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Scotiabank strategists Shaun Osborne and Eric Theoret note the Euro (EUR) remains soft as front-end spreads widen and European Union (EU) concerns persist over a possible US diesel export ban, despite official denials. While sentiment data have diverged from German GDP since 2024, improving IFO readings better align with firmer growth. Technically, they see EUR/USD in a bearish trend, with losses looking extended and support expected around 1.1325/50.

Bearish trend approaches value area

"The EUR retains a soft undertone, reflecting the sustained widening in front-end spreads on the one hand and ongoing EU concerns about the impact of a potential US export ban of diesel on the other (despite US denials yesterday that it would not pursue a 90-day ban)."

"Germany’s IFO Survey improved a little more than expected in September, with the Business Climate Index firming to 89.9 and Expectations rising to 90.4."

"The IFO sentiment data has diverged (unusually) from German GDP since 2024. The lag remains apparent but improved sentiment aligns somewhat better with firming growth trends in the economy."

"Bearish—Sustained losses in September leave the EUR poised to weaken a little further at least although the decline is starting to look extended and spot levels are nearing the lows seen through mid-year which may entice some “value” buyers. Support should be firmer in the 1.1325/50 range"

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

US and Iranian negotiators are discussing a phased agreement to end the conflict, Reuters reported on Thursday.

The potential deal suggests that, in the first phase, Iran will reopen the Strait of Hormuz in exchange for the US lifting its economic blockade and granting access to frozen Iranian assets.

However, negotiations are stalling as neither side wants to surrender its leverage, according to comments to Reuters from two Iranian sources.

In the meantime, US President Donald Trump said he thinks the US and Iran could reach a deal after the midterm elections to the US Congress on November 3.

Market's reaction:

• The US Dollar Index (DXY), which measures the buck against six peers, is up 0.10% at 101.21, but well below the day's high of 101.37.
• West Texas Intermediate, the US crude benchmark, retreated from around daily highs near $95.80 to $93.08.

• GBP/USD extends losses as hawkish Fed rhetoric supports the Greenback.
• Jobless claims beat forecasts, reinforcing a resilient US jobs market picture.
• Oil surge and Hormuz tensions intensify global inflation concerns.

The Pound Sterling (GBP) drops for the fourth straight trading day versus the US Dollar (USD) on Thursday, down 0.21%, as Federal Reserve (Fed) officials remain hawkish and US jobs data shows labor market strength. GBP/USD trades at 1.3213 after hitting a daily bottom of 1.3209, its lowest level since June 29.

Sterling sinks as hawkish Fed signals and strong jobs reinforce Dollar demand

Sentiment is downbeat as global bond yields rise, a headwind for stocks worldwide. The US 10-year Treasury yield is up 5 basis points to 5.162%, boosting the Greenback. The US Dollar Index (DXY), which measures the performance of the buck versus six currencies, is up 0.19% to 101.30.

Investors pricing in further tightening by major central banks, particularly the Federal Reserve, sent government bond yields soaring, as Oil prices jumped over 4% amid a lack of progress in talks between the US and Iran.

In fact, the tone turned harsh. Iran's Major General Safavi said that the Strait of Hormuz would never reopen in the same way, adding that Iran and Oman had reached an agreement on a mechanism to manage the strait.

Aside from this, Federal Reserve officials crossed the wires. New York Fed John Williams said that it is reasonable to see another rate hike this year, echoing comments from Philadelphia Fed Anna Paulson, who said “more rate hikes may be needed” to quell inflation.

Earlier, Cleveland Fed Beth Hammack warned that inflation pressures remain tilted to the upside, reaffirming her hawkish stance.

Meanwhile, US Initial Jobless Claims for the week ending September 19 came at 197K, below the previous week's reading of 198K and forecasts of 201K

In the UK, business activity cooled in September, while inflationary pressures built, exerting pressure on the Bank of England (BoE). The BoE stood pat at its September meeting, but Governor Bailey opened the door to rate increases.

Ahead, the UK economic docket will feature the GfK Consumer Confidence for September. Across the pond, US Durable Goods Orders and Consumer Sentiment will provide an update on the economy.

GBP/USD Price Forecast: Technical Outlook

In the daily chart, GBP/USD trades at 1.3232, extending a clear bearish bias as spot holds beneath the cluster of major simple moving averages around 1.3470 and below multiple broken trend-line supports that now act as resistance between roughly 1.3331 and 1.3512. The Relative Strength Index (14) at 25.1 sits in oversold territory, hinting that downside momentum is stretched but not yet signaling any meaningful recovery while price action remains capped by these overhead technical barriers.

On the topside, initial resistance emerges at the former downtrend break near 1.3331, followed by the descending resistance trend line around 1.3446 and the grouped 50/100/200-day simple moving averages near 1.3470. Above that zone, the prior rising support lines turned resistance at 1.3512 and 1.3720 define a broader ceiling, and only a sustained move back over these levels would ease the current bearish pressure and open room for a more durable rebound.

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

• DJIA slides to 51,100, its lowest since June, as 30-year yields reach a 2004 high.
• Philadelphia Fed President Paulson backs more hikes with rates at 3.75-4.00%.
• 30-year mortgage rates near 7%, a full point higher than before the Iran war.

The 30-year Treasury yield rose to its highest since 2004 on Thursday while the two-year yield barely moved, and the Dow Jones Industrial Average is falling with the long one. The index dropped as far as 51,100, its lowest since June, and is on track for a third losing session in a row.

Two-year yields follow what traders expect the Fed to do over the next couple of years. The 30-year follows what investors want paid for lending to Washington for three decades, and that price is the one still going up. Two Fed officials spent Thursday talking about the rate the Fed sets, and the market repriced the one it doesn't.

The end of forward guidance, announced with forward guidance

New York Fed President Williams told a London conference on Thursday that the era of explicit forward guidance is over, the same line Fed Chair Warsh has taken. In the same remarks, he said market bets on another hike before year-end looked reasonable to him.

Philadelphia Fed President Paulson, a voter this year who had favoured holding rates before the September meeting, said a little more tightening may be needed after the September 16 hike to 3.75-4.00%. She put the new inflation pressure down to the Middle East conflict and the artificial intelligence build-out, with tariff pressure easing.

The two-year yield is close to its 2023 high and didn't react to either speech, so for the Dow the next quarter-point is already in the price. Futures price an October hike as more likely than not, and 16 of 18 policymakers projected at least one more this year. President Paulson's warmest words on underlying inflation were that it hasn't gotten worse this year, which is the case for another hike delivered as praise.

The mortgage market has already done four hikes' worth of tightening

Investors want more to lend for 30 years because the Iran war has kept energy expensive, growth has held up and governments keep borrowing. Brent traded near $105 a barrel on Thursday. Japan's 10-year yield reached its highest since 1996 as Tokyo reopened after a three-day holiday, and Germany's finance agency expects record federal borrowing of €525.5 billion in 2026.

Bank of America analysts put US federal interest costs at a record 3.3% of Gross Domestic Product (GDP) in the second quarter, up from 1.7% the last time the 10-year yield was near 5% in 2007. Chair Warsh can raise the overnight rate at any meeting, but the 30-year yield is set by people who have to hold the bond until 2056.

The 30-year mortgage rate is near 7%, a full point above where it was before the war. The first Dow members exposed are Home Depot (HD) and Sherwin-Williams (SHW), which sell hardware and paint into a housing market where fewer people move at 7%. JPMorgan Chase (JPM) is the member that could come out ahead, because a bank borrows short and lends long, and a wider gap between two-year and 30-year yields could lift what it earns on new loans.

Levels that change the reading

Resistance: 51,500 is Wednesday's close, and Thursday opened beneath it and hasn't traded back above it since. Above that, 52,000 is the level the index gave up on Tuesday and hasn't regained, and each session since has made a lower high.

Support: Thursday's low near 51,100 took out the September 16 low and is the lowest since June, though buyers took back most of the drop off that low. 51,000 is the next round number beneath it.

Bias: The lean is short below 52,000, with 51,000 as the first objective and the 200-day Exponential Moving Average (EMA) near 50,250 as the second. The daily Stochastic Relative Strength Index (Stoch RSI) is near 19, its first reading under 20 since late July, so a bounce toward 51,500 could come first without changing the call. A daily close above 52,000 ends the short case.

Dow Jones daily chart

• The New Zealand Dollar retreats against a US Dollar supported by rising Treasury yields.
• Markets now see an 87% chance of a new RBNZ rate hike in October, sharply up from just 20% earlier this month.
• Higher Oil prices are fueling inflation risks and strengthening expectations of further monetary tightening in New Zealand.

NZD/USD trades around 0.5655 at the time of writing on Thursday, down 0.30% on the day. However, the pair limits its losses as the New Zealand Dollar (NZD) benefits from a sharp increase in expectations of further monetary tightening by the Reserve Bank of New Zealand (RBNZ).

Markets now price in around an 87% chance of a third RBNZ rate hike in October, compared with just 20% earlier this month. This rapid repricing of the monetary policy outlook provides support to the Kiwi, even as the broader market environment remains favorable to the US Dollar (USD).

Expectations of further tightening in New Zealand strengthened following comments from RBNZ Governor Anna Breman. The central bank chief warned that a sustained rise in Oil prices could push near-term inflation above the RBNZ's latest projections, increasing the need to maintain restrictive monetary policy.

NZD/USD nevertheless remains under pressure from the strength of the US Dollar. US Treasury yields extend their sharp rise, with the 10-year yield climbing to around 5.16%, its highest level since 2007, while the rate-sensitive two-year yield trades near 4.91%.

The rise in yields follows robust US activity data. The S&P Global Composite Purchasing Managers Index (PMI) unexpectedly climbed to 58.4 in September, its highest level in five years, reinforcing the view that the US economy remains strong enough to give the Federal Reserve (Fed) room to continue its fight against inflation.

The latest US labor-market data also support this scenario. Initial Jobless Claims edged slightly higher to 197K in the week ending September 19 from 196K previously, but remained below market expectations of 201K.

Against this backdrop, investors have increased bets on another Fed rate hike in October after the central bank delivered a 25-basis-point increase last week. According to the CME FedWatch tool, the chances of another rate increase stand at around 68%, up from 55% a week earlier.

Several Fed officials also maintain a firm stance on persistent inflation. Philadelphia Fed President Anna Paulson said on Thursday that the US central bank may need to raise interest rates again to bring inflation back toward its 2% target, while also highlighting the resilience of the economy.

NZD/USD therefore remains caught between opposing forces. A strong US Dollar and elevated US Treasury yields weigh on the pair, while the sharp increase in expectations of further monetary tightening in New Zealand helps limit the Kiwi's decline.

NZD/USD technical analysis

In the one-hour chart, NZD/USD trades at 0.5657, extending a bearish tone as it holds below the 100-period simple moving average (SMA) at 0.5707 and the 200-period SMA at 0.5727. The pair remains capped by nearby horizontal resistance at 0.5686, while the Relative Strength Index (14) slipping toward the oversold area around 29 reinforces persistent downside pressure rather than a sustained recovery attempt.

On the downside, immediate support is seen at 0.5649, ahead of a lower horizontal floor at 0.5626, which would come into focus on a fresh wave of selling. On the topside, a break above 0.5686 would be needed to ease the immediate pressure, with the 100-period SMA at 0.5707 and the 200-period SMA at 0.5727 forming a dense resistance band before the next barrier at 0.5735.

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

• Gold slides to a one-week low as a stronger US Dollar and rising US Treasury yields weigh on the metal.
• Strong US business activity data and hawkish Fed signals strengthen expectations of another interest-rate increase.
• XAU/USD slips below the 50-day and 100-day SMAs, keeping the near-term technical bias bearish.

Gold (XAU/USD) slides to a one-week low on Thursday as rising US Treasury yields and a stronger US Dollar (USD) reflect an increasingly hawkish Federal Reserve (Fed) outlook. At the time of writing, XAU/USD trades around $4,250, down nearly 0.85% on the day.

The 10-year US Treasury yield extends its sharp rise to around 5.16% after jumping 15.2 bps on Wednesday, reaching its highest level since 2007. The rate-sensitive two-year yield trades near 4.91%, close to Wednesday’s peak of 4.94%, its highest level since 2004.

A strong batch of US S&P Global Purchasing Managers’ Index (PMI) data drove the move. The Composite PMI unexpectedly rose to a five-year high of 58.4 in September, pointing to resilient economic growth and giving the Fed more room to tackle stubborn inflation.

US Initial Jobless Claims fell to 197K in the week ending September 19, below market expectations of 201K. The previous week’s reading was revised higher to 198K from 196K.

The strong figures strengthened expectations that the US central bank could raise interest rates again in October after delivering a 25 bps hike last week. The CME FedWatch Tool places the probability of a rate increase at around 75%, up from 55% a day earlier. Higher borrowing costs weigh on Gold by increasing the attractiveness of interest-bearing assets.

The shift also keeps the US Dollar in strong demand. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 101.37, its highest level in two months. A stronger US Dollar makes Gold more expensive for overseas buyers.

Recent remarks from Fed officials have kept the door open to additional rate hikes, with policymakers stressing the need to bring inflation back to the 2% target. New York Fed President John Williams said, “We need to get inflation back to target in a timely manner,” adding that it is “reasonable to see another rate hike by end of the year.” Cleveland Fed President Beth Hammack also warned that “the longer inflation remains high, the harder it is to bring it back to target.”

Meanwhile, elevated Oil prices linked to the war in the Middle East keep inflation risks tilted to the upside, reinforcing expectations of tighter monetary policy across major economies.

The United States and Iran held talks on the sidelines of the United Nations General Assembly earlier this week, but the two sides are still far apart on how to end the war. Reuters reported, citing a senior Iranian official, that Tehran is reviewing Washington’s response to its peace proposals, which prioritise lifting the US naval blockade on Iranian ports and reopening the Strait of Hormuz.

Technical Analysis: Sellers remain in control below key daily SMAs

XAU/USD remains bearish in the near term as it slips below key Simple Moving Averages (SMAs). Spot gold is capped below the 50-day SMA at $4,311 and the 100-day SMA at $4,308, forming a nearby resistance cluster that hints at downside risk. Momentum indicators reinforce this softer tone, with the Relative Strength Index (RSI) on the daily chart hovering near a neutral 42 and the Moving Average Convergence Divergence (MACD) indicator in negative territory, suggesting sellers still control the short-term swings.

On the downside, initial support is seen at the horizontal level near $4,150, where a break would expose the next bearish target around $4,000. On the topside, bulls would need to reclaim the clustered 50- and 100-day SMAs around $4,310 to ease immediate pressure, with further resistance then located at the 200-day SMA at $4,541 and the more distant structural barrier at $4,700. Until these overhead levels are overcome, rallies are likely to struggle and risk fading back towards the underlying support band.

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

Standard Chartered argues that Europe’s political balance could shift to the right in 2027, with key elections in France, Spain, Italy and Poland. The bank highlights France’s presidential race as most critical, warning an RN victory would be market negative. It also notes potential conservative and populist-right gains could reshape EU institutions and constrain climate, migration and trade policy.

EU institutions face rightward pressure

"Next year has the potential to deliver a material shift rightwards in the EU’s political centre of gravity."

"Given its political and economic weight in Europe, the stakes are highest in France where presidential elections (April 2027) could deliver a victory for the far-right Rassemblement National (RN)."

"The most visible impact of a pivot to the right would be in the European Council, where a culture of consensus-building would create room for far-right leaders to shape negotiations and threaten to use national vetoes on areas requiring unanimity."

"In the Parliament, this could increase pressure on the centre-right European People’s Party (EPP) to work more closely with far-right groups, while at the Commission level, a more right-wing Council could limit what President von der Leyen views as politically achievable."

"Right-wing and far-right governments will not necessarily agree on what to implement or change from a policy perspective, so their impact may be more acutely felt in terms of their capacity to block or dilute the pre-existing EU agenda, creating political paralysis in certain areas."

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

• USD/CAD extends its rally as Fed-BoC monetary policy divergence favours the US Dollar.
• Canadian Retail Sales fall in July, adding to pressure on the Canadian Dollar.
• Resilient US data and hawkish Fed comments keep another interest-rate hike on the table.

USD/CAD extends its advance on Thursday, climbing to its highest level since mid-July. The pair has posted only one daily decline over the past 12 trading days, reflecting the diverging monetary policy outlooks of the Federal Reserve (Fed) and the Bank of Canada (BoC). At the time of writing, USD/CAD trades around 1.4113, up nearly 2% so far this month.

Canadian Dollar struggles as US-Canada yield gap widens

Canadian Retail Sales data offered little support to the Canadian Dollar (CAD). Headline sales fell 0.7% MoM in July, slightly better than the 0.8% drop expected, while sales excluding automobiles also declined 0.7%

The recent USD/CAD rally is largely driven by the widening gap between short-term US and Canadian bond yields. The two-year US Treasury yield trades around 4.89%, slightly below Wednesday’s peak of 4.94%, its highest level since 2004. By comparison, Canada’s two-year government bond yield stands near 3.40%, leaving a gap of almost 150 basis points in favour of the US Dollar (USD).

US Treasury yields are rising across the curve as traders see a growing chance that the Fed will raise interest rates again later this year. The central bank delivered a 25-basis-point (bps) increase last week, lifting the federal funds rate to 3.75%-4.00%.

The hawkish shift has fuelled broad demand for the Greenback. The US Dollar Index (DXY), which tracks the currency against a basket of six major peers, trades around 101.37, its highest level since July 29.

Recent US economic data has strengthened the case for additional tightening. US Initial Jobless Claims fell slightly to 197K in the week ending September 19 from 198K previously and came in below market expectations of 201K. The S&P Global Composite Purchasing Managers’ Index (PMI) also climbed to a five-year high of 58.4 in September from 56.0 in August.

Fed officials have kept another rate hike on the table as inflation stays above the central bank’s 2% target. New York Fed President John Williams said, “We need to get inflation back to target in a timely manner,” adding that it is “reasonable to see another rate hike by the end of the year.” The CME FedWatch Tool places the probability of an October rate increase at around 65%, up from 55% a week ago.

Steady BoC policy outweighs support from higher Oil prices

In contrast, the BoC kept its policy rate unchanged at 2.25% for a seventh consecutive meeting earlier this month. The central bank noted that there was little evidence of higher energy prices spreading into broader inflation, with inflation excluding gasoline at 2.2% and core measures close to 2% in July.

The BoC acknowledged that upside inflation risks have increased but also warned that new US tariffs cloud the growth outlook. Interest-rate expectations are also outweighing the support that the commodity-linked Canadian Dollar would typically receive from higher Oil prices. West Texas Intermediate (WTI) Oil trades around $95, up nearly 11% so far this month.

(This story was corrected on September 24 at 16:55 GMT to replace the previous US Initial Jobless Claims reading of 196K with the revised figure of 198K.)