Forex News

• AUD/USD drops 0.34% to around 0.6960, reversing earlier gains as the US Dollar strengthens.
• US inflation accelerated to 3.7% in September, boosting expectations of further Fed interest rate hikes.
• Australian employment figures on Thursday could provide fresh direction for the Aussie.

AUD/USD reverses its earlier gains on Wednesday, falling 0.34% on the day to trade around 0.6960 at the time of writing. The pair retreats below the psychological 0.7000 level as stronger-than-expected United States (US) inflation data fuels a broad-based rally in the US Dollar (USD), putting renewed pressure on the Australian Dollar (AUD).

The US Consumer Price Index (CPI), released by the Bureau of Labor Statistics (BLS) on Wednesday, showed annual inflation accelerating to 3.7% in September, up from 3.4% in August and above market expectations. Core CPI, which excludes volatile food and energy prices, also rose to 2.6% YoY, compared with 2.4% previously.

On a monthly basis, headline and core inflation increased by 0.6% and 0.3%, respectively, highlighting persistent price pressures in the US economy. These figures reinforce expectations that the Federal Reserve (Fed) may need to maintain a restrictive monetary policy stance or raise interest rates further to bring inflation under control.

Following the release, markets increased the chance of a 25-basis-point (bps) Fed rate hike in October to 47%, compared with 22% the previous day. Investors also assign a 41% chance to another 25-bps increase in December, up from 18% a day earlier.

The repricing of Fed interest rate expectations drives US Treasury yields sharply higher, providing additional support to the Greenback. The benchmark 10-year US Treasury yield climbed near 5.33%, up from around 5.20% before the inflation report, making US Dollar-denominated assets more attractive to investors.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, advances 0.46% to around 102.70, reaching its highest level since April 2025. This broad-based Dollar strength weighs on AUD/USD, reversing the pair's earlier gains.

On the Australian side, investors turn their attention to Thursday's September employment report, which could influence expectations for the Reserve Bank of Australia's (RBA) monetary policy outlook.

AUD/USD technical analysis

In the one-hour chart, AUD/USD trades at 0.6964, keeping a bearish near-term tone as price holds beneath both the 100-period simple moving average (SMA) at 0.6974 and the 200-period SMA at 0.6968. The latest Relative Strength Index (14) reading at 33 suggests downside momentum is in play but edging toward oversold territory, hinting that while sellers remain in control, the pace of the decline could start to moderate rather than accelerate aggressively.

On the topside, initial resistance is offered by the 200-period SMA at 0.6968, followed by the 100-period SMA at 0.6974, with a stronger barrier at 0.6995 and then 0.7005. Further up, 0.7045, 0.7075, 0.7105 and 0.7140 form a wide cap that would need to be reclaimed to ease the broader bearish pressure. On the downside, immediate support appears at 0.6932, ahead of 0.6904 and 0.6883, where a break would open the way to a deeper slide, while a bounce from this cluster would merely signal consolidation within the prevailing downtrend.

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

• USD/CAD rises 0.50% as the US Dollar climbs following hotter-than-expected US inflation data.
• Rising US Treasury yields and Fed interest rate-hike expectations support the Greenback.
• Diverging Fed-BoC policy outlooks remain a key headwind for the Loonie.

USD/CAD climbs on Wednesday, reversing the previous day’s losses as the US Dollar (USD) rallies to a fresh year-to-date high following higher-than-expected US inflation data. At the time of writing, USD/CAD trades around 1.4287, up 0.50% on the day near 18-month highs.

The September Consumer Price Index (CPI) rose 0.6% monthly, matching expectations and picking up from August’s 0.4% increase. Annual headline inflation climbed to 3.7% from 3.4%, exceeding the 3.6% forecast.

Core CPI, which excludes food and energy, increased 0.3% monthly, above the 0.2% expected and unchanged from August. The annual core rate rose to 2.6% from 2.4%, also beating the 2.5% forecast.

The report gives the Federal Reserve (Fed) less reassurance that inflation is moving toward its 2% target, particularly as elevated Oil prices linked to Middle East tensions keep inflation risks tilted to the upside.

Traders now assign around a 50% chance of a rate hike at the Fed’s October 27-28 meeting, up from 22% before the release, while the probability of a December increase rises to 95%, according to the CME FedWatch Tool. Traders next look to US Producer Price Index (PPI) and retail sales figures due on Thursday.

Expectations of further Fed tightening after September’s 25-basis-point rate hike underpin broad demand for the US Dollar and keep US Treasury yields near multi-year highs. The US Dollar Index (DXY), which tracks the Greenback against six major currencies, climbs toward 102.80, its strongest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield rises toward 5.30%, after falling below 5.20% earlier this week.

Recent Fed comments show policymakers remain concerned about inflation. Boston Fed President Susan Collins said on Tuesday she expects “inflation to stay above 2% due to high energy prices.” Collins added that the “future path of monetary policy in new year will depend on data.”

Fed rate-hike expectations remain a key headwind for the Canadian Dollar. The Bank of Canada (BoC) has kept interest rates unchanged at 2.25% so far this year, leaving US rates 150-175 basis points (bps) above the Canadian policy rate. Further Fed tightening could widen that gap, while underlying inflation is near its 2% target and a weakening labour market gives the BoC little reason to raise rates soon.

Geoff Yu at BNY Mellon expects the ECB to skip an October rate hike and possibly be done for the year, citing clear guidance on second‑round effects, emerging sovereign risks and French budget uncertainty. He argues that any balance‑sheet response, such as ending quantitative tightening or using the Transmission Protection Instrument, would effectively mark the end of rate‑based tightening as policy tools must not work at cross‑purposes.

Tightening cycle seen near its end

"The ECB will skip October and could be done for the year. The ECB remains vigilant, but its language on second-round effects points to a skip in October."

"Given the emergence of sovereign risk and uncertainty surrounding the French budget, we see a December hold as probable unless natural gas prices move closer to the “severe” inflation scenario in the ECB’s staff projections."

"With sovereign and corporate spreads in focus, the ECB has already faced questions over activating the “Transmission Protection Instrument,” created in 2022 to counter disorderly widening in Eurozone sovereign spreads."

"We don’t see this as necessary for now; an end to quantitative tightening (QT) is the more likely step if OAT-Bund spreads begin widening again."

"But if the ECB’s balance sheet is deployed, even in the name of “transmission protection,” an end to rate-based tightening won’t be far behind, lest balance sheet support and rate hikes work against each other."

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

UOB’s Ho Woei Chen highlights that strong external demand, particularly in technology and AI-related products, is underpinning China’s growth in 2026. Export and import growth have remained robust, widening the trade surplus. Despite softer domestic conditions, recent fiscal and monetary measures are expected to stabilise activity, with overall 2026 GDP growth likely at the lower end of the official 4.5-5.0% target range.

External demand offsets domestic softness

"China’s external trade remained robust in Sep. Global AI-related capex growth and higher prices continue to support strong two-way trade in technology products. Export growth accelerated to 36.3% y/y (Bloomberg est.: 25.7%; Aug: 25.0%) and imports rose 31.0% y/y (Bloomberg est.: 25.0%; Aug: 28.2%)."

"China's external trade remained a key growth driver, with exports and imports rising 21.3% and 27.5% in 9M26, respectively. The cumulative trade surplus widened to US$938.11 bn, up from US$870.37 bn during the same period last year. Given the robust trade data to-date and technology-related demand, we raise our 2026 forecasts for export growth to 23% (from 17.0%) and import growth to 26% (from 22.0%)."

"Trade with the US has improved since the voiding of US tariffs imposed under President Trump’s International Emergency Economic Powers Act (IEEPA) as well as the stabilisation of US-China trade relations since the May summit between President Trump and President Xi. The latest meeting in Sep renewed commitments from both countries to preserving stable bilateral relations. Both exports and imports with the US remained at double-digit growth pace in Sep."

"While the AI-driven export boom has sustained external sector momentum through Sep, softer domestic conditions continued to weigh on China’s growth outlook. The recent step up in fiscal and monetary measures are expected to stabilise economic conditions with 2026 growth likely at the lower end of the 4.5-5.0% official target range."

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

Standard Chartered’s Saabir Salad analyzes Hungary’s fiscal outlook and its implications for Euro adoption and the Forint. The Tisza government’s 2027 budget and new medium-term fiscal plan, due this month, are seen as key tests of credibility. The bank now forecasts Hungary’s deficit at 7.5% of GDP in 2026, narrowing to about 5% in 2027 and below 3% by 2029–2030.

Fiscal consolidation tied to euro entry

"Hungary’s 2027 budget and new medium-term fiscal plan, both due this month, are the most significant domestic risk events for the rest of 2026."

"They will be the first full fiscal statement from the Tisza Party-led government, which took office in May, and the first substantive test of whether its euro adoption ambitions are backed by credible numbers."

"We expect the fiscal plan to project a narrowing of the fiscal deficit from c.7.5% of GDP in 2026 to close to 5% in 2027 (broadly in line with our revised 5.3% forecast), and below 3% by 2029 or 2030."

"Hungary has been under an EU Excessive Deficit Procedure (EDP) since July 2024, when the European Council judged the 2023 deficit of 6.7% of GDP to be excessive and set a corrective path intended to bring it below 3% by around this year."

"The consolidation package is likely to combine front-loaded cost savings from reduced waste and spending on procurement with a new wealth tax, while leaving room for the higher health-care and pension spending already pledged by Tisza."

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

• USD/JPY rises 0.39% to around 158.95, approaching its September peak as the US Dollar strengthens.
• US inflation accelerated to 3.7% in September, boosting expectations of further interest rate hikes.
• Japanese Yen faces pressure from a cautious Bank of Japan while markets assess intervention risks.

USD/JPY extends its advance on Wednesday, gaining 0.36% to trade around 158.90 at the time of writing. The pair approaches the psychological 159.00 level, near its September peak, as higher-than-expected United States (US) inflation data boosts the US Dollar (USD) and reinforces expectations of further monetary tightening by the Federal Reserve (Fed).

The latest US Consumer Price Index (CPI), released by the Bureau of Labor Statistics (BLS) on Wednesday, showed annual inflation accelerating to 3.7% in September, up from 3.4% in August and above market expectations. Core CPI, which excludes volatile food and energy prices, also rose to 2.6% YoY, compared with 2.4% previously.

On a monthly basis, headline and core inflation increased by 0.6% and 0.3%, respectively, highlighting persistent inflationary pressures that could encourage the Fed to maintain a restrictive monetary policy stance or raise interest rates further.

Following the release, markets increased the chance of a 25-basis-point (bps) Fed rate hike in October to 53%, up from 22% the previous day. Investors also assign a 50% chance of another 25-bps increase in December, compared to 18% a day earlier.

The repricing of interest rate expectations triggered a sharp increase in US Treasury yields, providing additional support for the Greenback. The benchmark 10-year US Treasury yield climbed to near 5.33%, compared with around 5.20% before the inflation report. Higher US yields widen the interest rate differential with Japan, making the US Dollar more attractive relative to the Japanese Yen (JPY).

The US Dollar Index (DXY), which measures the Greenback against a basket of six major currencies, advances 0.55% to around 102.75, its highest level since April 2025, reflecting broad-based demand for the US currency.

Meanwhile, the Japanese Yen remains under pressure following weaker-than-expected Japanese Producer Price Index (PPI) figures on Monday and cautious comments from Bank of Japan (BoJ) officials, which reinforce expectations that the central bank will leave interest rates unchanged at its October meeting.

BoJ Governor Kazuo Ueda reiterated the importance of keeping inflation anchored near the 2% target but provided no clear indication of when the central bank could resume raising interest rates. This cautious stance contrasts with growing expectations of further Fed tightening, reinforcing the monetary policy divergence between the United States and Japan.

However, the continued appreciation of USD/JPY towards 159.00 could revive concerns about a potential intervention by Japanese authorities to support the Japanese Yen. With the pair approaching its September peak, investors may become increasingly sensitive to warnings from Japanese officials about excessive currency volatility, potentially limiting further gains in USD/JPY.

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 158.95, extending its advance above the 100-period simple moving average (SMA) at 158.31 and the 200-period SMA at 158.16, which both underpin a bullish near-term bias. Price also holds over the recent horizontal floor at 158.45, while the Relative Strength Index (14) climbs into overbought territory near 71.9, hinting that upside momentum is strong but increasingly stretched.

On the topside, immediate resistance emerges at 159.00, where the latest horizontal barrier caps the current run-up. On the downside, initial support is seen at 158.45, ahead of the clustered underlying demand from the 100-period SMA at 158.31 and the 200-period SMA at 158.16; a deeper pullback would expose subsequent supports at 157.85, 157.00 and 156.50.

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

Deutsche Bank economists Sanjay Raja and Maui Brennan expect UK headline CPI to rise to 3.49% year-on-year in September, with core CPI at 2.74% and Services CPI at 3.71%. They project 2027 CPI to average 3.7% versus 3.2% in 2026, and see headline RPI jumping to 3.93% year-on-year near term and 5.2% longer term.

CPI and RPI projections move higher

"Where do we see September inflation? We expect inflation to push to its highest rate all year, with headline CPI rising to 3.49% y-o-y, with core CPI pushing to 2.74% y-o-y. Services CPI, we expect, will also rise, picking up pace to 3.71% y-o-y on stronger base effects."

"Looking ahead, we expect price pressures to increase further. Energy prices remain on an ascent. Lower harvests have already starting to show up in food cost price data."

"As such, our updated projections see CPI taking another step up, with 2027 CPI averaging 3.7% (previously, 3.5%) from 3.2% this year. Headline RPI, we expect, will rise from 3.7% y-o-y to 5.2% (previously, 4.8%)."

"Our projections sit broadly above the Bank’s forecasts with the exception of two categories: core goods CPI and food & non-alcoholic beverages CPI. We break down how our projections look relative to the Bank of England’s below."

"Where does this leave our projections? We see headline CPI still making its way higher from here, peaking at 4.3% y-o-y in February next year. For the full year now, we see headline CPI averaging 3.2% y-o-y in 2026 and rising to 3.8% y-o-y next year (previous: 3.5%)."

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

• GBP/USD drifts lower as stronger-than-expected US inflation data lift the US Dollar.
• Markets raise bets on an October Fed interest rate hike following CPI report.
• Traders turn their attention to UK growth and industrial production figures due on Thursday.

GBP/USD loses around 0.52% on Wednesday as higher-than-expected US inflation data reinforce expectations of further Federal Reserve (Fed) interest rate hikes, triggering fresh buying in the US Dollar (USD), while US Treasury yields also rebound sharply. At the time of writing, the pair trades around 1.3185, near its lowest level since June 2026.

The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, climbs to around 102.84, its highest level since April 2025. Meanwhile, the benchmark 10-year US Treasury yield rises more than 10 basis points (bps) to around 5.30%, after dipping below 5.20% earlier this week. Higher yields make Dollar-denominated assets more attractive, adding to the pressure on GBP/USD.

The September Consumer Price Index (CPI) rose 0.6% monthly, matching expectations and picking up from August’s 0.4% increase. Annual headline inflation climbed to 3.7% from 3.4%, exceeding the 3.6% forecast.

Core CPI, which excludes food and energy, increased 0.3% monthly, above the 0.2% expected and unchanged from August. The annual core rate rose to 2.6% from 2.4%, also beating the 2.5% forecast.

Traders now price in a 50% chance of a rate hike at the Fed’s October 27-28 meeting, up from 22% before the release, while the probability of a December hike stands near 95%, according to the CME FedWatch Tool. Money markets have also increased bets on three further rate hikes by the end of 2027.

On the UK side, expectations of Bank of England (BoE) tightening offer limited support to the British Pound (GBP). The central bank has kept interest rates unchanged so far this year, but higher energy costs threaten to keep inflation above its 2% target, strengthening the case for a rate increase.

BoE Chief Economist Huw Pill said on Wednesday that “underlying UK inflation never fell enough pre-Iran shock,” while “UK output and labor market have proven more resilient.” However, he questioned the extent of tightening anticipated by traders, saying, “I am a bit more sceptical about market pricing of four rate hikes over the next year.” Attention now turns to UK August Gross Domestic Product (GDP), industrial production and manufacturing production figures, due on Thursday.

• EUR/USD drops 0.55% to around 1.1135, reaching its lowest level since May 2025 as the US Dollar strengthens.
• US inflation accelerated to 3.7% in September, reinforcing expectations of further interest rate hikes.
• French fiscal concerns and rising bond yields add pressure on the Euro.

EUR/USD extends its decline on Wednesday, losing 0.55% on the day to trade around 1.1135 at the time of writing, its lowest level since May 2025. The pair breaks below the 1.1150 level, which had limited losses earlier this week, as stronger-than-expected United States (US) inflation data fuels expectations of further monetary tightening by the Federal Reserve (Fed).

The US Dollar (USD) gains momentum following the release of the September Consumer Price Index (CPI), which rose by 3.7% YoY, accelerating from 3.4% in August and exceeding market expectations, according to the Bureau of Labor Statistics (BLS). Core CPI, which excludes volatile food and energy prices, also accelerated to 2.6% YoY from 2.4% previously. On a monthly basis, headline and core inflation increased by 0.6% and 0.3%, respectively, highlighting persistent price pressures in the US economy.

These figures reinforce expectations that the Fed may need to maintain a restrictive monetary policy stance for longer to bring inflation under control. After the release, markets raise the chance of a 25-basis-point (bps) rate hike in October to 47%, compared with 22% the previous day. Investors also assign a 44% chance to a second consecutive 25-bps increase in December.

The repricing of Fed interest rate expectations provides strong support to the Greenback. The US Dollar Index (DXY), which tracks the currency against a basket of six major peers, advances 0.46% to around 102.70, reaching its highest level since April 2025.

The surge in US Treasury yields provides additional support to the Greenback. The benchmark 10-year US Treasury yield climbs near 5.33% at the time of writing, up from around 5.20% before the inflation report, as investors reassess the outlook for Fed interest rates. Higher bond yields increase the attractiveness of US Dollar-denominated assets, adding further downward pressure on EUR/USD.

Meanwhile, the Euro (EUR) remains under pressure amid persistent fiscal concerns in France. Investors question the government's ability to secure parliamentary approval for its deficit-reduction budget, with the spread between French and German 10-year bond yields hovering near 140 basis points.

Bank of France Governor and European Central Bank (ECB) policymaker Emmanuel Moulin warns that France must urgently demonstrate its commitment to fiscal consolidation, while ECB President Christine Lagarde stresses that the solution to the country's debt challenges lies primarily in domestic fiscal policy.

Investors now await Friday's final September Harmonized Index of Consumer Prices (HICP) report for further clues on Eurozone inflation.

EUR/USD technical analysis

In the one-hour chart, EUR/USD trades at 1.1139, maintaining a bearish near-term tone as the pair holds below both the 100-period simple moving average (SMA) at 1.1194 and the 200-period SMA at 1.1209. The recent slide has pushed the 14-period Relative Strength Index (RSI) down into oversold territory near 22, which hints at stretched downside momentum but has yet to trigger a decisive rebound while price remains capped beneath these key averages.

On the topside, initial resistance appears at 1.1150, ahead of the 100-period SMA at 1.1194 and the 200-period SMA at 1.1209, with a stronger barrier at the horizontal level of 1.1215; a recovery through this cluster would open the way toward 1.1270 and 1.1312. On the downside, immediate support is seen at 1.1100, followed by a deeper floor at 1.1050, where any extension of the current decline could slow as oversold conditions encourage profit-taking.

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

Rabobank’s Global Daily highlights European natural gas 1‑month TTF futures surging to 86.81 EUR/MWh, the highest level since 2023, after rising more than €60 from 2025 lows. Strategist Florence Schmit stresses growing European reliance on LNG ahead of the planned full phase‑out of Russian gas from 2027, with weaker October LNG exports from the Middle East and softer LNG arrivals into Europe.

TTF futures surge on LNG risks

"European natural gas 1-month TTF futures climbed to their highest level since 2023 at 86.81 EUR/MWh, having risen more than €60 from their 2025 lows."

"The rally has pushed prices above their early-September highs as geopolitical uncertainty continues to cloud the outlook for flows through the Strait of Hormuz."

"As Rabobank’s energy strategist, Florence Schmit, notes, this matters all the more as Europe’s reliance on LNG grows ahead of the planned full phase-out of Russian gas from the start of 2027, increasing competition with Asian buyers and the JKM market."

"Middle Eastern LNG exports are likely to be lower in October than in September, even allowing for unreported or “dark” transits, while LNG arrivals into Europe have already weakened this month."

"Or what happens when your access to energy is controlled by a war taking place thousands of miles away?"

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