Forex News

• GBP/JPY struggles to capitalize on its modest intraday uptick amid a pickup in JPY demand.
• Rising BoJ rate hike bets and intervention fears boost the JPY, exerting pressure on spot prices.
• A weak USD and the hawkish BoE underpin GBP, warranting caution aggressive bearish traders.

The GBP/JPY cross attracts fresh sellers following an intraday uptick to the 209.00 neighborhood and drops to a two-week low during the first half of the European session on Monday. Spot prices currently trade near the 207.80-207.70 region, down around 0.30% for the day, and seem vulnerable amid a pickup in demand for the Japanese Yen (JPY).

Minutes from the Bank of Japan's (BoJ) July monetary policy meeting, released earlier today, that policymakers debated the need for faster interest rate hikes amid growing concern over mounting inflation risks. This, in turn, lifted expectations that the BoJ will hike again as soon as October or December. Apart from this, looming intervention fears boost the JPY, which, in turn, is seen as a key factor exerting downward pressure on the GBP/JPY cross.

Japan's Finance Minister Satsuki Katayama affirmed that US President Donald Trump conveyed his concerns about the JPY's depreciation to Prime Minister Sanae Takaichi on the sidelines of the United Nations General Assembly last week. This fueled speculations of potential further joint currency interventions, favoring JPY bulls. However, a modest US Dollar (USD) weakness benefits the British Pound (GBP), which should limit losses for the GBP/JPY cross.

Meanwhile, Bank of England (BoE) ​Governor Andrew Bailey said on Friday that persistently high energy prices would make it harder for the central bank to leave interest rates on hold. This reinforces the recent shift in tone towards higher borrowing costs, which, in turn, could lend some support to the GBP and the GBP/JPY cross, warranting some caution before placing fresh bearish bets and positioning for an extension of the decline from the August swing high.

Bailey flags AI upside but warns energy risks could still lift Pound rates

FXS Speechtracker shows Bailey’s speech at 8.2, notably above the historic 6.3 average, signalling a more hawkish tilt than usual. The warning that prolonged high energy prices would make it harder to maintain a no-hike stance points to upside risks for the Bank Rate and supports a firmer Pound bias.

Comments on currently subdued pass-through of energy prices suggest some near-term caution, but the emphasis is on the risk of future tightening if pressures persist. The view that AI could be a positive shock in an era of negative supply shocks adds a medium-term constructive angle, yet the explicit consideration of rising mortgage rates underscores that any Pound-supportive hawkishness will be balanced by financial stability concerns.

Societe Generale analysts note Gold has failed to sustain gains above its 200-day moving average, reinforcing downward momentum. A short-term pullback is underway, with key resistance at the recent pivot high near $4,315. Supports are projected around $4,095 and in the June/July trough zone at $3,960/$3,940, which is described as crucial for the metal.

Precious metal faces key supports

"Gold has struggled to establish itself above the 200-DMA during its recent rebound attempt, highlighting the persistence of downward momentum."

"If Gold fails to reclaim the recent pivot high near $4,315, the decline may extend."

"The next supports are located around the projection of $4,095 and the June/July troughs at $3,960/$3,940, which is a crucial zone."

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

• US Dollar Index rose as Fed officials warn against elevated prices, pushing the October rate hike probability above 70%.
• Markets focus on upcoming employment reports and preferred inflation metrics to gauge policy direction.
• US rejects Iran’s Strait proposal, maintaining Middle East tensions alongside potential pre-election military actions.

The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, inched lower after opening at a bullish gap, remaining in the positive territory and trading around 101.10 during European hours on Monday.

The Greenback gains strength from hawkish comments made by Federal Reserve (Fed) officials. Financial market participants are focusing on upcoming economic data, including key US employment reports and the Fed's preferred inflation measures.

Cleveland Fed President Beth Hammack cautioned against allowing the public to normalize elevated prices, while Philadelphia Fed President Anna Paulson suggested further rate increases might be warranted. Reflecting these shifts, the CME FedWatch Tool now indicates a greater than 70% probability of a rate hike at the October Federal Reserve meeting, up from 57.6% last week and 17.7% a month ago.

US President Donald Trump rejected Iran’s proposal to reopen the Strait of Hormuz, maintaining that Tehran overplayed its hand, though negotiations are slated to resume this week. Additionally, President Trump signaled confidence that the conflict would conclude soon while keeping open the possibility of further military actions before the midterm elections.

Technical Analysis:

In the daily chart, Dollar Index Spot trades at 101.10. The near-term bias is bullish as price holds above both the nine- and 50-period Exponential Moving Averages (EMAs), suggesting a constructive uptrend structure. The 14-day Relative Strength Index (RSI) at 68.14 hovers just below overbought territory, hinting at strong but stretched upside momentum, while the elevated FXS Fed Sentiment Index at 147.72 reinforces the supportive backdrop for the dollar.

On the downside, immediate support is seen at the nine-period EMA at 100.66, with deeper demand expected at the 50-period EMA near 99.97 if a corrective pullback unfolds. As long as Dollar Index Spot remains above these moving average supports, the bulls are likely to defend the recent gains, keeping the focus on further upside extension once any overbought pressures are worked off.

Hammack flags inflation mindset risk as Fed keeps policy bias firmly hawkish

Fed’s Hammack delivered a moderately hawkish message with a FXS Speechtracker score of 7.2/10, slightly softer relative to the historical average of 7.5/10 but still clearly focused on inflation risks. The emphasis on the “biggest risk” being the formation of an inflationary mindset, alongside comments that growth is holding up and the job market is stable, underscores concern that persistent above-target inflation and ongoing demand and capital expenditure pressures could entrench expectations. Hammack’s insistence that policy must remain at a restrictive stance to ensure further disinflation reinforces a bias toward keeping rates elevated for longer rather than signaling imminent easing.

The FXS Fed Sentiment Index slipped by 0.34 points to 147.72, indicating a modest pullback in perceived hawkishness following the speech. However, with the index still well above the neutral 100 mark, the Fed’s overall stance remains firmly in hawkish territory despite the slight softening in tone captured by the FXS Speechtracker.

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

RaboResearch Global Economics & Markets notes the Reserve Bank of Australia (RBA) must decide on policy with strong construction growth and historical parallels to past Oil shocks and inflation spikes. Citing Australian Financial Review, the bank points to building approvals near record GDP shares and expects a 25 basis point hike, taking the official cash rate to 4.60%, which would support the Australian Dollar.

RBA seen hiking as construction booms

"The RBA has to grapple with that all, even if overlooking most of it, as soon as tomorrow."

"That’s as the Australian Financial Review notes the Bank faces a rates squeeze’ as construction grows at its fastest pace in 60 years – for data centres more than housing."

"Our Ben Picton sees a 25bps hike to take the OCR to 4.60%."

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

Societe Generale’s Kenneth Broux describes a difficult week for global bonds as rising Oil prices deter duration buying. US Treasuries and Bunds have repeatedly broken into higher yield ranges, with next US 10-year projections at 5.24% and 5.36% and Bund at 3.70%/3.74%. Relief may hinge on month/quarter-end rebalancing and upcoming US PCE and Eurozone CPI data.

Treasury yields eye higher projections

"For Treasuries but also Bunds, yields have stepped up and crossed into three new trading ranges in quick succession in September alone, scaling new cycle highs at every occasion."

"Levels are technically stretched but there is no incentive to snap up debt at discounted prices until the pattern breaks down."

"Next projections for US 10s are located around 5.24% and 5.36% and for 10y Bund at 3.70%/3.74%."

"Inflation data in the US and the euro zone will keep investors on alert in the coming days."

"Any relief may depend on month and quarter end portfolio rebalancing (benchmark duration extension)."

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

• GBP/JPY's tests two-week lows below 208.00 after being rejected at 209.00.
• The Pound resumes its bearish trend after a mild recovery attempt during the Asian session.
• The BoJ minutes highlight an increasing concern about inflation and policymakers' willingness to accelerate rate hikes.

The British Pound (GBP) extends losses against the Japanese Yen (JPY) on Monday, following a mild recovery attempt earlier in the day. The GBP/JPY hit fresh two-week lows at the 207.70 area on Wednesday, after being rejected at 209.00 in the Asian session, highlighting a more than 1% decline over the last two trading days and nearing oversold levels on intraday charts.

The Bank of Japan (BoJ) released the minutes of July's meeting earlier on Monday, which showed that some policymakers called for faster interest rate hikes in July, in light of the mounting inflation risks. The minutes, however, failed to have any significant impact on the pair at the moment of their release.

The bank hiked interest rates in September, but the two dovish dissenters in the committee left investors pondering the ability of the BoJ to tighten its monetary policy much further and sent the Yen lower across the board.

In the UK, the Bank of England has turned hawkish with Governor Bailey and Deputy Governor Clare Lombardelli hinting at interest rate hikes ahead, although, according to HSBC analysts, “weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term”

Apart from that, the political and fiscal backdrop is an additional source of weakness for the pound, says HSBC, noting that “the run-up to the budget update on 28 October may add further pressure, with elevated gilt yields and difficult fiscal choices ahead for the new Chancellor.”

Technical Analysis: Testing support at 207.80 with RSI approaching oversold levels

GBP/JPY trades at 208.00, holding the near-term bearish structure in place. Momentum indicators in the 4-hour chart remain bearish, with the Relative Strength Index (14) just above oversold levels and the Moving Average Convergence Divergence (MACD) histogram printing widening red bars, which suggests that upside attmepts are likely to find sellers.

Bears have pierced a trendline resistance from early September lows, at 208,10 and are now testing the support area around 207.80 (September 17 and 25 lows) with their focus on the key support area at the September 8 trough of 207.10.

On the topside, initial resistance arrives at 209.00, which has capped bulls on Monday. A clear break of that level would expose the horizontal resistance around 210.10 (September 23, 24 highs) ahead of the September 22 high at 210.90.

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

HSBC expects the Pound to be weighed down by weak UK labour demand and sluggish private sector momentum, especially versus a more resilient US economy. Markets already price significant Bank of England tightening, but higher energy prices complicate policy as inflation risks rise while growth momentum remains fragile, with fiscal challenges and elevated gilt yields adding further pressure on GBP/USD.

GBP challenged by growth and inflation

"Weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term, particularly as the US economy is looking more resilient."

"Markets are already pricing around 100bp of tightening from the Bank of England by July 2027, but higher energy prices create a difficult policy mix: inflation risks arerising even as growth momentum faces a challenging outlook."

"The run-up to the budget update on 28 October may add further pressure, with elevated gilt yields and difficult fiscal choices ahead for the new Chancellor."

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

• EUR/CAD rises as the BoC held rates at 2.25%, while the ECB hiked to 2.50%, weakening CAD support.
• Rising crude prices continue to boost Canadian inflation, offering partial support to the struggling CAD.
• Escalating Middle East tensions and ongoing US-Iran rhetoric keep forex markets on high alert for fresh catalysts.

EUR/CAD extends its gains for the third consecutive day, trading around 1.6110 during the European hours on Monday. The currency cross continues to appreciate as the Canadian Dollar (CAD) faces downward pressure, primarily driven by expectations of a widening interest rate gap between Canada and other major economies.

The policy divergent widened after the Bank of Canada (BoC) opted to hold its key policy rate steady at 2.25% during its September meeting. In contrast, both the US Federal Reserve (Fed) and the European Central Bank (ECB) raised their respective benchmark rates by 25 basis points, bringing the Fed funds target range to 3.75%–4.00% and the ECB deposit rate to 2.50%.

According to Reuters, financial markets are currently pricing in roughly a 45% chance of another 25 bps rate hike by the ECB in October, with a subsequent increase fully priced in no earlier than December.

However, HSBC analysts warn that the Euro “remains vulnerable to uncertainty over the European Central Bank’s appetite to raise rates,” especially in light of the Fed’s stance. They highlight that this vulnerability has been compounded “given the Federal Reserve’s more hawkish messaging at its September meeting,” underscoring a growing policy divergence that continues to weigh on EUR/USD sentiment.

Despite the headwinds from interest rate differentials, elevated oil prices are providing underlying support to the Canadian economy while keeping upward pressure on domestic inflation. Meanwhile, forex traders are searching for new market catalysts as they closely monitor escalating geopolitical developments in the Middle East.

Broad market sentiment remains heavily influenced by events in the region following US President Donald Trump’s rejection of Iran’s latest proposal to reopen the Strait of Hormuz. While President Trump stated that Tehran had overplayed its hand, he noted that negotiations are expected to resume shortly. Furthermore, he expressed confidence that the conflict with Iran will resolve soon, though he left open the possibility of additional military strikes prior to the upcoming US midterm elections.

• The Australian Dollar gains against its major currency peers amid hawkish RBA bets.
• The RBA is expected to hike its OCR by 25 bps to 4.6% on Tuesday.
• ING sees RBA Governor Bullock leaving the door open for more interest rate hikes.

The Australian Dollar (AUD) trades higher against its major currency peers, except the US Dollar (USD), during the European trading session on Monday. The antipodean gains are on expectations that the Reserve Bank of Australia (RBA) will hike interest rates at its policy meeting on Tuesday.

RBA seen hiking as inflation risks remain elevated

Analysts at ING note that the RBA will announce its policy decision at 05:30am BST tomorrow (04:30 GMT on Tuesday), with the bank expecting “a 25bp rate hike to 4.60%.”

ING highlights that with markets fully pricing in the 25-bps rate hike move, the Australian Dollar’s immediate reaction will hinge on the policy tone rather than the headline decision. ING added that the currency’s response will be “heavily dependent on whether Governor Michele Bullock will leave the door open for more hikes.”

Strategists at ING believe that RBA’s Governor Bullock will "leave the door open.” The team cites “elevated” inflation concerns, noting that “even if crude prices decline, domestic fuel prices are set to remain sticky for longer,” while “core CPI measures have all remained hot, the labour market is tight, and growth has proven stronger than expected” — a backdrop that, in ING’s view, supports the case for further tightening and underpins their constructive stance on the Aussie.

If the RBA hikes its Official Cash Rate (OCR), it would be its fourth this year.

Against the US Dollar (USD), the Australian Dollar is down almost 0.1%to near 0.7017 at the time of writing. The US Dollar outperforms as United States (US) Treasury Yields remain elevated amid expectations that the Federal Reserve (Fed) will hike interest rates again this year.

In the September policy meeting, the Fed hiked its policy rates by 25 bps to the 3.75%-4.00% range and signaled at least one more hike this year.

AUD/USD Technical Analysis

AUD/USD trades at 0.7016 at the time of writing, keeping a bearish near-term bias as price holds below the 20-day Exponential Moving Average (EMA) at 0.7100 and key Fibonacci retracements clustered overhead. The 14-day Relative Strength Index (RSI) at 34 hovers just above oversold territory, hinting at waning downside momentum but not yet signaling a convincing base while the pair remains capped beneath the 50% retracement at 0.7053 and the 38.2% Fibonacci level at 0.7096.

On the downside, immediate support emerges at the 61.8% Fibonacci retracement at 0.7009, ahead of a deeper structural zone defined by the 78.6% Fibonacci at 0.6947 and the cycle low at 0.6867. On the topside, resistance is first seen at 0.7053, followed by the 38.2% Fibonacci retracement at 0.7096 and the 20-day EMA at 0.7100, with stronger supply expected near the 23.6% Fibonacci retracement at 0.7150 and the cycle high around 0.7238.

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

• Stock futures fall as elevated oil and multi-decade Treasury yields heighten persistent inflation concerns.
• Fed rate hike bets jump to nearly 70% for October following hawkish remarks from central bank officials.
• Traders monitor Middle East developments alongside President Trump's negotiations with Iran and upcoming meetings with AI tech leaders.

Dow Jones futures decline by 0.35% to trade near 51,970 during European hours on Monday. Meanwhile, S&P 500 futures fall by 0.47% to trade around 7,770, while Nasdaq 100 futures lose 0.97% to trade near 30,590.

US stock futures fall as elevated oil prices intensified global inflation concerns, reinforcing expectations of a tighter monetary policy stance. In tandem with falling equity futures, US Treasury yields rose to multi-decade highs, driven by expectations of further Federal Reserve (Fed) rate increases and growing anxiety over expanding government debt. Market participants are now turning their attention toward key economic data scheduled for release this week, notably upcoming US employment reports and the Federal Reserve’s preferred inflation metric.

Recent comments from central bank leaders have further solidified hawkish policy expectations. Last week, Cleveland Fed President Beth Hammack warned against allowing the public to accept elevated prices as normal, while Philadelphia Fed President Anna Paulson signaled that modest additional tightening might still be required. In response to these developments, money markets have raised the implied probability of a rate hike at the October Federal Reserve meeting to 70%, up from 57.6% a week prior and 17.7% a month ago.

Meanwhile, financial markets are closely tracking international geopolitical developments for potential direction. US President Donald Trump recently rejected an Iranian proposal to reopen the Strait of Hormuz, maintaining that Tehran overplayed its hand, though he noted that diplomatic discussions are set to resume this week. President Trump also expressed confidence that the regional conflict would end soon, while leaving open the possibility of additional military action prior to the upcoming midterm elections.

Separate from geopolitical matters, President Trump was scheduled to host Anthropic CEO Dario Amodei for dinner on Sunday, with discussions expected to cover the AI executive's recent calls to slow the development of frontier AI models.

US labour data in focus as OCBC flags key event risk

Strategists at OCBC describe this week's US labour market report as "a key event risk," noting that Bloomberg consensus expects "non-farm payrolls to rise by 100,000 in September, down from 162,000 in August, while the unemployment rate is projected to remain at 4.1%." They suggest that any deviation from these expectations could have important implications for market views on the US growth and policy outlook.