Forex News
- Gold slips near $4,150, heading for a weekly loss.
- US CPI hit 3.7%, while producer inflation surged to 6.3% in September.
- October Fed hike odds fall to 16%, but December remains at 89%.
Gold (XAU/USD) price retreats about 0.10%, trading at $4,163 on Friday, poised for a weekly loss as traders assess recent US inflation data, which, although hotter than foreseen, led investors to trim their hawkish bets for the Federal Open Market Committee (FOMC) October meeting.
XAU/USD struggles near $4,160 as elevated Treasury yields offset reduced Fed tightening expectations
This week, US inflation data was the highlight of the economic docket, with both figures, the Consumer Price Index (CPI) for September rising 3.7% YoY above estimates of 3.6% and up from August’s 3.4%, while the Producer Price Index (PPI) crushed forecasts of 5.3%, rising 6.3% YoY.
Market participants increased the odds of a Fed rate hike this month post-the CPI release, near 60%. However, as the session progressed, most investment banks updated their forecasts, with most confident for a hike in December.
Money markets have priced in a 16% chance of a 25 bps move by the FOMC at the October meeting, but for December, the odds are high at 89%, according to Prime Terminal.
Meanwhile, Fed Chair Kevin Warsh disappointed investors by not providing guidance on future interest rates, though he recognized the strength of the US economy.
Bullion has failed to rally despite investors using it as an inflation hedge, as surging US Treasury yields have undermined the yellow metal.
The US 10-year Treasury yield is gaining three basis points, up to 5.106%, but it has failed to boost the Greenback, amid a scenario of higher rates in the US.
The US Dollar Index (DXY), which measures the buck’s performance against six currencies, is down 0.10% at 101.87.
On the data front, Industrial Production rose 0.7% MoM in September, exceeding estimates of 0.4% and the prior month’s 0.1% expansion.
Next week, the US economic schedule will feature housing data, Initial Jobless Claims, and Flash PMIs, which are closely watched by investors.
XAU/USD technical analysis: Gold remains unable to clear $4,200, dives towards $4,100
Gold continues to trade sideways within the $4,100-$4,200 range and appears to have bottomed near the range low.
Momentum-wise, the Relative Strength Index (RSI) is bearish; there’s a mild positive divergence which could open the door for further upside.
For a bullish reversal, the first resistance for XAU/USD would be $4,200, followed by a test of the 100-day Simple Moving Average (SMA) at $4,242. Above, the 50-day SMA sits at $4,331, followed by the $4,500 mark.
If XAU/USD continues lower, initial support is at $4,100. A decisive break below that level would bring the October 14 low of $4,073 into view, followed by the July 29 cycle low at $3,996 and the July 17 low at $3,959. The yearly low at $3,941 lies below those levels.
Gold FAQs
Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.
Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.
Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.
The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.
Standard Chartered’s Chong Hoon Park expects the Bank of Korea to keep its base rate at 3.00% through October and November, despite a less favourable inflation-growth mix. The report highlights sticky underlying inflation, strong AI- and semiconductor-led growth, and tighter financial conditions after a sharp KOSPI correction. The authors still project two 25bps hikes in 2027, taking the terminal rate to 3.50%.
BoK seen on hold despite risks
"We expect the Bank of Korea (BoK) to keep the base rate unchanged at 3.00% in October and November."
"We continue to forecast a 25bps hike in early 2027, followed by another in H1-2027, taking the terminal rate to 3.50% by end-2027."
"However, we acknowledge the rising risk of a November hike."
"However, given the sharp equity-market correction and the associated tightening in financial conditions, we maintain our base case of a hold in November."
"We will closely watch the October meeting for a shift in the balance of risks."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD struggles to extend gains as hawkish Fed expectations support the US Dollar.
- The pair trades below key daily moving averages, suggesting sellers retain control.
- Momentum indicators show early signs of recovery, but a strong bullish reversal appears uncertain.
EUR/USD struggles to extend its gains on Friday as the US Dollar (USD) steadies after coming under heavy pressure on Thursday. At the time of writing, the pair trades around 1.1230, below an intraday high of 1.1269, but remains on track for its first weekly gain in six weeks.
Euro Price This week
The table below shows the percentage change of Euro (EUR) against listed major currencies this week. Euro was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.32% | -0.65% | -0.05% | -0.82% | 0.49% | -0.63% | -0.67% | |
| EUR | 0.32% | -0.25% | 0.27% | -0.46% | 0.81% | -0.27% | -0.30% | |
| GBP | 0.65% | 0.25% | 0.46% | -0.21% | 1.06% | -0.02% | -0.07% | |
| JPY | 0.05% | -0.27% | -0.46% | -0.63% | 0.65% | -0.56% | -0.50% | |
| CAD | 0.82% | 0.46% | 0.21% | 0.63% | 1.31% | 0.09% | 0.16% | |
| AUD | -0.49% | -0.81% | -1.06% | -0.65% | -1.31% | -1.07% | -1.09% | |
| NZD | 0.63% | 0.27% | 0.02% | 0.56% | -0.09% | 1.07% | -0.06% | |
| CHF | 0.67% | 0.30% | 0.07% | 0.50% | -0.16% | 1.09% | 0.06% |
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 Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).
Hawkish Federal Reserve (Fed) expectations keep a floor under the US Dollar after this week’s US inflation data reinforced expectations of another rate hike before year-end. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.90 after touching an intraday low of 101.58, its lowest level since October 1.
Meanwhile, expectations of further European Central Bank (ECB) rate hikes offer limited support to the Euro (EUR), as traders weigh risks to growth alongside France’s fiscal and political concerns.
Nordea turns more constructive on USD as EUR/USD overshoots 2027 target
Strategists at Nordea highlight that "EUR/USD reached our H1 2027 target of 1.12 faster than expected." In response to the quicker-than-anticipated move, they state that "we therefore lower our year-end EUR/USD forecast to 1.10 from 1.14" and now "expect EUR/USD to test 1.08 in H1 2027 before recovering to 1.14 in H2 2027 and 1.20 by end-2028." Nordea underlines that "our baseline remains a strong US economy and two further Fed hikes, with risks skewed to the upside," and concludes that "overall, we remain constructive on the USD relative to the EUR over the next six to nine months."
Technical analysis
On the daily chart, EUR/USD keeps a bearish near-term bias as the pair holds well beneath the 50-day and 100-day simple moving averages (SMAs) at 1.1469 and 1.1470, and the 200-day SMA at 1.1584. Price is also below a dense Fibonacci retracement cluster, with the 23.6% level at 1.1239 leaning as immediate overhead resistance. The Relative Strength Index (RSI) at 38 suggests the pair is recovering from oversold conditions, while the Moving Average Convergence Divergence (MACD) has just turned marginally positive, hinting at waning downside momentum rather than a clear bullish shift.
On the topside, initial resistance appears at the 23.6% Fibonacci retracement at 1.1239, followed by the 38.2% level at 1.1319 and the 50% retracement at 1.1383. Higher up, the 61.8% retracement at 1.1447 is reinforced by the 50-day and 100-day SMAs clustered around 1.1470, while the 78.6% level at 1.1538 and the 200-day SMA at 1.1584 guard the path toward the cycle high at 1.1654. On the downside, the main support remains the structural Fibonacci anchor near 1.1111, where a sustained break would likely extend the broader bearish phase.
(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.
Royal Bank of Canada economists Claire Fan and Abbey Xu assess upcoming Canadian inflation data and the Bank of Canada’s Q3 Business Outlook Survey ahead of the Oct. 28 policy decision. They highlight persistent energy-driven inflation versus a still-soft economy, and expect this contentious balance of risks to keep the Bank of Canada on hold through the rest of 2026.
BoC seen staying uncomfortably on hold
"Canadian inflation data and the Bank of Canada’s Q3 Business Outlook Survey on Monday will be watched closely for signs on whether inflation pressures from persistently elevated energy prices are broadening and permeating across the economy."
"These releases will serve as key inputs for the BoC’s next interest rate decision on Oct. 28, as policymakers are wary that high oil prices could spill beyond gasoline prices into non-energy components and/or feed into rising business and consumer inflation expectations."
"Inflation risks, however, must be balanced against a gradually improving economy that remains soft."
"Progress has been choppy—GDP growth is set to slow in the second half of 2026 from the stronger pace in Q2, jobs have declined consecutively in August and September, and the unemployment rate has plateaued around 6.5% over the last three months after falling in the prior year."
"For now, we continue to expect a somewhat contentious trade-off between inflation and growth risks to keep the BoC uncomfortably on hold through the rest of 2026."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Nordea’s research team keeps its Federal Reserve outlook unchanged, expecting one more rate hike this year and another in 2027 as US inflation remains above the 2% target and growth stays strong. The bank argues that elevated long-term Treasury yields mainly reflect robust nominal GDP growth and heavy capital demand, and do not yet look particularly restrictive for the US economy.
Fed path steady with strong data
"Inflation is still clearly above target, and the September CPI shows it moving up, not down."
"Monetary policy still does not look restrictive enough for an economy in this shape."
"Against that backdrop, long-term yields above 5% are not particularly restrictive."
"We keep our Fed forecast unchanged. We still expect one more hike this year and another next year, with the risks tilted to the upside."
"All in all, our view is unchanged. A strong economy and above-target inflation still call for tighter policy. We expect one more hike this year and another next year. Higher long-term yields do not change that call. They mostly reflect the same strong economy that keeps the Fed hiking."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- AUD/USD struggles to extend its recovery as the US Dollar stabilises.
- Hot US inflation keeps markets leaning toward another Fed rate hike before year-end.
- Weak employment figures temper RBA rate-hike bets, although further tightening remains possible.
AUD/USD trims some of its earlier gains on Friday as hawkish Federal Reserve (Fed) expectations cushion the downside in the US Dollar (USD) and US Treasury yields following the previous day’s pullback. At the time of writing, the pair trades around 0.6941 after reaching an intraday high of 0.6967, remaining on track for a weekly decline.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.90 after touching an intraday low of 101.58, its lowest level in two weeks. Meanwhile, the benchmark 10-year US Treasury yield recovers toward 5.11% after falling to a three-week low near 5.04% on Thursday.
Treasury yields declined across the curve on Thursday, dragging the US Dollar away from the 18-month high of 102.94 reached earlier this week. The move came as concerns over AI valuations and debt-funded investments triggered a sell-off in equities and drove investors toward government bonds.
However, the Greenback finds some support as hotter-than-expected US inflation data and resilient consumer spending keep expectations tilted toward additional Fed rate hikes.
Despite the strong data, traders still expect the Fed to pause at its October 27-28 meeting. Expectations instead centre on December, with the CME FedWatch Tool showing roughly a 90% probability of a rate hike.
On the Australian side, Thursday’s weaker-than-expected labour market report tempered bets on another Reserve Bank of Australia (RBA) rate increase. Employment fell by 39.3K in September, compared with forecasts for a gain of 20K, while the Unemployment Rate stood at 4.7%.
The figures suggest that higher borrowing costs are weighing on hiring. Markets now expect the central bank to leave rates unchanged at its November 2-3 meeting after delivering four increases this year.
Still, September’s meeting minutes show that the RBA remains open to further tightening, with the Board prepared to raise rates again if needed to meet its inflation and employment goals.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
Scotiabank analysts highlight that Bank of England Governor Bailey sees little evidence of second-round inflation effects and a more resilient UK economy, with markets still pricing a 25bp hike next month. Technically, GBP/USD has rebounded strongly from mid-week lows, forming a bullish weekly outside range and opening scope to retest the 1.3650–1.3675 area, with key resistance at 1.3435.
Pound recovery points to range highs
"BoE Governor Bailey remarked that there was little evidence yet of second-round inflation effects in the UK while noting that the UK economy was more resilient than expected. The comments had no impact on OIS, with swaps still all but fully committed to a 25bps rate hike early next month."
"Elsewhere, Chancellor Healey will reportedly increase the corporation tax bank surcharge from 3% to 8% as part of next week’s budget in a bid to shore up UK public finances."
"Bullish – Solid GBP gains from Wednesday’s post-US CPI low have driven Cable back to the mid-1.33 area. A clear, bullish reversal is forming on the weekly chart as a result (a major outside range week)."
"With recent price action basing around the low point of the sideways range in place since April, the pound’s rebound suggests gains may extend to retest the upper end of the range (1.3650/75) in the coming weeks. Initial, key resistance sits at 1.3435 (200-day MA)."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities’ economist Robert Both expects Canadian CPI to rise to 3.2% year-on-year in September, driven mainly by higher Energy and Gasoline prices, while core measures such as CPI-trim and median remain near 1.9%. The subdued core profile should limit Bank of Canada reaction, even as new inflation forecasts in the October MPR are upgraded for headline CPI.
Headline CPI lifts, core stays soft
"We look for CPI to firm 0.1pp to 3.2% y/y in September (+0.2% m/m) on another large contribution from energy. Core CPI not expected to show any material broadening of price pressures, with CPI-trim/median projected to edge lower to 1.9% y/y."
"The subdued performance for core CPI should contribute to a more balanced message from the BoC in October with limited passthrough from high oil prices."
"Headline CPI is set to push further above the target range with a 0.1pp increase to 3.2% y/y in September as prices rise by 0.2% m/m."
"Our forecast would see CPI-trim hold at 1.9% y/y in September, while the weighted median edges 0.1pp lower to 1.9%. That would bring CPI-trim/median back to their 2026 lows, even if 3m rates of core inflation at 2.7% paint a more hawkish picture."
"While the Bank has leaned on those 3m rates of core CPI in previous episodes where momentum has shifted quickly, we don't think that 2.7% meets the threshold for the BoC to respond, especially on the heels of renewed weakness in the labour market."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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