Forex News
- US Dollar finds support from safe-haven flows following covert US military strikes on Iran's Qeshm Island.
- Traders weigh midterm election uncertainty alongside prediction markets favoring Democratic gains in the Senate.
- High energy prices sustain inflation concerns, keeping December Fed rate hike probabilities near 73%.
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, is holding its position after registering modest losses in the previous day and trading near 101.80 during Asian hours on Tuesday.
The US Dollar holds its ground as traders adopt a cautious stance ahead of the US midterm elections. Political pressure on US President Donald Trump and the Republican Party has mounted due to elevated energy prices linked to ongoing conflicts with Iran. Meanwhile, prediction markets currently reflect a 74% probability of the Democratic Party gaining control of the US Senate, highlighting the elevated political stakes surrounding the vote.
Beyond the election, market participants are keeping a close watch on the upcoming US jobs report scheduled for release later this week. The employment data is expected to offer fresh insights into labor market health and help shape expectations for future monetary policy decisions. The Federal Reserve has maintained a hawkish stance, with the CME FedWatch Tool currently pricing in roughly a 73% chance of a rate hike in December following a policy pause in October.
Additionally, the Greenback continues to draw support from safe-haven demand triggered by escalating military hostilities. A Wall Street Journal report citing US officials revealed that the United States launched an attack on Iran’s Qeshm Island on Monday, the latest in a series of covert, limited strikes carried out by Washington in recent weeks. These military actions occurred shortly after President Trump downplayed the likelihood of a full-scale return to war with Iran following Tuesday's elections.
Dollar softens as Fed patience and AI growth concerns weigh on yields
Strategists at Brown Brothers Harriman note that the Dollar and short-term US rates lost some momentum last week, with “USD and short-term Treasury yields drifted lower” after Fed Chair Kevin Warsh “struck a patient tone despite stalled progress on US inflation.” They add that “concerns about an AI investment slowdown compounded the move, casting doubt on the US growth outlook and dampening Fed rate hike expectations,” reinforcing the softer bias in the currency and front-end yields.
Dollar watchers eye October jobs data for confirmation of stabilizing labor demand
Brown Brothers Harriman’s Elias Haddad highlights Friday’s October nonfarm payrolls release as a key test for the US labor story, noting that consensus expects a “+65k rise in payrolls vs. +29k in September, consistent with stabilizing labor demand.” BBH points out that the “unemployment rate is expected to hold at 4.2%, a tick higher than the FOMC 2026 projection of 4.1%,” underscoring a modestly softer backdrop than the Fed’s longer-term view. Wage dynamics will also be in focus, with “average hourly earnings… forecast to rise 0.3% m/m vs. 0.1% in September, and ease at an annual pace of 2.9% y/y vs. 3.0% in September,” a profile that suggests some ongoing moderation in underlying pay pressures even as monthly gains firm.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.10% | 0.10% | 0.02% | -0.01% | 0.03% | 0.15% | 0.19% | |
| EUR | -0.10% | 0.00% | -0.11% | -0.11% | -0.05% | 0.05% | 0.09% | |
| GBP | -0.10% | -0.01% | -0.13% | -0.13% | -0.08% | 0.03% | 0.09% | |
| JPY | -0.02% | 0.11% | 0.13% | -0.01% | 0.02% | 0.15% | 0.19% | |
| CAD | 0.01% | 0.11% | 0.13% | 0.01% | 0.04% | 0.16% | 0.20% | |
| AUD | -0.03% | 0.05% | 0.08% | -0.02% | -0.04% | 0.13% | 0.16% | |
| NZD | -0.15% | -0.05% | -0.03% | -0.15% | -0.16% | -0.13% | 0.05% | |
| CHF | -0.19% | -0.09% | -0.09% | -0.19% | -0.20% | -0.16% | -0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
- AUD/USD consolidates its recent losses to a two-week low, touched during the Asian session.
- Traders now seem hesitant to place fresh directional bets and opt to wait for the RBA decision.
- The mixed technical setup further warrants some caution before positioning for further losses.
The AUD/USD pair enters a bearish consolidation phase below the 0.7000 psychological mark after touching a fresh two-week low during the Asian session on Tuesday as traders now look to the crucial Reserve Bank of Australia (RBA) rate decision for a fresh impetus.
The Australian central bank is widely expected to deliver a 25-basis-point (bps) interest rate hike, marking its fifth rate increase of the year amid the worsening inflation outlook. Traders will further take cues from the accompanying policy statement and RBA Governor Michele Bullock's comments during the post-meeting press conference to gauge whether this will be the peak of the current tightening cycle or if restrictive policy will need to linger longer. Apart from this, the focus will be on US midterm elections, which might infuse some volatility and produce short-term opportunities around the AUD/USD pair.
From a technical perspective, spot prices retain a near-term bearish tone following the recent failed attempt to build on the strength beyond the 200-day Simple Moving Average (SMA) at 0.7058. Meanwhile, the Moving Average Convergence Divergence (MACD) is slightly positive, and the Relative Strength Index (RSI) sits around 46, hinting at mildly improving momentum. However, the AUD/USD pair's location beneath the key Fibonacci retracement cluster starting at the 38.2% Fibo. level at 0.7027 suggests that rallies are likely to remain vulnerable and that the path of least resistance for spot prices is to the downside.
In the meantime, initial support emerges at the 23.6% retracement at 0.6977, ahead of a more important structural floor around 0.6896, where a break would likely reinstate heavier bearish pressure. On the topside, immediate resistance is located at the 38.2% Fibo. retracement at 0.7027, followed by the 200-day SMA near 0.7058 and the 50.0% retracement at 0.7068, with higher barriers at 0.7108 and 0.7166 before the swing high at 0.7239 comes into play.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
AUD/USD daily chart
Economic Indicator
RBA Interest Rate Decision
The Reserve Bank of Australia (RBA) announces its interest rate decision at the end of its eight scheduled meetings per year. If the RBA is hawkish about the inflationary outlook of the economy and raises interest rates it is usually bullish for the Australian Dollar (AUD). Likewise, if the RBA has a dovish view on the Australian economy and keeps interest rates unchanged, or cuts them, it is seen as bearish for AUD.
Read more.Next release: Tue Nov 03, 2026 03:30
Frequency: Irregular
Consensus: 4.85%
Previous: 4.6%
Source: Reserve Bank of Australia
- Silver may fall toward an 11-month low of $48.87 following covert US military strikes on Iran's Qeshm Island.
- Middle East tensions and high energy prices sustain inflation fears, leaving December Fed rate hike odds at 73%.
- Tech equity liquidations and US midterm election uncertainty add further downward pressure on precious metals.
Silver price (XAG/USD) depreciates after registering modest gains in the previous day, trading around $50.30 per troy ounce during Asian hours on Tuesday. Silver prices remain pinned near an 11-month low of $48.87 per ounce, a level hit on October 30, as mounting oil supply fears grip the market following a United States (US) attack on Iran’s Qeshm Island.
According to a Wall Street Journal report citing US officials, the raid on Monday is part of a covert sequence of limited strikes launched by Washington against Iranian targets in recent weeks. The military actions come shortly after US President Donald Trump downplayed expectations of a full-scale return to war with Iran following Tuesday’s midterm elections.
Meanwhile, Iranian state media outlet Press TV reported that Iran’s Islamic Revolutionary Guard Corps (IRGC) intercepted and downed two US MQM-170 drones south of Qeshm Island in the Strait of Hormuz, alongside destroying a 55th US MQ-9 drone east of the strategic waterway.
Precious metals, including Silver, have endured sustained selling pressure throughout the year as ongoing Middle East hostilities drove up energy costs and amplified inflationary risks. In response, central banks have maintained a hawkish monetary policy stance, with the CME FedWatch Tool currently pricing in approximately a 73% chance of a US Federal Reserve rate hike in December.
A broader global sell-off in technology and artificial intelligence equities triggered widespread asset liquidations across global markets. Simultaneously, market participants are monitoring the US midterm elections, where the Trump administration and the Republican Party face growing political scrutiny over elevated energy prices and inflation concerns.
Markets eye US midterms as Democrats gain momentum
Strategists at Brown Brothers Harriman note that attention is turning to the US midterm elections on Tuesday, with political handicapping increasingly favoring the Democratic Party. They point out that “Democrats are widely expected to win the House of Representatives,” while “Senate control is much closer, but the tide favors the Democratic Party,” underscoring expectations for a potential shift in the balance of power in Congress.
Silver FAQs
Silver is a precious metal highly traded among investors. It has been historically used as a store of value and a medium of exchange. Although less popular than Gold, traders may turn to Silver to diversify their investment portfolio, for its intrinsic value or as a potential hedge during high-inflation periods. Investors can buy physical Silver, in coins or in bars, or trade it through vehicles such as Exchange Traded Funds, which track its price on international markets.
Silver prices can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can make Silver price escalate due to its safe-haven status, although to a lesser extent than Gold's. As a yieldless asset, Silver tends to rise with lower interest rates. Its moves also depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAG/USD). A strong Dollar tends to keep the price of Silver at bay, whereas a weaker Dollar is likely to propel prices up. Other factors such as investment demand, mining supply – Silver is much more abundant than Gold – and recycling rates can also affect prices.
Silver is widely used in industry, particularly in sectors such as electronics or solar energy, as it has one of the highest electric conductivity of all metals – more than Copper and Gold. A surge in demand can increase prices, while a decline tends to lower them. Dynamics in the US, Chinese and Indian economies can also contribute to price swings: for the US and particularly China, their big industrial sectors use Silver in various processes; in India, consumers’ demand for the precious metal for jewellery also plays a key role in setting prices.
Silver prices tend to follow Gold's moves. When Gold prices rise, Silver typically follows suit, as their status as safe-haven assets is similar. The Gold/Silver ratio, which shows the number of ounces of Silver needed to equal the value of one ounce of Gold, may help to determine the relative valuation between both metals. Some investors may consider a high ratio as an indicator that Silver is undervalued, or Gold is overvalued. On the contrary, a low ratio might suggest that Gold is undervalued relative to Silver.
- USD/JPY bulls seem hesitant as intervention risks act as a tailwind for the Japanese Yen.
- Monday’s upbeat US ISM Manufacturing PMI and Fed hike bets lend support to the USD.
- Hopes for Iran diplomacy could cap the safe-haven buck ahead of US midterm elections.
The USD/JPY pair struggles to capitalize on the previous day's positive move, consolidating below the 158.00 mark during the Asian session on Tuesday amid mixed fundamental cues.
Traders remain on high alert amid fresh intervention warning from Japan's Finance Minister Satsuki Katayama on Monday, saying that the Joint FX statement with the US persists and that the government is prepared to act to curb excessive or disorderly weakness in the Japanese Yen (JPY). However, the uncertainty over the likely timing of the next rate hike by the Bank of Japan (BoJ) acts as a headwind for the JPY, which, along with a modest US Dollar (USD) uptick, offers some support to the USD/JPY pair.
The Institute for Supply Management (ISM) reported on Monday that its Manufacturing PMI rose from 54.5 in the previous month to 55.5 in October 2026, marking the 10th straight month of expansion. Furthermore, hawkish US Federal Reserve (Fed) expectations help the USD build on the overnight bounce from the late-October swing low. In fact, the CME Group's FedWatch Tool indicates that traders are pricing in over a 70% chance that the US central bank will raise borrowing costs again in December.
The upside for the USD, however, seems limited amid hopes for a potential diplomatic resolution to end the US-Iran war. In fact, US President Donald Trump said on Monday Iran wants to make a deal to end the war and that such an agreement could happen. Moreover, Iranian Foreign Minister Abbas Araqchi said that consultations through mediators were very intensive. Traders also demonstrate a widespread hesitancy ahead of US midterm elections, which could infuse volatility and influence the Greenback.
Meanwhile, the geopolitical risk premium remains in play as several days of negotiations between Iranian officials and Qatari mediators failed to make a major breakthrough despite revised proposals. This, in turn, favors USD bulls, backing the case for the emergence of some dip-buying around the USD/JPY pair. Traders now look to the release of the US JOLTS Job Openings data ahead of the US ISM Services PMI on Wednesday, though the focus will be on the US Nonfarm Payrolls (NFP) report on Friday.
USD/JPY 4-hour chart
Technical Analysis
The USD/JPY pair is consolidating marginally above the 100-period Simple Moving Average (SMA) on the 4-hour chart, which keeps the near-term bias mildly bullish. However, the recent range-bound price action makes it prudent to wait for a sustained break above the 158.60 barrier before positioning for any further gains. On the downside, the 157.00 mark could protect the immediate downside ahead of the trading range support near the 156.35 region. A convincing break below would shift the near-term bias in favor of bearish traders and pave the way for deeper losses.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
- EUR/USD bulls remain on the back foot as the USD draws support from Monday’s upbeat data.
- Fed hike bets also underpin the buck, while France’s debt crisis contributes to capping the Euro.
- The US midterm election results could infuse some volatility ahead of important macro releases.
The EUR/USD pair trades with a mild negative bias during the Asian session on Tuesday, looking to extend the previous day's modest pullback from the 1.1235 area, or a one-and-a-half-week top. Spot prices currently trade just below the 1.1200 mark, though the downtick lacks follow-through as traders seem hesitant ahead of the US midterm elections.
Prediction markets strongly favor Democrats winning the House, and a Republican sweep would be a larger market surprise, which could lift US Treasury yields and the US Dollar (USD). Nevertheless, the election results may infuse some short-term volatility and provide some impetus to the EUR/USD pair. In the meantime, Monday's better-than-expected US macro data, along with hawkish US Federal Reserve (Fed) bets, seems to act as a tailwind for the buck.
The Institute for Supply Management's (ISM) Manufacturing PMI rose from 54.5 in the previous month to 55.5 in October 2026, marking the 10th straight month of expansion. Furthermore, the CME Group's FedWatch Tool indicates that traders are pricing in over a 70% chance that the US central bank will raise borrowing costs in December. This, in turn, acts as a tailwind for the USD, though hopes for Iran diplomacy might cap gains and support the EUR/USD pair.
In fact, US President Donald Trump said on Monday Iran wants to make a deal to end the war and that such an agreement could happen. Adding to this, Iranian Foreign Minister Abbas Araqchi said that consultations through mediators were very intensive. However, several days of negotiations between Iranian officials and Qatari mediators failed to make a major breakthrough despite revised proposals, which keeps the geopolitical risk premium in play.
This might hold back trades from placing aggressive bearish bets on the USD, which, along with concerns about France’s deepening debt levels and political gridlock, should contribute to capping the EUR/USD pair. Traders now look forward to the release of US JOLTS Job Openings for some impetus ahead of the flash Eurozone CPI report and the US ISM Services PMI on Wednesday. The focus, however, will remain on the US Nonfarm Payrolls (NFP) report on Friday.
EUR/USD 4-hour chart
Technical Analysis
Against the backdrop of a decline from the August monthly swing high, the recent range-bound price action witnessed over the past month or so could be categorized as a bearish consolidation phase. Moreover, the EUR/USD pair holds beneath the 200-period Simple Moving Average (SMA) on the 4-hour chart, keeping a near-term negative tone.
That said, a convincing break below the trading range support, near the 1.1100 round figure, is needed to reaffirm the bearish outlook and set the stage for deeper losses. On the topside, immediate resistance is located at the 200-period SMA at 1.1267. Bulls would need to reclaim the said barrier to alleviate downside pressure and open the door to a more constructive bias.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
The United States (US) attacked Iran’s Qeshm Island on Monday in the latest of a series of limited strikes Washington has secretly carried out against the country in recent weeks, the Wall Street Journal (WSJ) reported, citing US officials.
The attacks followed comments by US President Donald Trump playing down the possibility of a return to war with Iran after Tuesday’s midterm elections.
Iran’s Islamic Revolutionary Guard Corps (IRGC) said that two US MQM-170 drones were intercepted and brought down south of Qeshm Island in the Strait of Hormuz, while the 55th US MQ-9 drone east of the Hormuz Strait was destroyed, Press TV reported.
Market reaction
At the time of writing, the West Texas Intermediate (WTI) is up 0.71% on the day at $95.65.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- GBP/USD softens to around 1.3405 in Tuesday’s early Asian session.
- Democrats are widely expected to win the House of Representatives.
- The BoE is likely to lift the Bank Rate to 4.0% at its November meeting on Thursday.
The GBP/USD pair loses ground to near 1.3405, snapping the four-day winning streak during the early Asian trading hours on Tuesday. Markets might turn cautious ahead of a week full of catalysts, including the US midterm elections, the Bank of England (BoE) interest rate decision, and US September jobs data.
US midterm elections raise the prospect of a broader narrative swing back to inflation and deficit woes. Traders will gauge how the election outcomes will shape the market outlook. Current forecasts point to Democrats winning the House, with control of the Senate less clear.
Economists from Reuters see that if Democrats gain control of both the House and Senate, investors anticipate stricter regulation and oversight of Artificial Intelligence (AI), potentially weighing on financial markets.
If Democrats take the House while Republicans retain control of the Senate, the impact on the US fiscal outlook is likely to be mixed. Meanwhile, if Republicans sweep, investors expect the administration may introduce further tax reforms or increase defense expenditure, potentially widening the country's already substantial budget deficit.
Economists polled by Reuters expect the BoE to raise the Bank Rate to 4.0% from 3.75% at its November policy meeting on Thursday. This would be its first hike since August 2023, when inflation was still more than the BoE’s 2% target. Traders will closely monitor the press conference for more clues about the UK interest rate outlook. Any hawkish comments from the BoE Governor Andrew Bailey could provide some support to the British Pound (GBP) against the US Dollar (USD).
BoE seen kicking off tightening cycle but guidance may cap Pound gains
Strategists at Brown Brothers Harriman note that the upcoming Bank of England policy decision and Monetary Policy Report on Thursday are widely expected to mark the start of a new tightening phase, with the BoE “widely expected to start tightening with a 25bps hike to 4.00% after standing pat all year.” They point out that “firmer UK inflation and economic activity back the move,” and anticipate a “vote split…seen at 7-2 with doves Alan Taylor and Swati Dhingra supporting a hold.”
However, BBH cautions that “BoE guidance and the updated MPR will test market expectations for 100bps of tightening over the next twelve months.” In their view, “persistent spare capacity across the forecast horizon would strengthen the case for pricing out hikes and limit GBP upside,” suggesting that while the initial move may be supportive for the Pound, the broader policy message could temper the market’s more aggressive rate path assumptions.
Logan flags more Fed hikes, keeping Dollar bulls in control
Fed’s Logan delivers a distinctly hawkish message, with an FXS Speechtracker score of 8/10, slightly above the 7.7/10 historical average and signaling a firmer stance relative to the established baseline. The insistence that the Fed “needs at least two more quarter-point rate hikes” and that skipping a meeting does not change the policy destination, combined with strong growth, solid consumer spending and a balanced-to-tightening labor market, underscores a commitment to making policy “modestly restrictive” until inflation is clearly headed back to 2%. Emphasis on gradual adjustment and clear communication suggests a preference for steady tightening that allows households, businesses and investors to adapt, reinforcing a supportive backdrop for the Dollar.
The FXS Fed Sentiment Index rose by 0.95 points to 143.62, firmly in hawkish territory and consistent with the above-baseline FXS Speechtracker score. This move higher in the FXS Fed Sentiment Index confirms that markets are interpreting Logan’s remarks as signaling further policy work ahead, a backdrop that typically underpins the Dollar against the Euro and Yen.
Technical Analysis: GBP/USD retains a positibe tone above the 100-day SMA
In the daily chart, GBP/USD holds a bullish near-term bias as spot remains above both the 20-period Bollinger middle band and the 100-day simple moving average (SMA). Price is pressing into the upper half of the Bollinger envelope, while the Relative Strength Index (14) at about 58 suggests constructive, but not overbought, momentum, hinting that buyers retain control as long as the pair stays anchored above the key moving average supports.
On the topside, immediate resistance aligns with the upper Bollinger band near 1.3465, where gains could pause or correct if buying pressure fades. On the downside, initial support is seen at the 100-day SMA around 1.3385, followed by the Bollinger middle band near 1.3318, while a deeper pullback would likely be contained ahead of the lower Bollinger band around 1.3175.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
- USD/CAD depreciates as rebounding crude oil prices near $95.80 per barrel bolster the commodity-linked Canadian Dollar against the US Dollar.
- Ongoing US-Iran diplomatic negotiations and Qatari mediation efforts help temper immediate geopolitical fears in energy markets.
- Safe-haven demand and US midterm election uncertainty continue to limit broader downside risks for the USD.
USD/CAD inches lower after posting modest gains in the previous day, trading around 1.3990 during Asian hours on Tuesday. The currency pair is experiencing downward pressure as the Canadian Dollar (CAD) receives support from a modest recovery in crude oil prices. Canada, being the largest crude oil exporter to the United States (US), sees its currency heavily tied to energy markets. West Texas Intermediate (WTI) crude has regained some ground, trading around $95.80 per barrel, following a steep drop of nearly 7% in the previous session.
However, potential gains in oil prices remain constrained by ongoing geopolitical developments. Crude prices could face further headwinds as Iran confirmed that indirect discussions with the United States aimed at resolving their eight-month conflict are still underway. The talks follow several days of negotiations between Iranian officials and Qatari mediators, which yielded revised proposals without achieving a major breakthrough.
Iranian Foreign Minister Abbas Araqchi noted that consultations remain intensive, stating that their conditions have been presented and further progress depends on Washington's political decisions. Meanwhile, US President Donald Trump previously indicated he would refrain from military action against Iran before the midterm elections.
Political developments in the United States are also influencing the broader economic environment. As American voters head to the polls for the midterm elections, the Trump administration and the Republican Party face mounting pressure regarding elevated energy prices. Current polling suggests Democrats are favored to win the House of Representatives, while control of the Senate remains closely contested.
Despite the Canadian Dollar's current support, losses for the USD/CAD pair may be limited as the safe-haven US Dollar gets a boost from election-related uncertainty. The midterms have raised concerns over potential shifts back toward inflation and deficit issues. Consequently, rate expectations have adjusted slightly, with the CME FedWatch Tool currently pricing in roughly a 73% probability of a US Federal Reserve rate hike in December, down from 80% a week earlier.
Dollar softens as Fed patience and AI growth concerns weigh on yields
Strategists at Brown Brothers Harriman note that the Dollar and short-term Treasury yields “drifted lower last week as Fed Chair Kevin Warch struck a patient tone despite stalled progress on US inflation.” They add that “concerns about an AI investment slowdown compounded the move, casting doubt on the US growth outlook and dampening Fed rate hike expectations.”
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
The People’s Bank of China (PBOC) sets the USD/CNY central rate for the trading session ahead on Tuesday at 6.7150 compared to the previous day's fix of 6.7146 and 6.6489 Reuters estimate.
PBOC FAQs
The primary monetary policy objectives of the People's Bank of China (PBoC) are to safeguard price stability, including exchange rate stability, and promote economic growth. China’s central bank also aims to implement financial reforms, such as opening and developing the financial market.
The PBoC is owned by the state of the People's Republic of China (PRC), so it is not considered an autonomous institution. The Chinese Communist Party (CCP) Committee Secretary, nominated by the Chairman of the State Council, has a key influence on the PBoC’s management and direction, not the governor. However, Mr. Pan Gongsheng currently holds both of these posts.
Unlike the Western economies, the PBoC uses a broader set of monetary policy instruments to achieve its objectives. The primary tools include a seven-day Reverse Repo Rate (RRR), Medium-term Lending Facility (MLF), foreign exchange interventions and Reserve Requirement Ratio (RRR). However, The Loan Prime Rate (LPR) is China’s benchmark interest rate. Changes to the LPR directly influence the rates that need to be paid in the market for loans and mortgages and the interest paid on savings. By changing the LPR, China’s central bank can also influence the exchange rates of the Chinese Renminbi.
Yes, China has 19 private banks – a small fraction of the financial system. The largest private banks are digital lenders WeBank and MYbank, which are backed by tech giants Tencent and Ant Group, per The Straits Times. In 2014, China allowed domestic lenders fully capitalized by private funds to operate in the state-dominated financial sector.
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