Forex News

Deutsche Bank strategists highlight Brazil’s surprise election, with President Lula winning a fourth term after trailing in the first round. A Tokyo-listed ETF tracking Brazilian equities fell sharply, and the Real is indicated lower via derivatives. They stress that a rightward shift in Congress should constrain fiscal loosening, making Lula’s ability to establish a credible fiscal path crucial for Brazilian assets.

Lula win reshapes fiscal expectations

"In Brazil, President Lula pulled off a remarkable and genuinely market-moving comeback overnight, winning a record fourth term by 51.8% to 48.2% against Flávio Bolsonaro, despite having lost the first round 45.1%-47.0% three weeks ago."

"It is the first time since Brazil returned to direct presidential elections in 1989 that the first-round runner-up has gone on to win the runoff. The result wrong-footed a market that had increasingly priced a Bolsonaro victory."

"A Tokyo-listed ETF tracking Brazilian equities fell around -15% in Asian trading, with the real also tracking a -10% decline according to derivatives. Bolsonaro had been viewed as the more market-friendly candidate and, after right- and centre-right parties increased their Senate share from 47% to 63% in the first round, investors had been anticipating a better chance of fiscal consolidation."

"Lula, by contrast, has promised an adjustment without yet specifying how it will be delivered. The important medium-term point, however, is that the rightward shift in Congress remains even after Lula's victory, which should constrain the administration's ability to pursue a materially looser fiscal agenda."

"So once the immediate election premium and Bolsonaro's challenge to the result are digested, the bigger question for Brazilian assets will be whether Lula can use that congressional constraint to establish a credible fiscal path. That matters, especially with debt concerns already keeping rates high."

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

The US Dollar (USD) maintains a well-supported stance across global FX markets as traders anticipate the Federal Reserve will keep the Fed funds rate steady at 3.75–4.00% at its upcoming policy meeting on Wednesday. With futures markets pricing in just 10% odds of an October rate increase, investors’ focus has rapidly shifted to the underlying resilience of US economic growth and persistent price pressures. Driven by projections of strong Q3 real GDP expansion near 3.2% annualized and accelerating core PCE inflation, institutional strategists at Brown Brothers Harriman (BBH) and TD Securities view the expected policy pause not as a dovish pivot, but as a tactical prelude to further monetary tightening in December that will preserve the Greenback's yield advantage.

BBH sees Fed pause underpinning the ongoing US Dollar strength

Elias Haddad at Brown Brothers Harriman (BBH) expects the Federal Reserve to leave interest rates unchanged at 3.75–4.00% this week, noting that calls for patience among key Fed officials match market pricing of just 10% odds for an October hike. However, with Q3 GDP projected to expand at a 3.2% annualized pace and September core PCE accelerating to 3.1% yearly, Haddad argues that booming private sector activity and persistent inflation risks will keep the US Dollar firmly supported while a December rate hike is virtually fully priced in.

"The FOMC is expected to keep the Fed funds target range steady at 3.75-4.00% after raising rates 25bps in September. Calls for patience from several key Fed officials support a pause. Futures market imply only 10% odds of a hike this week, with a December 9 rate increase virtually fully price in... Overall, robust US economic activity and rising price pressures argue for additional Fed funds rate hikes, offering ongoing USD support... Headline PCE is seen rising 0.5% m/m... and quicken to 3.6% y/y... Real GDP growth is anticipated to rise 3.2% annualized... driven by consumer spending and AI-related business investment."

TD Securities expects October hold to pave way for December rate hike

Oscar Munoz and Eli Nir at TD Securities project that the Fed will maintain its policy rate at 3.75-4.00% in October, validating current market expectations while refraining from aggressive new forward guidance. They emphasize that pausing in October actually raises the probability of a rate hike in December, with potential for a larger 50 basis points (bps) move if inflation data stay firm. TD Securities maintains a hawkish cycle outlook, expecting two further rate increases in December and March to combat sticky price pressures.

"We expect the FOMC to keep rates on hold this week despite rising inflation risks. The chance of a surprise hike is higher than normal, but we believe they will prioritize patience and wait until December. A hold in October will make a December hike all the more likely. After the upside surprise in September CPI, inflation risks are still pertinent... We expect the Fed to hike two more times (December and March). Inflation remains above target while risks are growing."

Key Takeaway

The widely expected FOMC decision to hold rates at 3.75–4.00% reflects tactical patience rather than a dovish turn, maintaining a highly supportive backdrop for the US Dollar. While BBH points to accelerating PCE inflation (3.6% year-on-year) and robust Q3 GDP growth (3.2% annualized) driven by AI investment as key drivers keeping the Greenback well-bid, TD Securities emphasizes that an October pause elevates the likelihood of subsequent tightening in December and March, ensuring that the US Dollar's interest rate advantage remains firmly intact into the coming year.

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

• The Oil price corrects to near $100.00 from its five-month high of $103.28.
• The Fed, the ECB and the BoJ are expected to leave interest rates unchanged this week.
• Oil prices to remain firm as escalation risk ahead of Israeli elections and US midterm elections remains elevated.

West Texas Intermediate (WTI), futures on NYMEX, retreats from its five-month high of $103.28 to near $100 on Monday. The oil price comes under pressure as investors turn cautious ahead of key monetary policy announcements from a number of global central banks.

Central bank trio in focus as markets eye unchanged rates before later hikes

Analysts at Danske Bank highlight that, for the remainder of the week, market attention will be firmly on upcoming policy meetings, with “focus turns to interest rate decisions from the Fed on Wednesday, the ECB on Thursday and the Bank of Japan on Friday.” The bank notes that it “expect all three to keep interest rates unchanged before resuming rate hikes later this year,” underscoring a near-term pause in policy tightening even as the broader narrative remains one of further increases ahead.

Last week, oil prices gained significantly amid fears of fresh escalation in tensions between the United States (US) and Iran. Financial markets turned cautious after the US State Department called for a wider withdrawal of US diplomatic personnel from the Gulf.

What to expect from oil prices going forward?

According to TD Securities, crude prices remain biased higher in the near term, with analysts warning that “we expect crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated.” They note that “recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,” reinforcing the geopolitical premium embedded in current pricing.

WTI Technical Analysis

In the daily chart, WTI US Oil trades at $100.51. The contract maintains a bullish near-term bias as price holds well above the 20-day Exponential Moving Average (EMA), currently at $95.68, suggesting the uptrend remains supported despite recent consolidation. The Relative Strength Index (RSI) at 62.99 stays in bullish territory but below overbought levels, hinting that upside momentum is positive yet not extreme.

On the downside, initial support is seen at the $100.51 area as an immediate pivot, with stronger underlying demand emerging near the 20-day EMA at $95.68 should a deeper pullback unfold. With no nearby technical resistance levels flagged by the current dataset, traders may continue to focus on how price behaves above these supports to gauge whether the bullish structure can extend or whether a corrective phase develops.

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

• GBP/USD dips below 1.3350, from last week's highs near 1.3420.
• The US Dollar ticks up in calm markets as traders trim USD short positions heading into the Fed's decision.
• The BoE is widely expected to hike rates in early November, which is likely to limit Pound dips.
  

The British Pound (GBP) extends its reversal from the five-week highs reached against the US Dollar (USD) last week, as investors trim USD short positions ahead of the Federal Reserve’s (Fed) monetary policy meeting, due on Wednesday. The GBP/USD pair hits session lows just below 1.3350, on Monday about 0.5% below last week’s peak, at 1.3419.

Market volatility remains at relatively low levels, as traders bide their time ahead of monetary policy decisions by the Fed and other central banks later this week, with the US Dollar showing a somewhat firmer stance than in the previous weeks.

Fed - BoE immediate monetary policy divergence is Pound-supportive

The US central bank is widely expected to leave its monetary policy unchanged on Wednesday. Fed policymakers have been requesting some more time to assess the impact of September’s rate hike before tightening monetary policy further, which has prompted investors to ditch hopes of back-to-back interest rate hikes.

Bets of a December hike, however, remain high with futures markets pricing in 80% odds for at least a quarter-point rate hike. Against this background, traders are likely to be very attentive to September’s Personal Consumption Expenditures (PCE) Price Index figures, due on Thursday, to confirm those hopes.

The Bank of England (BoE) will meet next week and markets are nearly fully pricing a 25-basis-point rate hike. Recent macroeconomic data, especially the unexpected Gross Domestic Product (GDP) growth and the overshot September Consumer Price Index (CPI), provide the ideal conditions for some monetary tightening, which is likely to keep Pound reversals limited.

Analysts at Societe Generale note that GBP/USD is “off five-week highs but up 0.5% this week after 0.7% last week, atypical path pre-budget, while observing that a “BoE rate increase [is] nailed on in November,”

“The brace of upside surprises for CPI and PPI output price inflation, and firmer wage data (...) will alert the MPC to the budding risk of second-round effects and will almost certainly trigger a hawkish response on interest rates the next meeting in two weeks.” says the bank in a note.

Danske Research Team notes UK flash PMIs strengthened in October, with the composite rising to 53.1 and new orders growing at the fastest pace in over two years. Employment returned to growth, but input cost inflation hit its highest level since June. The bank judges the release leans hawkish for the BoE ahead its November meeting, despite some supply‑chain distortions.

Improving data supports BoE tightening risk

"In the UK, the flash PMIs strengthened in October, with both services and manufacturing picking up. The composite rose to 53.1 from 52.0 as services increased to 53.1 from 52.1 and manufacturing edged up to 52.8 from 51.9."

"The details were also encouraging, with new orders growing at the fastest pace in over two years and employment returning to growth for the first time since September 2024."

"At the same time, input cost inflation rose to its highest level since June, mainly driven by higher energy, raw material and transport costs in manufacturing."

"However, part of the manufacturing gain reflected longer supplier delivery times, pointing to supply-chain disruptions rather than stronger demand. Overall, the print leans to the hawkish side for the BoE ahead of its November meeting."

"In the UK, the 2027 budget on Wednesday could gather attention ahead of the BoE's November meeting, as inflation concerns coupled with stronger growth could trigger a hike"

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

Brown Brothers Harriman’s (BBH) Elias Haddad expects the Bank of Japan (BoJ) to keep its policy rate at 1.25% while assessing September’s hike before tightening again. Firmer underlying inflation could lead to a more hawkish Outlook Report, with swaps pricing a high probability of a December move to 1.50%. This shift in expectations is seen as supportive for the Japanese Yen (JPY).

BoJ hold but hawkish expectations build

"The BoJ is widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again."

"In September, BoJ Governor Kazuo Ueda warned that rapid rate hikes could unsettle asset prices, adding that it could take some time to confirm that 2% inflation is entrenched."

"Still, firmer underlying inflation leaves scope for a more hawkish Outlook Report, lifting BoJ rate expectations in favor of JPY."

"The swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months."

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

• The Euro ticks up acrross the board as the German IFO Business Climate Index jumps to three-year highs in October.
• The improvement in economic expectations has offset the deterioration in current economic conditions sentiment.
• The EUR/GBP pair has retraced previous losses to reach session highs at the 0.8400 area.

The Euro (EUR) extends gains against the British Pound on Monday, following the release of a better-than-expected German IFO Business Climate report. The EUR/GBP pair has reversed a previous pullback and is testing the 0.8400 level at the time of writing, posting a 0.3% recovery from the year-to-date lows near 0.8360 hit earlier on Friday.

German businesses' sentiment about the economy improved in October to a 90.2 reading, its best performance in more than three years, from 89.9 in September, against market expectations of a deterioration to 89.8. The assessment of the current economic conditions deteriorated to 88.8 from 89.5 in the previous month, but these figures were offset by an improvement in the expectations gauge, which rose to 91.6 from 90.4 in September.

Lower Oil prices and retreating French yields are buoying the Euro

The Euro is drawing support from a moderate reversal in Oil prices; The price of the Brent Oil barrel dropped below $110.00 on Monday, posting a 2% decline from Friday’s highs amid news reporting that Qatari mediators arrived in Tehran on Sunday to push another initiative to de-escalate tensions between the US and Iran.

Apart from that, Moody’s ratings agency kept France’s debt status unchanged at Aa3 despite the country’s ballooning debt and the social unrest, which has led to massive protests in most of the major cities this weekend. Moody’s decision has been celebrated by the market, which had anticipated a downgrade, and France’s 10-yearTreasury yields fell below the 5% level before trimming some gains through Monday’s European trading session.

Looking ahead, investors are likely to look from the sidelines, awaiting monetary policy decisions by the European Central Bank (ECB) and other major central banks this week. The Bank of England’s (BoE) time is next week, and markets are bracing for a quarter-point rate hike. This is highly likely to keep the Pound's dips limited this week.

United Overseas Bank analysts Quek Ser Leang and Lee Sue Ann note that USD/CHF has shifted from a prior negative bias into a range-trading phase. They see the Dollar’s rapid rebound losing momentum below key resistance, with intraday support levels defining near-term risks. Over the 1–3 week horizon, they expect consolidation between 0.8200 and 0.8290.

Dollar rebound capped below resistance

"24-HOUR VIEW: USD declined to a low of 0.8190 last Thursday. When it was at 0.8200 on Friday, we highlighted the following: “Downward momentum is increasing, albeit not significantly. However, there is scope for USD to decline to 0.8180. To keep the momentum going, USD must hold below 0.8230.” The subsequent price movements did not unfold as expected. USD dipped to 0.8188 and then rose sharply to a high of 0.8255. The rapid rise could extend, but a clear break above 0.8265 appears unlikely. Support is at 0.8235; a breach of 0.8220 would indicate that the immediate upward pressure has eased."

"1-3 WEEKS VIEW: Following our negative USD view from the middle of the month, we highlighted last Friday (23 Oct, spot at 0.8200) that “while USD could continue to decline, given that there has been no significant increase in downward momentum, it remains to be seen whether 0.8140 is within reach.” We did not expect USD to rebound and break above our ‘strong resistance’ level at 0.8250. The breach of our ‘strong resistance’ level indicates that downward momentum has faded. USD has likely entered a rangetrading phase, and it is likely to trade between 0.8200 and 0.8290."

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

Societe Generale’s Dev Ashish analyzes Brazil after Lula’s surprise re-election over Flávio Bolsonaro. The note highlights likely pressure on Brazilian assets as markets unwind positions built on a Bolsonaro victory. It stresses challenging governability under a more conservative Congress, gradual fiscal consolidation, unresolved debt concerns and a higher-for-longer interest-rate outlook, including a shallower easing path for the Selic rate.

Markets reassess post-election Brazil

"Lula secured a surprise re-election victory, overturning a first-round deficit to defeat Flávio Bolsonaro 51.8%-48.2%, marking the first successful runoff comeback in Brazil's democratic era."

"Bolsonaro is challenging the result over the extension of voting hours, but a legal reversal appears unlikely. However, protests, judicial disputes and political tensions could persist."

"Governability will be challenging, as Lula faces a more conservative Congress that may constrain his legislative agenda while also limiting fiscal expansion."

"Fiscal consolidation is likely to remain gradual, leaving debt concerns unresolved and supporting a higher-for-longer interest-rate outlook."

"We expect a shallower easing cycle, with Selic ending 2027 at 12.25% and remaining above market expectations through 2028."

"Brazilian assets are likely to face immediate pressure and heightened near-term volatility as market unwinds positions built on expectations of a Bolsonaro victory."

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

Silver prices (XAG/USD) rose on Monday, according to FXStreet data. Silver trades at $54.02 per troy ounce, up 0.20% from the $53.92 it cost on Friday.

Silver prices have decreased by 24.00% since the beginning of the year.

The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, stood at 74.33 on Monday, up from 74.12 on Friday.

(An automation tool was used in creating this post.)