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A Bank of Mexico (Banxico) survey of private economists revised down headline and core inflation forecasts, updated projections for the USD/MXN exchange rate, and revised projections for future interest rates set by the Mexican institution.

Economists expect headline inflation to end at 3.87% in 2026, down from 3.90% in August, while core figures are expected to end at 3.90%, beneath August’s 3.99% projection.

For the next year, they see inflation at 3.82%, with the underlying print expected to drop to 3.78%.

Regarding economic growth, the Gross Domestic Product (GDP) for this year is forecast to rise 1.40%, up from 1.30% in August. Meanwhile, USD/MXN is projected to end this year at 17.50 and at 18.04 by the end of 2027.

The survey showed that analysts expect Banxico to hold rates unchanged at 6.50% through the end of next year.

• USD/MXN surges above 18.30 as Peso selling accelerates.
• DXY clears 102 while elevated yields reinforce Dollar demand.
• Mexico manufacturing returns to growth, but underlying recovery remains fragile.

The Mexican Peso (MXN) collapses on Monday, extending its depreciation by over 1.50% as the Greenback strengthens sharply amid growing fears that the Middle East conflict will be prolonged, keeping energy prices under pressure. The USD/MXN pair trades at 18.35, after bouncing off daily lows of 18.06.

Geopolitical risk, high yields and Dollar strength overwhelm improving Mexican factory data

Sentiment remains negative amid growing concerns of a potential escalation in the US-Iran conflict. This pushed energy prices and US Treasury yields higher, boosting the safe-haven appeal of the Greenback at the expense of the Mexican currency.

Aside from this, Mexico’s economic docket showed that manufacturing activity improved in September, according to S&P Global. The Manufacturing PMI expanded from 49.8 to 50.3.

Pollyanna De Lima, Economics Associate Director at S&P Global Market Intelligence, was cautious, saying that “September's PMI data suggested that Mexico's manufacturing economy moved fractionally back into growth territory, but the underlying picture was still quite fragile.”

Meanwhile, the Bank of Mexico (Banxico) private economists’ poll revealed that most see the main reference rate at 6.50% through the end of 2027, and the USD/MXN exchange rate to end around 17.50 this year.

In the US, data showed that business activity in the manufacturing sector remains solid, despite cooling, with the ISM Manufacturing PMI hitting 54.5, below estimates of 55, a tenth below August’s 54.6. Earlier, Initial Jobless Claims for the week ending September 26 came in at 197K, below forecasts of 200K and down from the previous week's 198K.

Given the backdrop, money markets trimmed their Fed-hawkish bets for October, but for December, the chances of another rate increase are 83%, according to Prime Terminal.

Also, high US Treasury yields keep the Greenback underpinned, as indicated by the US Dollar Index (DXY). The DXY, which measures the performance of the American Dollar against six peers, is at 102.16, up 0.69%, a headwind for the Mexican currency.

The US economic calendar ahead includes the September Nonfarm Payrolls report and additional Federal Reserve remarks.

USD/MXN Price Forecast: Technical Outlook

In the daily chart, USD/MXN trades at 18.3726. The pair holds well above the latest reading of the triple simple moving average (50, 100, 200) at 17.2219, keeping the near-term bias firmly bullish and suggesting an extension of the recent uptrend away from the mid-16.00s base. Momentum looks stretched, however, as the 14-period Relative Strength Index prints an overbought reading near 86.9, hinting that upside may be vulnerable to consolidation or a corrective pullback even as buyers remain in control.

On the downside, initial support is seen at the triple simple moving average cluster around 17.22, which reinforces the broader ascending structure. A deeper retreat would expose the horizontal support level at 16.8866, where previous demand emerged and a more significant downside correction could pause. With no clearly defined nearby resistance levels in the dataset, price action around current highs will guide whether USD/MXN extends the bullish phase or allows overbought conditions to unwind toward the 17.00–17.20 region.

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

The US Dollar (USD) has advanced further on Thursday, trading in levels last seen in early April 2025 on the back of the marked improvement in the sentiment surrounding the US Dollar, geopolitical uncertainty and renewed concerns over the French economy.

Here is what you need to know on Friday, October 2:

The US Dollar Index (DXY) has extended its move higher, leaving behind the key 102.00 hurdle to hit 18-month tops as investors continued to gear up for critical data releases at the end of the week. The NFP will be in the limelight, along with the Unemployment Rate and Factory Orders. In addition, the Fed’s Logan is due to speak.

EUR/USD has added to the ongoing weakness, selling off to the low 1.1200s while reaching new 17-month troughs. The release of the flash Inflation Rate in the euro bloc will wrap up the domestic calendar. The ECB’s Cipollone and Vujčić are also due to speak. 

GBP/USD has faded the previous day’s bullish attempt, reaching new four-month lows in the sub-1.3200 region. The BoE’s Decision Maker Panel (DMP) will be the sole release on the UK docket.

USD/JPY failed to maintain its earlier move past the 158.00 barrier, slipping back toward the low 157.00 afterwards, keeping its decent gains for the day. The Unemployment Rate will be in focus along with the Tokyo CPI and Monetary Base data.

There was no respite for the deep correction in AUD/USD, which has clinched fresh three-month lows near the 0.6900 threshold. Next on tap in Oz will be the publication of the final S&P Global Services PMI on October 5.

Front-month WTI futures have added to Wednesday’s uptick and challenged the $93.00 mark per barrel as supply concerns resurfaced following China’s decision to suspend exports of oil products.

Gold has traded in a volatile fashion, hovering below the $4,200 mark per troy ounce amid traders’ assessment of the Fed’s potential rate path in light of recent softer-than-expected inflation data.

• Gold remains subdued as a stronger US Dollar and surging Treasury yields limit demand.
• Softer-than-expected US inflation reduces October Fed rate-hike bets, offering limited support to Gold.
• The daily setup remains bearish while XAU/USD trades below the Bollinger middle band.

Gold (XAU/USD) treads water on Thursday as a stronger US Dollar (USD) and elevated US Treasury yields limit the upside. At the time of writing, XAU/USD trades around $4,175, up 0.45% on the day, as traders assess the latest US economic data and its implications for the Federal Reserve’s monetary policy path.

The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades near 102.13, while the benchmark 10-year US Treasury yield holds around 5.25%, after reaching 5.34%, its highest level since 2002.

Higher Treasury yields increase the opportunity cost of holding non-yielding assets such as Gold, while a stronger US Dollar makes the precious metal more expensive for buyers using other currencies.

US manufacturing activity remained firm in September, although growth slowed slightly. The ISM Manufacturing Purchasing Managers' Index (PMI) eased to 54.5 from 54.6, missing the 55.0 forecast. Meanwhile, the Prices Paid Index jumped to 77.9 from 71.1, much higher than the 72.3 expected, showing that factories continue to face strong cost pressures.

Other data released on Thursday showed that the US labour market remains on a solid footing. Initial Jobless Claims fell to 197K in the week ending September 26, below expectations of 200K and the previous reading of 198K. The four-week moving average also declined to 200K from 202.5K.

The figures follow Wednesday’s ADP report, which showed that private-sector employment increased by 90K in September, beating the 70K forecast and accelerating from 36K in August.

Minneapolis Fed President Neel Kashkari said on Thursday, “4.1% unemployment rate is good, labor market is healthy,” while noting that “consumer spending is strong across the economy.” Kashkari added, “We will do what we need to get inflation to the goal,” but cautioned, “If we keep raising rates, it will put different pressure on different parts of the economy.”

However, markets have scaled back expectations that the Federal Reserve (Fed) will raise interest rates this month following softer-than-expected US Personal Consumption Expenditures (PCE) inflation data released on Wednesday. Core PCE inflation rose 0.2% MoM, below the 0.3% forecast, while the annual rate remained unchanged at 3.0%, undershooting expectations of 3.3%.

The CME FedWatch Tool shows that traders now see about a 36% chance that the US central bank will raise interest rates at its October 27-28 meeting, down from 70% earlier this week. The dovish repricing offers some support to Gold, although traders are not ruling out another rate hike later this year.

An upward revision to US economic growth highlighted the continued resilience of the world’s largest economy. Annualized Gross Domestic Product (GDP) expanded by 2.2% in the second quarter, above economists’ forecast of 1.5%. Resilient economic growth and firm labour-market conditions give the Fed more room to tackle inflation, which remains above its 2% target.

Meanwhile, the lack of progress in US-Iran negotiations to reopen the Strait of Hormuz keeps Oil prices elevated and inflation risks tilted to the upside, supporting the case for tighter monetary policy.

As a result, the hawkish Fed outlook, a stronger US Dollar and elevated Treasury yields remain key headwinds for Gold. Traders now await Friday’s NFP report for fresh direction.

Technical Analysis: Bearish bias holds as RSI remains below 50

On the daily chart, XAU/USD maintains a bearish near-term bias as it sits below the 20-day Bollinger Simple Moving Average (SMA) at $4,301. The metal is also capped well beneath the upper Bollinger band at $4,471, keeping rallies contained, while the Relative Strength Index (RSI) is around 40 and a negative Moving Average Convergence Divergence (MACD) reading both hint at limited bullish momentum and a corrective tone within a weakening trend, as suggested by the Average Directional Index (ADX) near 19.

On the downside, immediate support emerges at the lower Bollinger band near $4,131, ahead of the horizontal floor at $4,100, with a deeper bearish extension exposing the $4,000 level. On the topside, recovery attempts would first face resistance at the 20-day Bollinger SMA at $4,301, followed by the upper band at $4,471, while a stronger bullish reversal would only take shape on a sustained break above the structural barrier at $4,700.

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

• USD/JPY retreats from 158.44 as intervention concerns support the Japanese Yen.
• Elevated US Treasury yields and resilient economic data keep the US Dollar broadly firm.
• Cautious Bank of Japan signals and wide interest-rate differentials limit the Yen’s recovery.

USD/JPY reverses its earlier gains on Thursday as traders hesitate to push the pair higher amid the risk of intervention by Japanese authorities. This allows the Japanese Yen (JPY) to regain some ground even as the US Dollar (USD) climbs to a fresh year-to-date high. At the time of writing, USD/JPY trades around 157.95 after touching an intraday high near 158.44.

The US Dollar remains firmly supported by elevated US Treasury yields and resilient economic data. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, trades near 102.13, while the benchmark 10-year US Treasury yield holds around 5.25%, after reaching 5.34%, its highest level since 2002.

Recent US economic data points to continued resilience, allowing the Federal Reserve (Fed) to keep borrowing costs elevated. The ISM Manufacturing Purchasing Managers’ Index (PMI) eased slightly to 54.5 in September from 54.6, missing the 55.0 forecast. However, the Prices Paid Index jumped to 77.9 from 71.1, pointing to persistent inflationary pressures. Initial Jobless Claims fell to 197K in the week ending September 26, below expectations of 200K and the previous reading of 198K.

The data follows an upward revision to US economic growth and downward revisions to inflation figures. Softer-than-expected Personal Consumption Expenditures (PCE) data prompted traders to scale back expectations of a rate hike at the October 27-28 meeting. Still, with inflation running above the central bank’s 2% target, policymakers remain concerned about price pressures, keeping another rate hike later this year on the table.

Yen upside capped as Japan data and BoJ signals keep tightening bar high

Brown Brothers Harriman’s Elias Haddad points out that Japan’s latest data and policy signals continue to argue against a rapid shift in the BoJ’s stance. He notes that Japan’s Q3 Tankan survey and the BoJ’s September meeting Summary of Opinions “suggest the bar for the BoJ to speed up its tightening cycle remains high.” The Tankan all industries business conditions index “improved to a 35-year high of 21 vs. 18 in Q2,” but Haddad highlights that “businesses expect it to ease to 15 in Q4 and inflation expectations were broadly steady,” tempering the case for more aggressive policy action.

At the same time, he observes that the BoJ’s Summary of Opinions was “hawkish on direction but generally cautious on the pace,” underscoring a preference for gradualism. Adding to that restraint, Haddad flags that “the Cabinet Office urging BoJ policymakers ‘to examine carefully the cumulative effects of past policy interest rate hikes’ adds resistance to a faster hiking cycle,” reinforcing the view that any further tightening is likely to proceed slowly and limiting near-term upside for the Yen.

The BoJ is still moving toward higher rates, but its gradual approach contrasts with tighter policy settings in the United States and other major economies. The wide US-Japan interest-rate gap therefore remains a major source of pressure on the Yen.

For now, the threat of intervention is keeping that pressure in check. Japanese Prime Minister Sanae Takaichi said on Thursday that the Yen’s undervaluation poses a problem, strengthening the view that authorities could step in if currency moves become rapid or disorderly.

• AUD/USD falls 0.48% on Thursday as US Dollar strength outweighs support from Australia’s tighter monetary policy.
• Australia’s trade surplus narrows to A$495 million in August as imports rise sharply.
• US Treasury yields reach fresh highs, supported by resilient economic activity and persistent inflationary pressures.

AUD/USD falls to around 0.6910 on Thursday at the time of writing, down 0.48% on the day. The Australian Dollar (AUD) loses ground against the US Dollar (USD) despite the Reserve Bank of Australia’s (RBA) decision to raise interest rates this week, as rising US Treasury yields support the Greenback.

The RBA raised its key interest rate by 25 basis points (bps) to 4.6% on Tuesday, marking its fourth 25-bps increase this year. RBA Governor Michele Bullock also left the door open to further monetary tightening as the central bank remains committed to bringing inflation back toward its 2% target.

However, trade data released on Thursday provides a less encouraging signal for the Australian economy. Australia’s Trade Balance surplus narrowed sharply to A$495M from A$1.351B in July. Imports rose 5.8% after falling 2.4% in the previous month, while exports increased 3.7% following a 3.6% contraction.

The downside pressure on AUD/USD mainly comes from a firm US Dollar, supported by the sharp rise in US Treasury yields. The benchmark 10-year US Treasury yield trades around 5.24% at the time of press after reaching 5.34%, its highest level since 2002.

The latest US data also reinforces the resilience of the economy. Initial Jobless Claims fell to 197K in the week ending September 26 from 198K previously and below the 201K market consensus. Continuing Jobless Claims also declined by 11K to 1.701M.

These figures add to Wednesday’s Automatic Data Processing (ADP) report, which showed that the US private sector added 90K jobs in September, above expectations of 70K and accelerating from the 36K increase recorded in August. United States (US) Gross Domestic Product (GDP) growth for the second quarter was also revised higher to an annualized rate of 2.2% from 1.5% previously.

Manufacturing activity also remains robust. The Institute for Supply Management (ISM) Manufacturing Purchasing Managers Index (PMI) edged lower to 54.5 in September from 54.6 in August, missing expectations of 55. However, the report’s underlying components remained solid, with the Employment Index rising to 52.7 and the New Orders Index climbing to 55.3. The Prices Paid Index also jumped to 77.9 from 71.1 previously, pointing to persistent price pressures.

The combination of resilient economic activity and persistent inflationary pressures leaves the Federal Reserve (Fed) with room to maintain a restrictive monetary policy stance. Expectations of further tightening have nevertheless eased following Wednesday’s softer core Personal Consumption Expenditures (PCE) inflation data. According to the CME FedWatch tool, markets now see around a 36% chance of an interest-rate hike at the October 27-28 meeting.

Elevated US Treasury yields and expectations that the Fed could maintain restrictive monetary policy for longer are therefore supporting the US Dollar and keeping AUD/USD under pressure despite the RBA’s latest rate hike.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.6910, extending a bearish near-term tone as the pair holds well beneath both the 100-period simple moving average (SMA) at 0.6988 and the 200-period SMA at 0.7030. The clustering of these longer-term SMAs above price suggests persistent topside pressure, while the Relative Strength Index (14) near 29 hints at oversold conditions that could slow, but not yet reverse, the downside bias.

On the downside, immediate support emerges at 0.6907, ahead of a lower horizontal floor at 0.6883. On the topside, initial resistance aligns with 0.6955, followed by 0.6980 and the 100-period SMA at 0.6988, before the 0.7005 handle and the 200-period SMA at 0.7030 reinforce a broader supply zone. Higher up, 0.7045, 0.7075, 0.7105 and 0.7140 define successive barriers that the pair would need to reclaim to ease the current bearish structure.

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

• US Jobless Claims and firm ISM components reinforce US resilience.
• US Prices Paid surge keeps inflation pressure elevated despite softer PCE.
• Nonfarm Payrolls loom as next test for Sterling bears.

The Pound Sterling (GBP) dives by over 0.44% on Thursday, as business activity in the manufacturing sector remains solid in the US, while US jobs data confirmed the strength of the labor market. Consequently, this pushed US yields and the US Dollar higher. At the time of writing, the GBP/USD pair trades at 1.320 after bottoming at 1.3182, its lowest since June 26.

GBP/USD slides as resilient US data and geopolitical tension lift Greenback

Market mood is dismal, as a resolution to the US-Iran conflict seems far from imminent. A report by Al Jazeera stated that a US official said three aircraft carriers and two landing groups would be deployed around Iran by the end of November. Consequently, Oil prices remain bid, US Treasury yields are elevated near 2000s levels and the Greenback, as measured by the US Dollar Index (DXY), gains 0.47%.

The DXY, which measures the buck’s performance against six currencies, is at 101.94, on the verge of challenging the 102.00 mark. On the other hand, the US 10-year T-note is down 1 basis point to 5.277%.

US data showed a strong economy, even though the ISM Manufacturing PMI in September was 54.5, below estimates of 55, a tenth below August’s 54.6. The sub-components of new orders and employment rose, with the former up from 53.7 to 55.3 and the latter edging up from 51.2 to 52.7.

The ISM Prices Paid sub-component continued to show that inflationary pressures are building, as the index rose from 71.1 to 77.1, exceeding forecasts of 72.3.

Earlier, Initial Jobless Claims for the week ending September 26 came in at 197K, below forecasts of 200K and below the previous week's 198K.

Despite witnessing the rise in the ISM prices paid sub-component, the softer reading of the Fed’s gauge of inflation, the core PCE, is weighing on money market traders, which has decreased the chances for a rate hike at the October meeting, from around 38% to 30%, according to Prime Terminal.

In the UK, a scarce economic docket turns the focus to Prime Minister Andy Burnham speech, in which he hinted at making changes to pensions and put back into the table a potential re-joining to the European Union, which according to Chris Turner, ING strategist “would likely be seen as a positive by the foreign exchange market, having witnessed sterling's crash following the Brexit vote in 2016.“

Ahead, the UK’s docket is absent, but not so in the US. The schedule will feature September’s Nonfarm Payrolls report, as well as further Fed speaking.

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3203, maintaining a bearish near-term bias as it holds clearly below the cluster of key simple moving averages (SMAs) and broken trend lines overhead. The 50-, 100- and 200-day SMAs, represented by the latest triple moving average reading at 1.3455, sit well above spot and reinforce a capped tone, while the recent break under the downtrend-related levels around 1.3315 and 1.3435 leaves the pair vulnerable to further downside. The Relative Strength Index (14) at 29.9 flirts with oversold territory, hinting that bearish momentum is stretched but not yet signaling a confirmed reversal.

On the topside, initial resistance is seen at the former trend-line break around 1.3315, ahead of the descending resistance trend line tied to the 1.3653 peak near 1.3435. Above there, the grouped daily SMAs around 1.3455 form a dense barrier, with additional resistance at the higher support-turned-resistance trend-line breaks at 1.3540 and 1.3742. On the downside, the absence of well-defined nearby structural support levels below 1.3203 suggests that any recovery would likely be corrective while the pair trades under these clustered resistance zones.

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

• EUR/USD extends its decline to a fresh year-to-date low below 1.1300.
• Elevated US Treasury yields and resilient economic data support the Greenback.
• Traders await Eurozone inflation and US Nonfarm Payrolls data on Friday.

EUR/USD extends its decline on Thursday, falling to its lowest level since May 2025 and setting a fresh year-to-date low as the US Dollar (USD) remains firmly supported by elevated US Treasury yields and resilient US economic data. At the time of writing, the pair trades around 1.1253, down 0.67% on the day.

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, climbs to a fresh year-to-date high, trading around 101.96. The benchmark 10-year US Treasury yield trades around 5.30%, close to the 5.34% peak reached earlier in the day, its highest level since 2002.

The US ISM Manufacturing Purchasing Managers’ Index (PMI) edged down to 54.5 in September from 54.6, missing the 55 forecast but staying comfortably above the 50 mark that separates expansion from contraction. The Prices Paid Index, however, jumped to 77.9 from 71.1, well above expectations of 72.3.

The US labour market also remains firm. Initial Jobless Claims fell to 197K in the week ending September 26, below the 200K forecast and the previous reading of 198K. The four-week moving average declined to 200K from 202.5K. The data follows Wednesday’s ADP report, which showed that private-sector employment increased by 90K in September, beating expectations of 70K and rising sharply from 36K in August.

The latest figures suggest that the US economy remains strong enough for the Fed to maintain a tight monetary policy stance. However, the CME FedWatch Tool shows that traders see only about a 36% chance that the central bank will raise interest rates at its October meeting after the Fed’s preferred inflation measure showed some moderation.

Core Personal Consumption Expenditures inflation rose 0.2% MoM in August, below the 0.3% forecast, while the annual rate remained unchanged at 3.0%, undershooting expectations of 3.3%. Even so, inflation remains above the Fed’s 2% target, while elevated energy prices keep the risks tilted to the upside as US-Iran negotiations remain deadlocked.

Fed policymakers continue to signal concern about inflation. Kansas City Fed President Jeff Schmid said on Thursday, “Officials have work to do on inflation,” adding that “energy prices are one of the biggest challenges for monetary policy today.” Boston Fed President Susan Collins said, “Economic growth is near trend, if not more than that; labor market near full employment, but inflation is too high.”

On the European side, stronger Eurozone manufacturing activity offers limited support to the Euro (EUR). The final HCOB Manufacturing PMI rose to 52.9 in September from 52.7, reaching its highest level since May 2022.

On the monetary policy front, the European Central Bank (ECB) has raised interest rates twice this year, while markets are pricing in additional tightening as inflation remains elevated. Preliminary data released on Wednesday showed that inflation in several major Eurozone economies accelerated more than expected in September. However, policymakers have also acknowledged downside risks to growth, which could keep the ECB cautious about raising rates aggressively. Traders now turn their attention to Friday’s preliminary Eurozone inflation report and US Nonfarm Payrolls data.