SMA near $63 and the 23.6% Fibonacci retracement at $63.09, which together define a broader demand area before the structural low around $55.

On the topside, initial resistance emerges at the 38.2% Fibonacci retracement at $68.11, ahead of the 50.0% retracement at $72.17 and the 200-day SMA at $73.18. A sustained break above this cluster would open the way toward the higher Fibonacci levels at $76.23 and $82.01, where the next significant supply zones are found.

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

• Gold rebounds despite Fed hike as Oil weakness caps the US Dollar.
• Ten-year yield nears 5%, keeping bullion upside partly restrained.
• October hike odds and Fed speakers shape next Gold move.

Gold (XAU/USD) price extends its gains on Friday, edging up 0.89% as Oil prices eased despite renewed concerns of supply shortages and despite a week that featured a rate hike by the Federal Reserve (Fed), which pushed the yellow metal to a nearly two-month low of $4,235. XAU/USD trades at $4,379 at the time of writing.

XAU/USD rebounds as softer crude offsets lingering pressure from near-5% yield

The yellow metal remains bid as risk appetite soured amid growing concerns that the Middle East conflict, which involves the US and Iran exchanging attacks in the Persian Gulf, while the Houthis and Saudi Arabia fight in the Red Sea.

Last week, the Houthis, an Iran-backed Yemeni group, attacked the Arabian East-West Oil pipeline, forcing its shutdown. This would delay Oil shipments to buyers in Europe, according to a Bloomberg article, which noted that Saudi Aramco has not confirmed the information.

Despite this, West Texas Intermediate (WTI) continues to trade subdued, capping the Greenback’s advance. The US Dollar Index (DXY), which measures the performance of the buck against six peers, is almost flat at 100.29.

The US 10-year Treasury yield is up nearly six basis points to 4.996%, boosted mostly by the Federal Reserve's 0.25% rate hike on Wednesday, following a unanimous decision.

Worth noting, the dot plot in the Fed’s projection materials showed that most officials expect at least one more rate hike. Fed Chair Kevin Warsh recognized that the economy remains strong, which justified the first rate increase in three years, with the Fed emphasizing the need to achieve the 2% inflation goal.

US data showed that Industrial Production remained flat from July to August at 0% MoM, falling short of July’s 0.2% and the expected 0.3% growth.

Money markets priced in a 55% chance that the Fed would increase rates again at the October meeting, according to Prime Terminal.

Recently, Kansas City Fed President Jeffrey Schmid said he supported the rate hike, noting that inflation continues to trend above 3% and that, excluding inflation, the economy is performing well.

The central bank bonanza ended with the Bank of England holding rates unchanged, while the Bank of Japan opted for a 25-basis-point rate increase to 1.25%.

Next week, the US economic docket will feature speeches by Federal Reserve officials, jobs data, S&P Flash PMIs data and Durable Goods Orders.

XAU/USD technical analysis: Gold struggles at $4,400; retreats despite remaining positive

Price action shows Gold facing stiff resistance at $4,400, with the yellow metal retreating after reaching a high of the day of $4,399. The Relative Strength Index (RSI) shows momentum favouring buyers, with the index turning bullish.

If XAU/USD clears $4,400, this opens the path to challenge key resistance levels like the $4,450 and $4,500 psychological milestones.

On the flip side, for a bearish resumption, Gold must drop below the 100-day Simple Moving Average (SMA) at $4,320, then the 50-day SMA at $4,288, and finally the September 16 low at $4,235.

• USD/CHF turns lower as traders take profits following a strong weekly advance.
• The pair stays on track for a fourth straight weekly gain as the Swiss Franc underperforms.
• Fed-SNB policy divergence and carry-trade demand could keep the Franc under pressure.

USD/CHF turns lower on Friday as the US Dollar (USD) loses momentum heading into the weekend, with traders booking profits after a strong weekly advance driven by the Federal Reserve’s (Fed) hawkish interest-rate hike. At the time of writing, the pair trades around 0.8220 after briefly climbing above 0.8250 earlier this week, its highest level since May 2025.

The US Dollar Index climbed to a fresh seven-week high earlier on Friday as US Treasury yields rebounded after a brief pullback from recent multi-year highs. The index now trades around 100.26, retreating from an intraday high of 100.56. Meanwhile, the benchmark 10-year Treasury yield trades close to 5.00%, not far from the 2007 high of 5.04% touched earlier this week.

Treasury yields are finding support from firm Oil prices as the war in the Middle East keeps energy supply risks elevated. The Fed raised interest rates by 25 basis points to the 3.75%-4.00% range on Wednesday, delivering its first increase since 2023. The updated dot plot showed that 16 of 18 officials expect at least one more rate hike this year. As a result, the US Dollar’s downside could remain limited.

Kansas City President Jeffrey Schmid said on Friday that he supported this week’s rate hike as recent data suggest inflation is trending above 3%. Schmid stressed that the current inflation problem is “not just about energy,” adding that price growth has been “hot” across a broad range of goods and services. He also described the labour market as balanced and economic growth as solid.

Despite the intraday decline, USD/CHF is on track for a fourth straight weekly gain, driven largely by Swiss Franc weakness rather than broad US Dollar strength. Prospects of additional Fed rate hikes could widen the interest-rate gap with Switzerland, where the Swiss National Bank keeps its policy rate at zero. This gap makes US Dollar-denominated assets more attractive and could leave the Swiss Franc vulnerable to additional losses. Traders now turn their attention to the SNB’s monetary policy decision next week.

At the same time, the Swiss Franc is becoming more popular as a funding currency for carry trades. The Bank of Japan’s (BoJ) policy normalisation and rising Japanese interest rates make the Yen less attractive for funding such trades, pushing investors to sell the Franc to buy higher-yielding currencies.

• DXY tops 100.50, its best level since late July, as Japan raises rates.
• The Bank of Japan raised its rate to 1.25%, the highest since 1995.
• Futures put another Fed increase on October 28 at 57.6%.

The Bank of Japan (BoJ) raised its rate to 1.25% on Friday and the Yen weakened anyway. The Dollar Index ran to its highest level since late July on that and has given the move back, trading just above 100.30. The Euro is 57.6% of this index and the Yen is 13.6%, so seven tenths of what the Dollar is measured against belongs to a central bank that raised rates in September.

Three central banks, a quarter point each, and the same two gaps

The European Central Bank (ECB) raised its deposit rate to 2.50% on September 10. The Federal Reserve raised its rate to 3.75-4.00% on September 16. The BoJ raised its own to 1.25% on September 18. All three moved by a quarter point, so the two gaps that set most of this index are as wide as they were nine days ago. Japan's rate is the highest it has been since 1995 and exactly a third of the bottom of the Fed's range.

An increase that made the next one less certain

The Japanese vote was 7-2, with board members Asada and Sato, both appointed this year, against. Speculators had flipped to betting on a stronger Yen before the meeting on the view that the BoJ would keep going, so two dissents were enough to turn the currency the other way.

BoJ Governor Ueda said the bank will keep raising rates as the economy and prices allow, and that underlying inflation risks running above the 2% target. The dissenters had the more recent number behind them, because Japanese core inflation eased to 1.7% in August from 1.8% in July, its first slowdown in four months. The Yen had reached a seven-month high against the Dollar earlier in September on the view that more increases were coming, and traders who wanted a date for the next one got a direction instead.

What the Dollar is actually being paid

Cash in Dollars earns 3.75-4.00%, cash in Euros earns 2.50% and cash in Yen earns 1.25%, and none of those differences changed this month. Further out, the 10-year American government bond pays about 5.00% and the Japanese one about 2.95%.

What changed is the path. Futures put another Fed increase on October 28 at better than even odds, take the rate to 4.50-4.75% by the middle of 2027, and then price nothing at all for the eighteen months after that. The market has the Dollar's advantage growing no further after June 2027, and it is paying up for that advantage in September 2026.

Europe is the bigger half of that trade and the quieter one. The ECB has raised twice this year, in June and September, and economists do not expect the next move before December, which leaves the Euro's 57.6% of the index sitting on a rate that is not going anywhere for three months. The Yen's 13.6% is where the argument is, because the BoJ has now moved twice in three months after moving once every six.

The Pound is 11.9% of the index and the Bank of England (BoE) left its rate at 3.75% on Thursday, where it has been since December. That is the one gap of the three that got wider in September, and it got wider because the Fed moved rather than because the BoE did. Between them the Euro, the Yen and the Pound are more than eight tenths of this index, so the case rests on what the Fed does next.

Ten Fed speeches loom ahead

The American calendar is mostly talk. Ten Fed speeches are scheduled between Monday and Friday, three of them from New York Fed President Williams, with Chicago Fed President Goolsbee going first on Monday at 10:30 GMT. Fed Chair Warsh has spent his time in the job refusing to give forward guidance, and his committee is about to give ten speeches worth of it.

The data is thinner. An ADP four-week average of employment change lands Tuesday at 12:15 GMT against 16.25K, and the flash purchasing surveys at 13:45 GMT on Wednesday are the only real read on growth before the meeting, both of them forecast to slow while staying above 50. All of it feeds the October 28 pricing, which is what the Dollar's advantage over the Euro and the Yen currently rests on.

Levels and bias

Resistance: 100.50 is where the buying stopped, with the session high just above it and no trade above that level since late July. Then 101.00, and the peak near 101.50 that the Dollar left behind at the end of July.

Support: 100.00 held through the session, with the low near 100.20. Beneath it, the 50-day Exponential Moving Average (EMA) near 99.70 is the level the Dollar reclaimed on Wednesday and has not traded below since.

Bias: Bullish while 100.00 holds. The first objective is 101.00 and the second is 101.50. The daily Stochastic Relative Strength Index (Stoch RSI), a momentum gauge, is near 68 and still rising, which fits a market working higher. A daily close below 99.70 ends the bullish case.

DXY daily chart

• DJIA gives back Thursday's bounce to trade near 51,500 as factory output stalls.
• Industrial production was flat in August against a forecast of 0.3%.
• Four industrial companies make up 15.7% of the index between them.

The Dow Jones Industrial Average trades near 51,500, back at the level where Wednesday's selling stopped, which means Thursday's rebound is gone. The selling ran one way down from the session high, and every level that looked like a floor turned into a step. Each of the last three sessions has made a lower high than the one before. The 10-year Treasury yield is back above 5%, and the only American data on the calendar was industrial production, which came in at zero.

No growth in the part of the economy the index is named after

Industrial production was flat in August against a 0.3% forecast, after 0.2% in July. The number counts what American factories, mines and utilities actually made, which is as close as the calendar gets to measuring the business this index was built to track. It also counts two industries the Dow owns nothing in, since there is no miner and no utility among the 30.

Four companies, and one of them is most of it

What there is: Caterpillar (CAT), Honeywell (HON), Boeing (BA) and 3M (MMM), the four members classified as industrials. Between them they hold 15.7% of the index, a little more than half of what the five financial companies hold. The average has had the word industrial in its name since 1896 and four of its members still qualify.

The four have not had the same year. Caterpillar's share price is up more than 36% in 2026, 3M's is up less than 2%, and Boeing's is down about 7%. Because weight follows the share price here, Caterpillar's 9% is worth more to the index than the other three put together.

Flat output is not falling output, and one month of it changes nothing at these companies directly. What it changes is the read on new orders, because factories that are not making more do not buy more of the machines, controls and adhesives the four of them sell. That is why Friday's durable goods number carries more for them than August's output did.

The case for another increase was never built on the factories

Kansas City Fed President Schmid, who does not vote on the committee until 2028, said he supported Wednesday's increase and that recent data puts the inflation trend above 3%. The problem is not only energy, he said, because price growth has been strong across a broad set of goods and services. The calendar scores his speeches on how far they lean toward higher rates, and it put this one at 8.0 against his usual 7.2.

The 10-year Treasury yield is back above 5% after dipping on Thursday, having reached its highest level since July 2007 earlier in the week, and the 30-year is above 5.30%. President Schmid also said the economy is performing well outside of inflation, on the day its factory output was reported at zero.

Those are the rates that aircraft financing and corporate borrowing are priced off, so they reach Boeing's customers first and the other 29 members through their own debt. The Fed's own projections put core inflation at 3.4% this year, higher than it thought in June, and do not have it back at 2% until 2029. Growth is marked at 2.3% and unemployment at 4.1%, which describes an economy the committee thinks can take another increase.

Two more looks at the factories before the October meeting

Flash purchasing surveys land Wednesday at 13:45 GMT, with manufacturing forecast at 53.6 after 53.9 and services at 56 after 56.5. A Purchasing Managers Index (PMI) above 50 means more firms reported growth than decline, so both are forecast to stay above water and to slow while they do it. Durable goods orders follow Friday at 12:30 GMT, forecast at -0.5% after 1.1% in July, and that number is the order book for Caterpillar, Boeing, Honeywell and 3M.

Jobless claims on Thursday are forecast at 202K after 196K. The Michigan survey on Friday carries sentiment, forecast at 47.8, and what households expect prices to do over the coming year, last reported at 4.6%. Home Depot (HD), McDonald's (MCD), Nike (NKE) and Amazon (AMZN) make up 9.6% of the index and sell into both numbers. The sentiment reading is forecast to confirm the earlier estimate to the decimal.

Levels and bias

Resistance: 52,000 stopped the bounce, with the session high just short of it. Above that, the 50-day Exponential Moving Average (EMA) near 52,600 has been falling since early September and has capped every bounce since the Fed's decision.

Support: The session low just under 51,500 is the first floor. Beneath it, Wednesday's low near 51,200 is the lowest the index has traded since June, and then 51,000.

Bias: Bearish while 52,000 caps. The first objective is 51,200 and the second is 51,000. The daily Stochastic Relative Strength Index (Stoch RSI), a momentum gauge, is near 24 and still falling, which fits an index making lower highs. A daily close above 52,000 ends the bearish case.

Dow Jones daily chart

• USD/JPY gains 0.63% on Friday, driven by a sharp decline in the Japanese Yen.
• The Bank of Japan raised its policy rate by 25 basis points to 1.25%, its highest level in 31 years.
• Expectations of further US interest rate hikes support the US Dollar and Treasury yields.

USD/JPY advances sharply on Friday, trading around 156.95 at the time of writing, up 0.63% on the day. The pair has pulled back after reaching a daily high of 158.06 earlier in the day. The Japanese Yen (JPY) weakens significantly despite the Bank of Japan (BoJ) raising interest rates, while the US Dollar (USD) remains supported by expectations of further rate hikes from the Federal Reserve (Fed).

The BoJ raised its policy rate by 25 basis points (bps), from 1% to 1.25%, its highest level in 31 years, in line with market expectations. The decision was approved by a seven-to-two vote, with Toichiro Asada and Ayano Sato opposing the increase in borrowing costs.

The Japanese Yen's negative reaction may appear counterintuitive following another monetary policy tightening. However, with the rate hike largely priced in, investors are focusing primarily on signals regarding the future path of monetary policy.

BoJ Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates if developments in the economy and prices warrant further tightening. However, the BoJ also highlighted several sources of uncertainty, including tensions in the Middle East, developments in artificial intelligence-related demand and volatility in foreign exchange markets.

The latest inflation data also help limit expectations of more aggressive tightening. Japan's National Consumer Price Index (CPI) remained unchanged in August, while underlying inflation stood below the BoJ's 2% annual target. These figures temper expectations regarding the pace of future rate hikes and weigh on the Japanese Yen.

Meanwhile, the US Dollar benefits from a hawkish repricing of the US monetary policy outlook. The Fed raised its benchmark interest rate by 25 bps on Wednesday to a range of 3.75%-4%, delivering its first rate hike since 2023 as rising energy prices keep inflation risks elevated. According to the CME FedWatch tool, markets see about a 55% chance of another 25 bps increase at the October meeting, up from about 40% before the Fed meeting.

The shift in interest rate expectations also supports US Treasury yields. The benchmark 10-year yield rebounds to around 4.98%, approaching the 5.04% peak reached on Tuesday. Higher US yields reinforce the US Dollar's yield advantage over the Japanese Yen and contribute to the advance in USD/JPY.

Against this backdrop, the US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, trades above 100.50, close to its highest level in seven weeks. The combination of a firm US Dollar and the Japanese Yen's disappointing reaction to the BoJ decision therefore keeps USD/JPY close to the 157.00 level.

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 156.98. The pair holds above the 100-hour simple moving average (SMA) at 155.60 and the 200-hour SMA at 154.73, keeping the near-term bias bullish while Friday’s pullback looks more like consolidation after the recent spike towards 157.95. The Relative Strength Index (14) has eased back to around 51, hinting that overbought conditions seen earlier in the week have unwound, leaving room for another topside attempt if buyers defend the current region.

On the topside, the next key resistance sits at the horizontal barrier of 158.00, where fresh supply could emerge after this week’s highs just below that level. On the downside, initial intraday support is seen around the 156.98 area, with additional protection at the prior horizontal floor of 156.50. Below that, the 100-hour SMA at 155.60 and the nearby horizontal level at 155.50 form a secondary demand band, while the 200-hour SMA at 154.73 remains a deeper structural support that would need to hold to preserve the broader bullish tone.

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

On Friday, Kansas City Federal Reserve (Fed) President Jeffrey Schmid said he supported the rate hike, as “recent data suggest inflation trending above 3%.” Schmid added that tightening policy is a step toward achieving the Fed’s 2% goal, that inflation has broadened across a set of goods and services and that the economy is performing well.

Key highlights:

I supported rate hike, recent data suggest inflation trending above 3%.

Rate hike was a step towards returning to the 2% target.

Current inflation problem not just about energy. Price growth has been 'hot' across a broad set of goods and services.

High inflation a sign supply and demand are out of balance.

Outside of inflation, the economy is performing well.

Labor market appears in balance and economic growth solid.