Forex News

• AUD/USD recoups some post-RBA losses but stays in negative territory.
• The RBA raises rates to 4.85%, while Governor Bullock signals a possible pause to assess incoming data.
• Traders monitor Oil price swings, US midterm elections and upcoming US employment figures.

AUD/USD claws back some of the losses recorded immediately after the Reserve Bank of Australia’s (RBA) monetary policy announcement earlier on Tuesday, which pushed the pair to a two-week low of 0.6961. At the time of writing, AUD/USD trades around 0.6990, down 0.10% on the day.

The RBA raised its cash rate by 25 basis points (bps) to 4.85%, as expected, taking rates to their highest level since 2008. This marks its fifth hike this year as policymakers respond to surging inflation fuelled by the global Oil shock triggered by the war in the Middle East.

The Australian Dollar fell despite the hike as traders focused on the split vote and softer policy guidance. Six board members backed the increase, while three preferred to hold rates steady. The RBA also dropped its explicit reference to further hikes if needed.

RBA Governor Michele Bullock struck a cautious tone, saying it was “probably best to pause and assess incoming data.” Bullock also said she was “uncertain about the next rate move” and stressed that monetary policy “requires time to take effect.”

However, the central bank maintained that “the Board will continue to do what it considers necessary to bring inflation sustainably back to target.” It also warned that inflation is “not expected to reach the top of the 2-3 percent target range until late 2027, around three quarters later than previously forecast.”

Meanwhile, volatile Oil prices keep the US Dollar (USD) choppy on Tuesday. Oil prices have edged lower following unconfirmed reports that Washington and Tehran have made concessions over Iran’s nuclear program and frozen funds, raising hopes of diplomatic progress.

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, hovers around 101.80, little changed on the day, with attention also on the US midterm elections.

Attention also turns to US employment data, starting with JOLTS Job Openings on Tuesday and ending with Nonfarm Payrolls (NFP) on Friday. The figures could shape expectations for a December Fed rate hike and provide fresh direction for AUD/USD.

ING’s Francesco Pesole reports the Australian Dollar fell after the RBA raised rates to 4.85% but signalled a more dovish stance via a 6-3 vote, softer guidance and a weaker economic outlook. He expects no further hikes, yet remains positive on AUD thanks to strong carry and limited scope for dovish repricing. ING still targets AUD/USD at 0.7100 by year-end despite near-term challenges.

RBA stance and AUD/USD year-end target

"The Aussie dollar came under pressure this morning after the RBA hiked rates as expected to 4.85%, but delivered some dovish signals. First, the 6-3 split suggests lower conviction around today’s decision than in markets, which had almost fully priced in a hike (21bp)."

"Second, the statement dropped its reference to potential further hikes for the first time since June. Third, the economic outlook was revised sharply to the downside, with a focus on falling house prices weighing on consumers and upside risks to unemployment."

"At the press conference, Governor Michele Bullock reinforced the RBA’s wait-and-see approach, stressing that monetary tightening still has to feed through to the economy. She left the door open to further tightening, but the bar is clearly higher now. The RBA appears happy to assess the impact of previous hikes before acting again."

"This is in line with our forecast of no further RBA hikes. Despite today’s correction, we remain positive on AUD, which offers the best short-term carry in G10, including on a volatility-adjusted basis. Markets price only a one-in-three chance of another hike at the coming meetings and already embed 13bp of easing by the end of 2027, leaving AUD with limited risk of further dovish repricing for now."

"The current environment remains a bit challenging for AUD amid AI-related jitters, but we remain confident that our 0.7100 AUD/USD target can be reached by year-end."

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

Commerzbank’s Norman Liebke argues that the US midterm elections are only one factor for the Dollar, with institutional and geopolitical risks also in focus. He outlines how different Congressional outcomes could pressure or support the Dollar, and highlights potential Iran-related escalation or a contested vote as key sources of volatility for US assets and the Dollar.

Congress outcomes and geopolitical risks

"The US midterm elections are taking place today. The first results are likely to start coming in shortly after midnight CET, although the outcome in particularly closely contested states may not become clear until several days after the election. According to the latest polls, the Republicans appear headed for a significant defeat and could lose not only their majority in the House of Representatives but also control of the Senate."

"If only the House of Representatives changes hands, the dollar would likely face some headwinds as well, albeit to a lesser extent. If the Republicans retain control of both chambers, this should instead provide support for the dollar."

"What happens immediately after the midterms is also likely to be relevant for the dollar. If Trump were indeed to escalate the conflict with Iran again and launch another attack on the country, this would initially point to further increases in energy prices and rising risk aversion. The dollar could benefit from its role as a safe haven, as it did at the beginning of the Iran war."

"On the other hand, the recent hopes of a diplomatic solution put significant downward pressure on oil prices yesterday. A further easing of tensions with Iran could therefore put additional pressure on the dollar. There is also another risk: while a challenge by US President Trump to the election results is not the baseline scenario, it cannot be ruled out entirely given events in recent years. The resulting political uncertainty would increase volatility in financial markets."

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

Standard Chartered’s Nicholas Chia reviews the Reserve Bank of Australia’s (RBA) November decision to lift the cash rate to 4.85% in a 6-3 split vote. The report highlights a less dovish tone than markets perceived, with Governor Bullock stressing upside inflation risks, higher NAIRU and neutral rate, and the possibility of follow-through hikes or delayed easing, with the first cut tentatively expected in Q3-2027.

Policy options kept firmly open

"The Reserve Bank of Australia (RBA) hiked the cash rate to 4.85% at the 3 November meeting, as we and market consensus had expected. The 6-3 split decision and the omission of references to further cash rate increases in the statement were likely read by the market as dovish. That said, the statement still cited upside risks to inflation and conceded that capacity pressures have been tighter than previously thought."

"Governor Bullock struck a balanced tone at the press conference, in our view. She dismissed suggestions that the omission of references to further cash rate increases in the statement implies that the RBA is done with hiking, stressing that the RBA is “preserving our options”. She indicated that both the non-accelerating inflation rate of unemployment (NAIRU) and the neutral interest rate have crept higher, although she did not provide estimates for either measure."

"Our base case is that the RBA is done with rate hikes, and the market is similarly not pricing in any more hikes in 2027. We would continue to watch for the risk of follow-through hikes by the RBA (or of a later start to policy easing in 2027). We tentatively expect the first rate cut in Q3-2027; the RBA has recently shown little aversion to hiking rates to multi-year highs as upside risks to inflation materialise."

"For now, we think it will prefer to wait and reassess the economic backdrop at subsequent meetings amid external uncertainty, elevated oil prices and positive spillovers from global tech spending."

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

• EUR/GBP remains near April 2025 lows as the Euro struggles to recover.
• France’s fiscal risks and BoE interest rate hike expectations support the British Pound against the Euro.
• PMI and Eurozone inflation figures come into focus ahead of Thursday’s BoE decision.

EUR/GBP edges lower on Tuesday after posting modest gains the previous day, when a sharp decline in Oil prices offered some relief to the energy-dependent Eurozone and supported the Euro (EUR). At the time of writing, the cross trades around 0.8336, down 0.11% on the day.

Oil prices rebound after the Wall Street Journal (WSJ) reported that Washington carried out limited strikes on Iran’s Qeshm Island. West Texas Intermediate (WTI) trades above $97, up 2.45%, after losing nearly 7% on Monday. The decline followed reports that Iran’s President said the Supreme Leader had granted the government more authority over negotiations.

The Euro remains near levels last seen in April 2025, as heightened fiscal risks in France keep the British Pound (GBP) favoured against the single currency. A light economic calendar on Tuesday leaves traders focused on Middle East headlines and Oil price movements.

On Wednesday, attention turns to the final October Services and Composite Purchasing Managers’ Indexes (PMIs) from the Eurozone and the United Kingdom, alongside preliminary Eurozone inflation figures.

These releases lead into the Bank of England’s (BoE) monetary policy announcement on Thursday. The BoE is widely expected to deliver its first rate hike since 2023 as policymakers seek to prevent the Middle East energy shock from feeding into broader price pressures.

BoE rate hike expectations also lend support to the British Pound against the Euro. A rise to 4% would widen the gap with the ECB’s 2.50% deposit rate to 150 basis points (bps) from 125 bps.

Sterling outperformance persists as EUR/GBP slide invites consolidation

Analysts at ING note that Sterling is “trading reasonably well,” underpinned by the market’s view that “high energy prices leave the Bank of England no alternative but to hike rates on Thursday.” They add that “upside economic surprises, UK fiscal policy seemingly heading in the right direction and warmer ties with the EU all seem to be helping sterling too.” Positioning is also seen as supportive, with ING highlighting that “speculators are still running reasonably large short positions in sterling, which suggests this period of sterling outperformance can continue.”

Against this backdrop, ING points out that “EUR/GBP has come a long way very quickly – a near 4% drop in a little over a month,” and judges that “some consolidation is probably due.” Even so, they argue that with “high energy prices likely to keep expectations of higher UK policy rates in place until early next year and French budgetary problems unresolved, it is too early to expect a significant low in EUR/GBP.”

Ryan McKay at TD Securities describes a precarious global Oil market where Middle East flows have returned to pre-war levels but logistics remain distorted, keeping a sizeable risk premium embedded. High-frequency data show crude surplus building mostly on water while onshore inventories draw, with product markets still in heavy deficit and likely forcing future crude market tightening.

Global crude balance and product deficit

"The global energy market remains in a precarious state. While flows from the Middle East via the Strait of Hormuz, the Gulf of Oman and through bypass pipelines have returned to pre-war levels, market pricing has remained elevated. Improved demand, still tight product markets, and an escalation supply risk premium, due to persistent Houthi attacks on Saudi infrastructure and IRGC tanker attacks, are the main reasons prices remain elevated."

"The tanker shuttle trade around the coast of Oman is expensive, requires constant US Navy support and has logistical frictions tied to increased loading and travel times due to ship-to-ship transfers, which has also contributed to sky-high freight rates."

"Looser supply-demand, but drawing inventories and higher prices. Our high frequency crude oil supply-demand data implies a surplus growing to near 2-3m b/d recently, however this implied surplus is thus far only contributing to a build up of oil on water, while onshore commercial inventories continue to decline."

"On the flip side, global petroleum product markets remain in an estimated deficit of over 2m b/ d, suggesting the crude market will likely need to tighten again at some point to alleviate the product market pressures."

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

• The US Dollar Index is picking up from session lows but remains within previous ranges, below 102.00.
• The Greenback is drawing support from hostilities in Iran and higher Oil prices, but US political uncertainty is capping gains.
• ING experts affirm that a Democratic sweep might put some short-term pressure on the USD.

The US Dollar shows a mild bullish tone against most of its main peers on Tuesday as fresh hostilities in Iran cast doubt over a peace process and boost Oil prices, while uncertainty about the US midterm elections keeps rallies limited so far. The US Dollar Index (DXY) has bounced up from session lows in the 101.50 area but remains capped below the 102.00-102.10 area, which capped upside attempts on Monday and Friday.

The Greenback is drawing some support from the increasing concerns of a resumption of hostilities in Iran after the US military hit targets on the Iranian Qeshm Island in the Strait of Hormuz, in what the US authorities called a “defensive” operation.

Trump remains optimistic about a peace deal with Iran

Meanwhile, efforts to bring the parties back to the negotiating table remain alive, and have obtained some support from the US side. US President Donald Trump downplayed the possibility of an all-out war and affirmed that a peace deal with Iran “could happen,” as, in his opinion, Tehran "wants a settlement, as soon as possible."

On the macroeconomic front, US ISM Manufacturing Purchasing Managers' Index (PMI) figures, released on Monday, showed stronger-than-expected factory activity, with price pressures at high levels, suggesting thst the US economy entered the fourth quarter on strong footing.

The data, however, failed to provide any significant support to the US Dollar, as investors await the result of US midterm elections to make investment decisions. Strategists at ING argue they “don’t expect today’s US midterm results to cause structural shifts in FX.” ING analysts, however,, flag some “short-term pressure” for the Dollar if the Democrats were to secure both the House, which is “widely expected,” and the Senate, described as a “close call.”

BNY Markets’ John Velis maintains the view that the Federal Reserve will deliver one additional rate hike in December to preserve credibility after its latest hold. He sees a murkier outlook heading into 2027, arguing inflation is mainly supply-driven and expectations anchored. Velis doubts higher rates can address supply pressures but warns demand-side risks could justify more tightening later.

December hike then uncertain 2027 path

"After last week’s anticipated hold by the FOMC, we maintain our view that there will be one additional rate hike in December this year, to preserve Fed credibility. Heading into 2027, the landscape appears much murkier."

"Yes, inflation remains high, and the recent bout of higher oil prices will undoubtedly keep the pressure on prices. We’ve argued, and continue to argue, that inflation is mainly supply driven, and that inflation expectations remain well anchored over long horizons."

"We’re not convinced that higher rates will be able to rein in supply pressures, as they are indeed a demand-management tool. Nevertheless, it bears watching to see if demand-side pressures emerge in 2027, in which case interest rate remedies would be appropriate."

"We noted with some interest Warsh’s assertion at last week’s press conference that the interest rate hike in September tightened financial conditions meaningfully, since aside from the AI-related wobbles in October, there’s scant evidence of such tightening pervading across the real economy."

"Still, should financial jitters persist, conditions will naturally tighten, requiring fewer hikes in 2027 than the two currently priced in."

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

• The Indian Rupee gains further against the US Dollar due to lower oil prices.
• The risk premium on oil prices erodes due to hopes for US-Iran diplomacy resolution.
• US midterm elections are the next key trigger for global markets.

The Indian Rupee (INR) extends its winning streak against the US Dollar (USD) for the third trading day on Tuesday. As of writing, the USD/INR pair is down 0.15% to near 94.75.

The Indian currency strengthens as oil prices continue to face selling pressure on the back of improved hopes for United States (US)-Iran diplomatic resolution.

At press time, the MCX Crude Oil contract expiring on November 19 is up 1.65% to near Rs. 9,222, but is down almost 7.5% from its recent multi-month high of Rs. 9,972.

Oil risk premium eases as diplomacy headlines reshape market tone

According to TD Securities, recent headlines suggesting that US President Donald Trump is willing to give diplomacy more time, and "signaling attacks may not be imminent immediately before/after the midterms," have already seen "a portion of the geopolitical risk premium priced out of crude oil and petroleum products." The strategists add that "with flows elevated, and a large portion of recent upside attributed to a risk premium, these headlines will have an increasingly large impact on the market," as positioning and sentiment adjust to the evolving geopolitical narrative.

However, TD Securities has cautioned that “headlines alone are unlikely to shed the whole risk premium.” TD Securities adds that “so long as there is no concrete conclusion to the war, and tanker and Houthi attacks remain prevalent, we do not anticipate a complete erosion of the risk premium via diplomacy headlines alone,” underscoring that persistent geopolitical threats continue to underpin pricing.

Lower oil prices bode well for currencies from economies, such as India, which rely heavily on oil imports to meet their energy needs.

Investors brace for US midterm elections

Strategists at Brown Brothers Harriman (BBH) note that “the US midterm elections will be held on Tuesday,” with “Democrats widely expected to win the House of Representatives.” They add that “Senate control is much closer, but the tide favors the Democratic Party,” as “Democrats need a net gain of four seats to secure a majority in the Senate” — a target that is “within reach as Republicans are defending six of the seven toss-up seats.”

BBH highlights that betting markets “favor a Democratic sweep,” with Polymarket and Kalshi “putting the odds around 70%.” In their view, that “points to a relatively muted initial market reaction if Democrats win both chambers,” whereas “a Republican Senate hold would be the bigger surprise and could spark more market volatility.”

Technical Analysis: USD/INR sees more downside towards 94.16

In the daily chart, USD/INR trades at 94.75, keeping a bearish near-term tone as spot holds beneath the 20-day Exponential Moving Average (EMA) at 95.20. The pair’s position under this short-term trend gauge suggests rallies remain capped, while the Relative Strength Index (14) at 37.64 stays below the neutral 50 line, hinting at prevailing downside pressure rather than an oversold extreme.

On the topside, immediate resistance is located at the 20-day EMA at 95.21, and a daily close above this barrier would be needed to soften the current bearish bias. On the downside, the June 25 low at 94.16 is the key support level.

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