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Commerzbank’s Volkmar Baur reports that Brazil’s election outcome surprised markets, with Lula winning the run‑off and BRL dropping about 10% toward 5.50 per Dollar. He stresses Lula’s limited fiscal room given high debt and deficit, and argues the key for the Brazilian Real will be how quickly Lula can convince investors that his reform and consolidation pledges are credible.

Fiscal credibility key for Real

"Brazil’s election result caught markets on the wrong foot. While the first round had raised hopes of a change in power, Ignacio Lula da Silva (“Lula”) ultimately prevailed in yesterday’s run-off and will return to the presidency."

"The real reacted sharply. Having strengthened after the first round, BRL dropped around 10% towards 5.50 against the dollar in thin Asian trading."

"As my colleague Norman pointed out last week, attention will now quickly shift to fiscal policy. With public debt at 83% of GDP and a budget deficit of around 10%, Lula has little room to disappoint."

"He has promised fiscal consolidation in recent weeks, partly in response to market pressure. Now he needs to deliver. That will not be easy, particularly as he faces a more conservative Congress following the parliamentary elections in early October."

"The initial sell-off may well have been exaggerated, but that does not mean it will reverse immediately. Markets had been positioned for a Bolsonaro victory and the associated reform agenda, and such positioning can unwind quickly. "

"For the real, the crucial question is therefore how quickly Lula can convince investors that his reform pledges are credible."

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

• USD/CAD rebounds from a six-week low, snapping a seven-day losing streak as the US Dollar recovers.
• Traders brace for Wednesday's Fed and BoC decisions, with the central banks expected to take different policy paths.
• Traders also await key US economic releases and Canada's GDP data later this week.

USD/CAD rebounds on Monday, snapping a seven-day losing streak as traders reposition ahead of this week’s Federal Reserve (Fed) and Bank of Canada (BoC) monetary policy announcement. At the time of writing, the pair trades around 1.4023 after falling to 1.3969 on Friday, its weakest level since September 16.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.87, recovering from last week’s low of 101.45.

The BoC and Fed announce their interest rate decisions on Wednesday and are expected to take different paths. Traders anticipate a 25-basis-point hike from the Canadian central bank, which would mark its first rate increase since July 2023. In contrast, the Fed is expected to pause after raising rates by 25 basis points in September.

The Canadian central bank will also publish its quarterly Monetary Policy Report, providing updated growth and inflation projections. BoC Governor Tiff Macklem recently said persistently high energy prices would lead to a significant upward revision to the bank’s inflation forecasts. With markets already anticipating a BoC hike and a Fed pause, traders will scrutinise policymakers’ remarks for clues about the timing and pace of further interest rate increases.

Analysts at Commerzbank argue that the Canadian Dollar is “likely to receive some support from monetary policy, at least in the short term,” as the Bank of Canada’s stance diverges from its major peers. They note that their economists “expect both the Fed and the ECB to tighten less than the market is currently pricing in.” By contrast, they highlight that, “given the BoC’s recent hawkish comments, the risk of higher inflation expectations and the prospect of higher BoC inflation forecasts, the BoC could raise rates more than once by the end of next year,” underscoring a comparatively more aggressive policy path that could underpin CAD.

Beyond the central bank decisions, traders also await key economic releases this week. On Tuesday, the US will release the ADP Employment Change four-week average, Durable Goods Orders, Consumer Confidence and New Home Sales. On Thursday, attention will turn to the US Personal Consumption Expenditure (PCE) report, third-quarter Gross Domestic Product (GDP) and weekly Initial Jobless Claims. In Canada, August GDP data is due on Friday.

TD Securities expects September PCE data to confirm elevated US inflation pressures. Core PCE is forecast at 0.32% m/m and 3.1% y/y, with market‑based core PCE at 0.34%. Headline PCE is seen at 0.49% m/m, driven by energy, while real spending turns slightly negative and income growth remains modest, underscoring a squeeze on consumers. They project US Real GDP at 2.5% q/q annualized in Q3, below consensus but still reflecting robust underlying activity.

PCE data to confirm inflation risks

"September PCE prices are likely to reflect the strong CPI print."

"We expect core PCE picked up to 0.32% m/m (3.1% y/y) with strong goods and services."

"Headline was also likely faster at 0.49% (3.6% y/y) due to energy."

"Underlying inflation should accelerate, with market-based core PCE likely rising 0.34%."

"PCE prices to reflect elevated inflation risks while we expect real spending and income to turn negative."

"Consumption likely remained resilient while decelerating slightly with fixed investment also strong in large part due to AI."

"We expect GDP growth picked up in Q3 to 2.5% from 2.2% previously with underlying activity remaining robust."

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

• GBP/USD falls to 1.3342 as US Dollar demand strengthens.
• October Fed hike odds remain at 9%, while December reaches 83%.
• November BoE hike fully priced as UK Autumn Budget approaches.

The Pound Sterling (GBP) loses some ground against the US Dollar (USD) on Monday, drifting lower about 0.22% as traders await the Federal Reserve’s (Fed) monetary policy decision this week and brace for the release of the UK’s Autumn Budget. At the time of writing, the GBP/USD pair trades at 1.3342.

Pound retreats as Dollar strength, UK fiscal uncertainty overshadow BoE hike speculation

Geopolitics continue to drive price action, along with AI hype as Anthropic filed for its IPO, driving the Nasdaq higher. Meanwhile, the US Dollar Index (DXY), which tracks the performance of the buck’s value against six currencies, is up 0.24% to 101.99, a headwind for the GBP/USD pair.

Last week, the US economic schedule was light, with price action being driven by the Middle East conflict and tech stocks. Speculation that the Federal Reserve will raise rates at the two-day meeting ending this Wednesday dissipated, with odds at 9%, while chances of a December hike fell from around 90% last week to 83% as of writing, according to Prime Terminal.

Meanwhile, energy prices are edging lower as senior regional diplomats flew to Iran to try to de-escalate rising tensions. Rumors of a possible US-Israel attack on Tehran waned as US President Donald Trump stated that he would not attack Iran, he said on Sunday.

Last week, the US Dollar came under selling pressure during a tech-led market selloff. Corporate earnings reports from large cloud computing providers Alphabet, Microsoft and Amazon will also test the fragile AI-led market rally and broader risk appetite.

In the UK, eyes are on Chancellor of the Exchequer John Healey, who is poised to reveal his budget, with the priority of stabilizing the UK bond market amid fears of big spending moves that the new Prime Minister Andy Burnham talked about when he became prime minister.

Meanwhile, expectations that the Bank of England will raise rates on November 5 hinge on the release of solid economic data, underscoring the economy's resilience.

Money markets have priced in a 100% chance of a 25-basis-point hike, meaning the interest rate differential between the US and the UK would narrow to zero, an indication that GBP/USD might recover in the coming weeks if Fed Chair Kevin Warsh fails to strike a hawkish tone.

Ahead, the US economic docket will feature Durable Goods Orders, housing and jobs data, along with the Conference Board Consumer Confidence.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3344. The pair retains a bearish near-term bias as it holds below the clustered 50-, 100- and 200-day simple moving averages (SMAs) around 1.3400, while also trading under key upward trend-line breaks at 1.3640 and 1.3820. Momentum has improved, with the Relative Strength Index (14) rising toward a neutral 52 area, but this only hints at moderating downside pressure rather than a clear shift in trend while price remains capped by these overhead structures.

On the topside, initial resistance is seen at the downward-sloping trend-line break near 1.3397, ahead of the dense SMA ceiling around 1.3400; a daily close above this cluster would be needed to ease the bearish bias and open the way toward 1.3640 and 1.3820. On the downside, immediate support is offered by the prior resistance trend line now turned floor around 1.3260, and a sustained move below this level would likely reassert selling pressure and expose lower levels in the broader range.

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

• The Australian Dollar loses 0.24% on Monday but holds above 0.7000 after reaching a one-month high.
• Growing expectations of another interest rate hike in Australia could limit Aussie's downside.
• Investors await Australian inflation figures and the Federal Reserve's monetary policy decision on Wednesday.

AUD/USD edges lower on Monday, trading around 0.7015 at the time of writing, down 0.24%. The pair retreats after reaching a monthly high earlier in the day, as investors adopt a cautious stance ahead of several major economic events this week.

The Australian Dollar (AUD) could draw support from growing expectations of another interest rate hike by the Reserve Bank of Australia (RBA) at its upcoming November monetary policy meeting.

These expectations have strengthened following recent hawkish comments from RBA Assistant Governor Sarah Hunter, who warned that inflation has not yet been fully brought under control. She indicated that further interest rate increases could be necessary, particularly amid the risk of international inflationary pressures becoming entrenched in the Australian economy.

Against this backdrop, investors are closely watching Wednesday's release of Australia's Consumer Price Index (CPI). Higher-than-expected inflation could reinforce expectations of further monetary tightening by the RBA, providing additional support for the Australian Dollar. Conversely, a sharper slowdown in price pressures could weaken rate hike expectations and weigh on the currency.

On the US side, the US Dollar (USD) struggles to extend Friday's modest recovery after hitting a three-week low. Declining US Treasury bond yields and hopes of easing tensions in the Middle East are limiting demand for the Greenback. However, geopolitical uncertainties remain and could trigger renewed safe-haven demand for the US Dollar.

Market attention is also turning to Wednesday's monetary policy decision by the Federal Reserve (Fed), following the two-day Federal Open Market Committee (FOMC) meeting. Investors will closely examine the central bank's guidance regarding the future path of interest rates.

The US economic calendar remains busy, with Thursday bringing the advance estimate of third-quarter Gross Domestic Product (GDP) and the Personal Consumption Expenditures (PCE) Price Index, a key inflation gauge closely monitored by the Fed.

These releases could reshape expectations for the future path of US interest rates and trigger renewed volatility in AUD/USD, as the diverging monetary policy outlooks in Australia and the US remain in focus.

RBA hike risks build as TD flags hawkish shift and November move

According to TD Securities, markets had been “under-priced for the risk of a follow-up hike” even as the bank’s earlier commentary, following the Minutes of the RBA’s September meeting, maintained a call for no further increases this year. On returning to the office, TD’s team “listened to the Deputy Governor's fireside chat from last week and there is no confusion here - his comments were hawkish,” marking a clear shift in tone.

TD stresses that “the Deputy Governor's hawkish comments last week preceded this week's Q3 CPI,” and that “the timing of this hawkish commentary runs counter to his hawkish commentary in March of this year and earlier last month that were delivered after strong data outcomes.” This sequencing, they argue, materially changes the policy risk profile around the upcoming meeting.

On the data front, TD Securities “forecast Q3 quarterly trimmed mean to print 0.92% q/q, above the Bank's 0.85% forecast.” They note that, “theoretically, this should be enough for the Bank to remain on hold at its November meeting given the Bank's decision to hike at its September meeting.”

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.7018 and remains mildly capped in the near term, with price holding below the 100-period simple moving average (SMA) at 0.7020 and the horizontal barrier at 0.7040. The pair still trades above the longer-term 200-period SMA at 0.6990, but the Relative Strength Index (14) near 41 suggests fading bullish momentum and a corrective tone while the broader uptrend structure stays intact.

On the downside, initial support is seen at 0.7013, ahead of the horizontal floor at 0.6994 and the 200-period SMA at 0.6990, which together define a key demand zone for buyers to defend. On the topside, immediate resistance aligns at the 100-period SMA at 0.7020, with a stronger cap at 0.7040; a sustained break above these levels would ease current selling pressure and reopen the path toward higher hourly highs.

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

Commerzbank’s Norman Liebke notes that the Canadian Dollar has underperformed G10 peers but sees support from rising Bank of Canada rate expectations and high Oil prices. He argues that BoC communication has opened the door to rate hikes, while inflation expectations, fragile labour markets and US trade tensions will shape CAD performance and forecast paths for EUR/CAD and USD/CAD.

BoC tightening supports Canadian Dollar

"Nevertheless, Macklem’s latest comments have significantly increased the risk of an imminent rate hike, and we therefore expect an initial move before the end of this year. Although market participants assign an 85% probability to a rate hike this week, and we also expect a hike given the recent more hawkish comments, we nevertheless consider such a move due to the subdued core inflation premature. A total of four rate hikes are priced in by September 2027."

"While further moves next year are certainly possible, this expectation appears somewhat ambitious to us. The interest rate outlook nevertheless remains supportive for the CAD, particularly as our economists expect less tightening from the Fed and ECB by the end of 2027 than currently priced in. However, a substantial part of the expected BoC tightening is also likely already priced in, meaning that additional CAD strength will increasingly depend on the BoC adopting an even more restrictive stance than the market currently expects."

"This leaves the BoC facing an increasingly difficult balancing act. The signs of weakness seen so far are unlikely to be sufficient to rule out rate hikes, particularly because the Canadian real economy has been sending mixed signals for some time. But stronger labour market and economic data would reinforce the case for further rate increases."

"Conversely, a more pronounced deterioration in economic activity could limit the BoC’s scope for additional tightening. Moreover, changes in interest rates affect the real economy only with a lag, meaning the BoC would probably proceed more cautiously if the economy weakened further. The trade conflict therefore remains a key risk factor for the CAD: even if the effective tariff burden ultimately rises by less than feared, persistent uncertainty could weigh on Canada’s growth outlook and thereby limit the Canadian dollar’s appreciation potential."

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

• Gold reclaims $4,000 as Middle East diplomatic efforts prompt a pullback in Oil prices.
• Traders await the Fed's monetary policy announcement scheduled for Wednesday.
• Technical indicators remain bearish, with RSI near oversold territory and MACD in negative territory.

Gold (XAU/USD) attracts dip-buying interest on Monday after last week’s sharp decline pushed the metal to $3,975, its lowest level since July. A pullback in Oil prices also offers some support as traders react to diplomatic efforts to ease tensions in the Middle East. However, a recovery in the US Dollar (USD) keeps the metal’s gains in check ahead of the Federal Reserve’s (Fed) monetary policy decision on Wednesday.

At the time of writing, XAU/USD trades around $4,025, up 0.73% on the day. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.99 after falling to 101.45 last week, its lowest level since October 1.

Reuters reported that officials from Saudi Arabia, Pakistan and Turkey, the three Mecca Pact members, are holding talks with Iranian leaders in Tehran on Monday. Iranian Foreign Ministry spokesman Esmaeil Baghaei said the discussions would cover Israel’s expansionist policies, developments in the Palestinian territories and Lebanon, and the repercussions of US and Israeli military action against Iran.

The meeting follows talks between Qatari mediators and Iranian officials in Tehran on Sunday as part of efforts to ease regional tensions. West Texas Intermediate (WTI) Oil eases to around $100.30 per barrel after reaching $103.28 on Friday, its highest level since May. 

The metal lost around 4% last week as rising Oil prices reinforced expectations of further Federal Reserve (Fed) tightening, outweighing support from falling US Treasury yields and a softer US Dollar (USD). Treasury yields came under pressure as concerns over AI-related investments drove demand for government bonds. The broader equity sell-off may also have prompted some traders to sell Gold to cover losses elsewhere.

The Fed's monetary policy announcement could determine whether Gold holds above the $4,000 psychological mark or faces another round of selling. The Fed is widely expected to leave interest rates unchanged at 3.75%-4.00% after raising them by 25 basis points (bps) in September. However, a pause may offer little reassurance to Gold buyers if policymakers keep the door open to another increase in December, with traders pricing in around a 79% probability of a hike, according to the CME FedWatch Tool.

Fed seen on hold now but December hike risk builds as inflation stays above target

According to TD Securities, analysts don't expect "much new communication from the FOMC or Chair Warsh." In their view, "a hold in October will make a December hike all the more likely," particularly after the "upside surprise in September CPI," which underscores that "inflation risks are still pertinent."

TD Securities therefore "expect the Fed to hike two more times (December and March)," noting that "inflation remains above target while risks are growing." They add that "the evolution of inflation data will determine the extent and pace of hikes later in the cycle," suggesting that incoming price figures will be crucial in shaping the policy path beyond early next year.

Technical analysis: Lower Bollinger Band caps upside

On the daily chart, XAU/USD is attempting to move back above the lower Bollinger Band at $4,023. The Relative Strength Index (RSI) at 36 sits just above oversold territory, while the Moving Average Convergence Divergence (MACD) histogram remains negative; both indicators hint at persistent downside pressure rather than a decisive exhaustion of the recent slide.

On the upside, initial resistance emerges at the lower Bollinger Band near $4,020, followed by the middle band around $4,130 and the upper band near $4,241. A sustained break above these levels could open the door for a recovery toward the $4,400-$4,500 zone, followed by $4,700.

On the downside, immediate support lies in the $3,975-$3,950 region. A decisive break below this zone could trigger a deeper decline toward the $3,900 psychological mark, followed by $3,800.

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

(This story was corrected at 14:15 GMT on Monday to clarify in the first paragraph that Gold fell to its lowest level since July, not August.)

TD Securities’ Macro Research team, led by Robert Both and Emma Lawrence, expects the Bank of Canada to keep its policy rate at 2.25% at the October 28 meeting, despite markets pricing around 20bps of tightening. They argue recent inflation data and growth uncertainty do not justify an immediate hike, but now anticipate rate increases in December and January, with a terminal rate near 2.75%.

October pause before further tightening

"All eyes will be on Wednesday's Bank of Canada decision and whether the Bank follows on Governor Macklem's hawkish comments with the first hike since 2023. We think they hold at 2.25%."

"We look for the Bank of Canada to hold rates at 2.25% in October, despite the recent comments from Governor Macklem after the IMF meetings in Thailand. While we can't rule out a 25bp move after Macklem's roundtable and the subsequent shift in market expectations, we do not think the Bank should be hiking without more evidence of high oil prices broadening into core inflation."

"With ongoing uncertainty over the impact of new trade tensions and threats of further escalation going forward, we think the right move would be to wait for another six weeks for more clarity. If the Bank does hold in October, we also expect to see more hawkish messaging to signal that hikes will be coming soon."

"However, the Bank's recent messaging does indicate more of a forward-looking approach to manage inflation risks, and for that reason we are pulling forward rate hikes to December and January from our previous view for January/March. We still look for the Bank to stop at 2.75%."

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

• EUR/USD edges lower as a firmer US Dollar and France's fiscal concerns weigh on the Euro.
• Traders await this week's Fed and ECB policy decisions, with both central banks expected to hold interest rates steady.
• Upcoming US inflation and Eurozone growth figures could influence expectations for December policy moves.

EUR/USD edges lower on Monday as a rebound in the US Dollar (USD) weighs on the Euro (EUR) ahead of this week’s Federal Reserve (Fed) and European Central Bank (ECB) monetary policy decisions. Meanwhile, France’s worsening fiscal outlook and bond-market pressures remain additional headwinds for the Euro.

At the time of writing, the pair trades around 1.1183, down 0.17% on the day. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.99 after falling to 101.45 last week, its lowest level since October 1.

The Fed announces its decision on Wednesday, followed by the ECB on Thursday, with both central banks widely expected to leave interest rates unchanged. Inflation remains above their respective 2% targets, while higher energy costs linked to Middle East tensions keep risks tilted to the upside. With traders anticipating rate hikes from both in December, guidance on the policy outlook could drive a stronger market reaction than the decisions themselves.

Euro faces headwinds as higher oil and inflation expectations outpace ECB response

According to Commerzbank, the recent rise in oil prices should be particularly problematic for the Euro, as “higher oil prices in particular should put greater pressure on the euro, as their impact on both inflation and economic activity in the euro area is more pronounced and, on balance, negative for the currency.” The bank notes that “short-term inflation expectations have risen more strongly in the euro area than in the US,” and that “higher inflation expectations are currently not being offset by a corresponding shift in relative interest-rate expectations.” Taken together, Commerzbank argues, “this is, in principle, a negative signal for the euro.”

At the same time, the bank observes that the recent widening in French spreads has not yet translated into broader Eurozone stress, commenting that “this suggests that the market currently views the fiscal concerns largely as a French problem.” Commerzbank sees “one possible explanation” in “the expectation that the ECB would intervene if contagion became more pronounced, thereby limiting the risk of broader fragmentation in the euro-area bond market.”

Beyond the central bank decisions, a busy economic calendar could also influence EUR/USD this week. Tuesday’s US releases include the ADP employment update, September Durable Goods Orders, October Consumer Confidence and September New Home Sales. Thursday brings September Personal Consumption Expenditures (PCE) inflation, the advance estimate of third-quarter Gross Domestic Product (GDP) and weekly Initial Jobless Claims.

In the Eurozone, October business climate, consumer confidence and economic sentiment figures are due on Thursday. Friday’s releases include preliminary third-quarter GDP and the unemployment rate for the bloc, alongside Germany’s preliminary October Consumer Price Index (CPI).

Commerzbank’s Dr. Vincent Stamer analyzes Spain’s strong economic performance, with GDP expected to grow 2.6% in 2026, far ahead of other Euro area economies. He attributes this to higher potential growth driven by immigration and labor market reforms, but warns that these tailwinds are peaking, with political and bond-market risks likely to slow growth below 2% next year.

Economic momentum seen peaking

"Spain’s economy has been growing at an average rate of just under 3% per year since 2023 and is on track for 2.6% growth this year as well. This means that economic output in Spain has risen nearly three times as fast as in the euro area excluding Spain. What are the reasons for this, and what does the future hold?"

"It is highly likely that Spain’s GDP will, from now on, grow at no more than its potential rate and will not exceed it any further. Potential growth, in turn, is likely currently at its peak and will now begin to decline. The virtuous cycle of growth, falling structural unemployment, and rising productivity could slow down."

"Furthermore, the net migration is also declining relative to Spain’s steadily growing population. This dampens potential growth as measured in percentage terms, so that by 2030 it is likely to be a good one percentage point below the current level."

"Growth in Spain is expected to remain strong for the time being, but may already be weaker now than it was in the first half of this year. After strong growth of 2.6% this year, the growth rate could slip below 2% next year. Spain thus remains the star performer among the major economies of the eurozone."

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