Forex News

• NZD/USD falls 0.70% on Monday and trades near its lowest level since November 2025.
• Renewed risk aversion and geopolitical tensions revive demand for the US Dollar.
• Expectations of higher interest rates in New Zealand struggle to support the Kiwi against a stronger Greenback.

NZD/USD extends its decline on Monday and trades around 0.5582 at the time of writing, down 0.70% on the day. The pair is flirting with the November 2025 low at 0.5580 after posting six consecutive weeks of losses. NZD/USD is therefore trading close to an important area between 0.5580 and 0.5470. This region has triggered several notable rebounds since 2020, increasing the focus on the pair's behavior around current levels.

The New Zealand Dollar (NZD) remains under pressure amid renewed demand for the US Dollar (USD), as caution dominates financial markets. Turmoil in global bond markets and persistent geopolitical risks favor safe-haven assets, allowing the Greenback to regain momentum despite recently disappointing US economic data.

Geopolitical concerns remain particularly elevated. The head of Yemen's Presidential Leadership Council, Rashad al-Alimi, announced the start of military operations aimed at retaking territories still controlled by the Houthis. Meanwhile, Iranian Parliament Speaker Mohammad Bagher Ghalibaf said that the Strait of Hormuz would remain closed until Tehran's conditions are met. Fresh Russian strikes on Ukraine also keep uncertainty elevated and support demand for safe-haven assets.

This risk-averse environment is particularly negative for the New Zealand Dollar, which is traditionally sensitive to shifts in investor sentiment. Turmoil in global bond markets adds to the pressure, as elevated energy prices fuel concerns about persistent inflation and deteriorating public finances across several major economies.

The US Dollar rebound comes despite a less supportive US monetary policy backdrop. Recent inflation and employment data have reduced expectations of another interest rate hike as soon as October by the Federal Reserve (Fed), pushing US Treasury yields lower from their recent highs. Nevertheless, investors continue to see the possibility of another increase in borrowing costs before the end of the year, helping to limit downside pressure on the Greenback.

Investors now turn their attention to the release of the US Institute for Supply Management (ISM) Services Purchasing Managers Index (PMI) on Monday. The consensus expects the index to ease to 55 in September from 55.4 in August. The final S&P Global Services PMI will also attract attention after the preliminary estimate rose to 58.7, its highest level in more than five years.

On the New Zealand side, expectations of further monetary tightening have so far failed to halt the Kiwi's decline. Markets anticipate an increase in the Official Cash Rate (OCR) by the Reserve Bank of New Zealand (RBNZ) at its October 28 meeting. This prospect could nevertheless provide some support to the New Zealand Dollar if expectations for higher interest rates continue to strengthen.

NZD/USD technical analysis

In the daily chart, NZD/USD trades around 0.5583, extending its decline and retaining a bearish near-term bias as spot holds well below the 100-day simple moving average (SMA) at 0.5806 and the 200-day SMA at 0.5846. The pair is pressing a minor horizontal floor at 0.5580, while the Relative Strength Index (14) near 24 signals oversold conditions that could slow the downside rather than reverse the broader weakening trend for now.

On the topside, initial resistance appears at 0.5626, followed by tighter caps at 0.5649 and 0.5686, ahead of a more significant barrier at 0.5735 and the higher trend references at the 100-day SMA at 0.5806 and 200-day SMA at 0.5846. On the downside, a clean break under the immediate support at 0.5580 would expose the next bearish target at 0.5540, where buyers may try to stabilize the pair after the latest oversold slide.

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

HSBC strategists highlight that GBP/USD is under pressure as resilient United States (US) data, a more hawkish Federal Reserve and narrowing UK-US rate differentials weigh on the British Pound (GBP). They note a relatively weak United Kingdom (UK) outlook versus the US and expect the Dollar to strengthen gradually against the Pound unless the upcoming UK Budget delivers a positive surprise.

Cyclical drivers weigh on Pound

"GBP was largely unmoved against both the USD and EUR by UK Prime Minister Andy Burnham’s keynote speech to the Labour Party conference on 29 September. The speech set out a broad long-term vision for the economy, including greater regional devolution and energy market reform, but provided little detail on either the economic growth or fiscal strategy ahead of the Budget on 28 October."

"The lack of an immediate market reaction is telling. Investors appear more focused on the forces currently driving GBP/USD such as resilient US economic data, a more hawkish FOMC, and the narrowing support provided by UK-US interest-rate differentials. GBP/USD has fallen this month to its lowest level since June, with the US side of the equation doing much of the work."

"The UK backdrop remains less supportive, with HSBC Economics expecting growth to slow and a cautious Bank of England ahead of its 5 November meeting."

"Markets are pricing around 21bp of tightening for November but that is heavily dependent on energy markets and the Middle East."

"For GBP/USD to find greater domestic support, the budget will need to provide a positive surprise. Burnham’s proposals may eventually support GBP if they improve productivity, unlock regional investment and raise the UK’s growth potential."

"Until the government clarifies how it will manage public debt while encouraging private sector expansion, GBP/USD is likely to remain governed by cyclical factors. The 28 October Budget may reveal more details but US data, Federal Reserve policy and energy prices are likely to set the tone for GBP/USD. We expect the USD to strengthen gradually against the GBP in the near term."

(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 says the Brazilian Real (BRL) and local assets are poised to open higher after Flávio Bolsonaro’s stronger-than-expected first-round election result. Haddad adds that Bolsonaro’s momentum ahead of the October 25 runoff, together with proposals for faster fiscal repair and lower taxes, reinforces a positive BRL outlook already supported by Brazil’s attractive carry and strategic commodity exposure.

Flávio Bolsonaro momentum boosts Real

"BRL and Brazilian assets are poised to open higher after Bolsonaro’s stronger than expected showing in the first round of the presidential election."

"Rightist Senator Flávio Bolsonaro of the Liberal Party (PL) won roughly 47% of the vote against 45% for leftist President Luiz Inácio Lula da Silva of the Workers’ Party (PT), overturning the narrow lead most polls had given the incumbent."

"The result gives Bolsonaro momentum heading into the October 25 runoff."

"Bolsonaro’s plan for faster fiscal repair and lower taxes would add to the positive BRL outlook, already underpinned by Brazil’s attractive carry and strategic exposure to commodities linked to energy, AI, and defense."

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

• The Euro remains under pressure as fiscal and political concerns deepen across Europe.
• A sharp sell-off in French government bonds revives fears of Eurozone fragmentation.
• Stronger-than-expected UK PMI figures provide additional support to the British Pound.

EUR/GBP extends its decline on Monday, sliding to its lowest level since mid-July as political turmoil and mounting concerns over Europe’s public finances weigh on the Euro (EUR). At the time of writing, the cross trades around 0.8478, down 0.24% on the day, after touching an intraday low of 0.8458.

Concerns centre on France, where high debt, a widening budget deficit and doubts over the government’s ability to pass its 2027 budget have triggered a sharp sell-off in government bonds. Adding to the political unease, Spanish Prime Minister Pedro Sánchez has called a snap election amid intensifying housing protests.

Analysts at MUFG note that the Euro has "continued to weaken at the start of this week" as "intensifying fears over the destabilizing financial conditions in the Eurozone" follow a "sharp sell-off in French government bonds." They highlight that the move has "encouraged a broad-based softening of the euro," with the single currency falling to "fresh year-to-date lows overnight against the US Dollar and Yen at 1.1161 and 176.41 respectively."

MUFG points out that "the yield spread over German Bunds has blown to just over 140bps, which is almost 60bps wider than before the summer," adding that "the increasingly rapid sell-off is adding to a sense of crisis in the French government bond market." According to the bank, these "unfavourable developments have triggered fears over the re-emergence of fragmentation risks in the Eurozone that could impede the transmission of monetary policy."

The European Central Bank’s (ECB) Transmission Protection Instrument allows the central bank to purchase bonds from individual Eurozone countries when an unwarranted and disorderly rise in borrowing costs threatens the smooth transmission of monetary policy. However, access depends on fiscal sustainability and compliance with broader European Union economic rules.

ECB Chief Economist Philip Lane said on Monday that “the rise in long-term rates will slow growth and reduce pass-through by more than projected.” Lane added that policymakers remain on a “middle path” and that a measured response is appropriate, while warning that a second wave of the energy supply shock poses upside risks to inflation and downside risks to growth.

On the data front, final Eurozone figures showed that the HCOB Composite PMI rose to 53.1 in September from 52.0, while the Services PMI climbed to 53.0 from 51.6. Meanwhile, the UK S&P Global Composite PMI was revised up to 52.0 from the preliminary estimate of 51.7, while the Services PMI came in at 52.1, also above the initial reading of 51.7.

OCBC’s Christopher Wong notes that widening Eurozone bond spreads and fragmentation concerns are tightening financial conditions and putting renewed pressure on the Euro. EUR/USD has fallen to its weakest level since May 2025, and while the Dollar could extend gains if French-German spreads stay wide, the ECB’s anti-fragmentation tools are expected to limit systemic stress.

Spreads and ECB backstops in focus

"Rising fragmentation fears are tightening financial conditions through higher sovereign borrowing costs and wider risk premia. This raises the risk that the ECB becomes more cautious on further policy tightening as financial stability concerns begin to compete with inflation risks. As a result, EUR has come under renewed pressure, with EUR/USD falling to its weakest level since May 2025."

"USD could extend its gains against the EUR if the recent widening in the French-German OAT-Bund spread persists. Wider peripheral spreads tend to tighten Eurozone financial conditions and weigh on EUR sentiment. However, betting on a disorderly sell-off in European bonds remains risky given the ECB's extensive anti-fragmentation toolkit."

"The ECB retains powerful tools to limit unwarranted spread widening, including the Transmission Protection Instrument (TPI), which was specifically designed to counter disorderly market dynamics that threaten monetary policy transmission across the Eurozone. While the activation threshold remains high and requires political and economic conditions to be met, the ECB is unlikely to remain passive if market fragmentation intensifies. In the near term, verbal intervention is likely to be the first line of defence should spreads continue to widen."

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

Societe Generale’s analysts use their Brent, West Texas Intermediate (WTI) and Diesel price forecasts to derive forward-looking inflation surprises for the US and Eurozone. By linking spreads, inventories and refining cracks, they construct 12‑month crude and Diesel paths and show that, if these are accurate, Consumer Price Index (CPI) surprises can be estimated well ahead of official releases using an energy-centric framework.

Using oil paths to project CPI

"Since most inflation surprises (measured as the gap between realised inflation and one year-ahead forecasts) can largely be attributed to fluctuations in oil prices, we can derive a forecast for inflation surprises using our own oil price outlook. Based on the scenarios presented in our latest outlook, we construct crude oil and diesel price paths for the next 12 months."

"The key idea is straightforward: if the oil price forecast is sufficiently accurate, it becomes possible to estimate CPI surprises well in advance, without having to wait for the actual inflation releases."

"We forecast Brent using a proprietary model that links spreads and inventories. We then derive a WTI price forecast by assuming an average $5/bbl discount to Brent. A discerning reader may challenge this "fixed" spread, but it simplifies the exercise for our purposes."

"We then examine recent trends in refining cracks to derive a diesel price forecast. Again, this relies on the simplifying assumption of a stable relationship between product prices and crude oil prices, which readers are free to challenge and adjust based on their own views."

"The next CPI release is expected on 14 October. According to our model, inflation should surprise modestly to the upside, coming in just below a 2-percentage point surprise relative to one-year-ahead expectations."

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

• USD/CAD retreats to 1.4240, from highs near 1.4300, turning flat on the daily chart.
• The US Dollar rally loses steam ahead of the release of the ISM Services PMI report.
• The Loonie has lost more than 3% in a four-week selloff, hammered by Fed-BoC divergence.

The Canadian Dollar (CAD) pares previous daily losses on Monday, as the US Dollar (USD) pulls back from multi-month highs against most peers, with market concerns about higher global debt yields keeping investors away from risk. The USD/CAD pair is trading at the 1.4240 area at the US session opening times, turning flat in the daily chart, after being capped at 1.4293 earlier in the day, the highest level since March 2025.

The turmoil in the global bonds market has been moving currencies in Monday’s Asian and European session, pushing the US Dollar higher amid the EUR/USD weakness. The Euro is back in the spotlight as the escalating borrowing costs in France have spurred fears of some contagion among other EU members, which brings back echoes of the 2009 credit crisis.

This has offset the negative impact from the disappointing US Nonfarm Payrolls report on Friday, which has practically discarded a back-to-back interest rate hike by the US Federal Reserve after the October 27-28 meeting.

US ISM Services PMI is expected to moderate slowdown in September's business activity

In the US calendar on Monday, the highlight is the ISM Services Purchasing Managers’ Index (PMI) report, due at 14:00 GMT. The headline figure is expected to show that the sector partially reversed August's acceleration in September, with the Index pulling back to 55 from 55.4 in the previous month.

Investors will also be attentive to the Final S&P Services PMI. Preliminary data showed that the sector’s activity accelerated to 58.7 in September, its strongest reading in more than five years, from 56.5 in August.

Fed-BoC divergence is keeping the CAD on the back foot

In Canada, the calendar is void on Monday, and investors will await Tuesday's Ivey PMI data and Friday's employment report for more insight into the country’s economic outlook. The CAD, however, has depreciated more than 3% over the last four weeks, as the Fed’s hawkish turn accentuated the monetary policy divergence with the Bank of Canada (BoC).

The BoC has kept its benchmark interest rate steady at 2.25% for already a year, and is not expected to hike it anytime soon. Consumer prices remain above the 2% target, but a somewhat softer labour market and, above all, the economic uncertainty stemming from the trade war with the US will force the central bank to tread cautiously with monetary policy.

MUFG’s Lee Hardman notes that unwanted tightening in Euro-zone financial conditions is prompting markets to pare back expectations for further ECB rate hikes. Pricing has shifted closer to MUFG’s forecast of two additional moves, which may still be too aggressive if fragmentation risks intensify, while speculation grows that the ECB could slow QT or activate its Transmission Protection Instrument.

Tightening conditions challenge ECB path

"The unwanted tightening in financial conditions has already encouraged market participants to scale back expectations for further ECB rate hikes in response to the energy price shock."

"Market pricing for ECB hikes has moved more in line with our own forecast for two further hikes which could still prove too aggressive if the re-emergence of fragmentation risks intensify."

"There is also building speculation that the ECB may have to take further policy action to ease contagion risks by slowing down QT, and/or even utilizing their Transmission Protection Instrument (TPI) for the first time."

"However, a decision to utilize the TPI would create the impression that the ECB is helping governments to finance their deficits."

"As such, the ECB would only decide to purchase government bonds through the TPI if the purchases are temporary, and governments take action as well to tighten fiscal policy to restore investor confidence."

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