Forex News

Societe Generale's Anatoli Annenkov expects French fiscal uncertainty to sustain bond-market volatility beyond the 2027 elections. He explains why ECB intervention remains unlikely for now and how TPI and OMT could provide conditional support if fragmentation threatens monetary policy transmission.

ECB toolkit for fragmentation risks

"Bond markets are likely to remain focused on France until well beyond the 2027 elections, keeping volatility and contagion risks elevated until a clear and credible fiscal strategy emerges. This will require the ECB to stay alert to market developments that could impair monetary policy transmission. While the bar for intervening remains high, a sharp deterioration in market liquidity and functioning would quickly bring the ECB back into focus as the euro area’s first line of defence against fragmentation."

"Many client questions focus on what the ECB could and would do if sovereign bond markets start fragmenting more severely, with French and potentially other sovereign debt selling off in an unwarranted and disorderly manner, threatening the smooth transmission of monetary policy. Key to remember is that the ECB has no mandate to “save” countries. Rather, as functioning financial markets are essential for the ECB to deliver on its primary price stability mandate, it also has financial stability responsibilities."

"For now, neither the scale of repricing nor market dysfunction warrants ECB intervention, with the bar for unilateral action remaining high. There is no specific level of spreads or market dysfunction that would automatically trigger intervention. Italian spreads over Bunds exceeded 300bp in 2018 without ECB action."

"Only with the prospects of credible corrective action by the affected government, possibly including EU support, or in case of unwarranted spill-over effects on markets and other countries, would we see the case for the ECB to activate instruments such as the TPI, OMT (both never used) or even temporary broad-based asset purchases to address disorderly markets that threaten monetary policy transmission. Any such measures should be temporary, targeted and tailored, conditional on implementation of corrective fiscal measures and with a clear exit path."

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

HSBC’s FX Viewpoint, dated 2 November 2026, reviews the latest FOMC decision and its implications for the Dollar. The Federal Reserve kept rates at 3.75-4.00% but signalled that a December hike remains possible as US economic activity is described as strong and inflation elevated. HSBC maintains its strong USD view into 2027, while warning that the path may be volatile.

Fed hold sustains Dollar strength

"At its 27-28 October meeting, the FOMC voted 10 to 2 to hold the federal funds target range steady at 3.75-4.00%, in line with expectations."

"The accompanying statement left the door open for a December hike."

"The USD is likely to face a bumpy road into year-end."

"We have maintained our strong USD view for several months, supported by US economic resilience, a hawkish Fed, and challenges facing other major currencies."

"That view remains intact as we head into 2027, although the path is unlikely to be smooth."

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

• EUR/USD bounces from lows near 1.1100 but is struggling to extend gains beyond 1.1200.
• Eurozone Manufacturing data was supportive, but concerns about France's debt remain weighing.
• The technical picture shows a corrective reaction, with the bullish momentum still fragile.

The Euro (EUR) holds a positive tone against the US Dollar (USD) on Monday, favoured by positive Eurozone factory activity data and concerns about US elections. The EURUSD pair, however, is struggling to find acceptance above the 1.1200 level, which leaves price action in no man’s land between the nearly 18-month lows just above 1.1100 hit on Thursday and a cluster of resistance between 1.1255 and 1.1285.

Upward revisions to October’s Eurozone Manufacturing Purchasing Managers’ index figures have provided a fresh boost to the Euro, which had already taken advantage of investors’ concerns about the outcome of the US midterm elections, which will take place on Tuesday. 

EUR/USD, however, steadied later on, as markets put the delicate financial stability of some Eurozone members back into the equation. Fitch delivered an unscheduled ratings review on France, shifting its outlook on French sovereign debt from stable to negative and signalling another ratings review by the end of February.
"Let’s see whether this unscheduled move puts much pressure on the OAT-Bund spread today,” says Chris Turner, an analyst at ING, who also argues that " the news limits the potential for EUR/USD to rebound on softer energy prices.”

Technical Analysis: Immediate resistance is at the 1.1255 - 1.1285 area

EUR/USD trades around 1.1220, keeping the bearish near-term tone intact, yet with momentum indicators showing fading traction. The 4-hour Relative Strength Index (RSI) at 46.5 has lifted out of oversold territory but remains below the midline, while the Moving Average Convergence Divergence (MACD) is marginally positive, pointing to an easing bearish trend rather than reversing structure.

Bulls are likely to find significant resistance between the October 22 high at 1.1256 and the October 2 high at 1.1285. Further up, the next target is the area between June lows, at 1.1325, and the 38.2% Fibonacci retracement at 1.1337

On the downside, below Friday's low, at 1.1104, bears are likely to be attracted by the May 2025 lows around 1.1050 ahead of the 1.1000 psychological area.

(This story was corrected on November 2 at 13:23 GMT to clarify that EUR/USD hit a nearly 18-month low on Thursday, not Friday.)

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

OCBC strategists Sim Moh Siong and Christopher Wong expect the US Dollar (USD) to stay broadly supported into 1H27, with EUR/USD potentially dipping below 1.10 as AI-related uncertainty and elevated energy prices sustain US growth and inflation premia. However, firmer Asian currency management and fading AI impulse later on underpin a U-shaped EUR/USD profile, with scope for Euro recovery in 2H27 as Fed hawkishness eases.

Dollar firm but not one-way

"These conflicting forces have kept the USD broadly range-bound. AI concerns are challenging the US growth premium, while higher energy prices reinforce inflation risks. At the same time, markets may increasingly question how far the Fed can tighten if AI-related stress leads to a material tightening in financial conditions."

"We still think it is too early to position for sustained USD weakness. AI remains broadly supportive of US growth and the USD, but it is no longer a one-way trade. USD upside should also be more contained, particularly as firmer currency management in China and potentially Japan helps anchor regional Asian currencies."

"We remain constructive on the USD against the EUR into 1H27 and see scope for EUR/USD to slip below 1.10. European tail risks remain unresolved. While Moody’s decision to retain France’s Aa3 rating provided some relief, the negative outlook and lingering fiscal risks should limit the scope for a sustained OAT rally ahead of the 2027 French presidential election."

"Beyond 1H27, we retain our U-shaped EUR/USD profile. As the US AI growth impulse peaks and fades, the hawkish Fed risks that have supported the USD should also ease, creating room for EURUSD to turn higher in 2H27."

"USD should stay supported into 1H27, with EUR/USD potentially slipping below 1.10. But AI uncertainty and firmer Asian FX management should cap USD gains, setting the stage for a EUR/USD recovery in 2H27."

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

ING’s Chris Turner says Sterling is trading relatively well as markets fully price a 25bp Bank of England (BoE) rate hike to 4.00% on Thursday. He cites high energy prices, better United Kingdom (UK) data, supportive fiscal policy and improved European Union (EU) relations as positives, while noting large speculative short positions and expecting EUR/GBP consolidation rather than a significant low in the cross.

Sterling buoyed by fully priced BoE move

"Sterling is trading reasonably well. Helping it has been the view that high energy prices leave the Bank of England no alternative but to hike rates on Thursday."

"A 25bp rate hike to 4.00% looks like a done deal."

"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."

"Notably, speculators are still running reasonably large short positions in sterling, which suggests this period of sterling outperformance can continue."

"EUR/GBP has come a long way very quickly – a near 4% drop in a little over a month. Some consolidation is probably due. But 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."

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

The US Dollar (USD) has retraced most of its previous losses on Monday, but remains on the defensive with investors wary of holding large US Dollar longs ahead of the US midterm elections, while growing concerns about an AI bubble pose an additional threat. Against this background, the US Dollar Index (DXY) trades at 101.66 at the time of writing, still close to the bottom of the October range at the 100.40 area.

Macroeconomic data released last week reinforced the rhetoric of US economic exceptionalism. Gross Domestic Product (GDP) growth accelerated sharply in 3Q, and inflation remains at levels well above the Federal Reserve's (Fed) target, keeping pressure to hike interest rates further. The US Dollar index, however, is failing to find support from these figures, and has shown a capped tone during the last two weeks.

Midterm elections and tech sell-off curb US Dollar's upside attempts

Analysts at MUFG/BTMU caution that a “damaging defeat for the Republicans could put a dampener on US Dollar strength” on Tuesday. They argue such an outcome would “limit room for further fiscal stimulus” and could shift market focus toward “less market friendly policies beyond the current Presidency,” adding another layer of political uncertainty to the US Dollar outlook.

In a similar vein, ING highlights positioning and political risk as key near-term drivers, noting that “the main risk for the Dollar today is some precautionary unwinding of net-long positions ahead of Tuesday’s US midterm elections.”

The bank points out that “a Democratic sweep is trading around 68% in prediction markets,” a scenario that “could be seen as slightly negative for the US Dollar from a few angles, from higher risk of government shutdown and gridlock on debt ceiling negotiations to potential damage to already shaky AI-related sentiment.” Against this backdrop, ING concludes that “we’d be cautious in chasing the USD upside in the next few days.”

BBH experts, on the other hand, put the focus on equity markets, where the “tech sell-off can keep USD on defensive in the near term.” BBH, however, assesses that “strong US economic activity and rising price pressures reinforce the Fed’s hawkish bias,” meaning that “rate differentials” should remain “supportive of USD” even as near-term sentiment softens.

Rabobank expects the Reserve Bank of Australia (RBA) to raise interest rates at its upcoming meeting, supported by stronger-than-expected inflation data and hawkish policymaker comments. However, concerns that Governor Bullock may highlight economic headwinds have weighed on the Australian Dollar (AUD). The bank sees AUD/USD rising to 0.71 in three months but has lowered its 9- and 12-month forecasts to 0.72 from 0.73, reflecting a relatively constructive outlook for the US Dollar (USD).

Australian Dollar weighed by growth worries

"It is RaboResearch’s view that the RBA is primed to hike rates at tomorrow’s policy meeting. Indeed, according to the Bloomberg survey, all but three forecasters expect the central bank to announce a rate hike this week. Despite the strength of the market’s conviction about the direction of policy this week, the AUD is the third worst performing G10 currency measured over the past 5 days."

"The reasons behind Rabobank’s expectation for a rate rise this week lie with the recent stronger than expected Australian CPI inflation data coupled with recent hawkish commentary from RBA rate setters."

"While it is RaboResearch’s house view that there is risk of subsequent rate hikes, depending on the trajectory of the oil price after the US mid-term elections, the lacklustre tone of the AUD in recent sessions reflects the risk that Governor Bullock could instead indicate that she is becoming more concerned about the health of the real economy."

"Supported by our house call which sees risk of further RBA tightening this cycle, we see scope for AUD/USD to edge higher to 0.71 on a 3-month view. That said, given the expectation that the Fed will hike rates further in December, upside potential for the currency pair is likely limited. Indeed, if attention does start to refocus on the headwinds facing household demand from higher interest rates and inflation, AUD/USD could start to struggle."

"For now we have revised lower our 9- and 12-month AUD/USD forecasts to 0.72 from 0.73. This reflects our relatively constructive medium-term view for the USD."

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

• GBP/JPY edges higher as the Japanese Yen remains under pressure against most of its major peers.
• BoE rate hike expectations and easing UK fiscal concerns support the Pound.
• The BoJ's hawkish signals and intervention warnings offer little support to the Yen.

GBP/JPY edges higher on Monday as the Japanese Yen (JPY) struggles despite the Bank of Japan’s (BoJ) hawkish signals. Meanwhile, reduced fiscal uncertainty following the UK’s Autumn Budget supports the British Pound (GBP) as traders turn their attention to this week’s Bank of England (BoE) monetary policy announcement. At the time of writing, the cross trades around 211.87, up 0.44% on the day, after briefly climbing above 212.

The BoE announces its interest rate decision on Thursday, with a 25-basis-point (bps) increase fully priced in as soaring energy costs drive inflation higher. Steady labour market conditions and resilient growth also give policymakers room to raise borrowing costs. Attention will centre on the forward guidance and whether policymakers back market expectations for further tightening in 2027.

Analysts at ING note that Sterling is “trading reasonably well,” supported by the market’s conviction that “high energy prices leave the Bank of England no alternative but to hike rates on Thursday.” They add that “a 25bp rate hike to 4.00% looks like a done deal,” with sentiment toward the Pound further bolstered by “upside economic surprises, UK fiscal policy seemingly heading in the right direction and warmer ties with the EU,” all helping Sterling too.

OCBC argues that "GBP resilience should extend into early 2027 as fiscal discipline, resilient growth and political stability remain supportive." However, they caution that "with substantial BoE tightening already priced in, further gains will require increasingly positive UK surprises."

On the other side of the cross, the Japanese Yen (JPY) remains under pressure despite the BoJ’s hawkish stance, as elevated energy prices also push other central banks toward tighter policy. Interest rates elsewhere remain well above Japan’s, keeping yield differentials wide.

As widely expected, the BoJ kept interest rates unchanged at 1.25% on Friday, while signalling further increases if the economy and prices evolve in line with its projections. In its full quarterly outlook report released on Monday, the BoJ said underlying inflation had risen toward 2%, with gradual progress toward anchoring it at that level. It added that further rate increases would likely ease price pressures and support consumption.

Meanwhile, the Yen drew little support from renewed intervention warnings. Japanese Finance Minister Satsuki Katayama reiterated on Monday that authorities remained ready to act against disorderly currency moves and that Japan’s joint foreign exchange statement with the US remained in effect.