Forex News

• GBP/JPY trades with a positive bias as the Japanese Yen underperforms its major peers.
• The BoJ is expected to hold interest rates on Friday, with focus shifting to a possible December hike.
• The UK Autumn Budget on Wednesday takes focus ahead of the BoE's November monetary policy meeting.

GBP/JPY posts modest gains on Monday as the Japanese Yen (JPY) underperforms its major peers. However, price action remains largely range-bound as traders brace for key events this week, including the UK Budget and the Bank of Japan’s (BoJ) monetary policy announcement. At the time of writing, the cross trades around 210.18, up 0.19% on the day.

The BoJ announces its interest rate decision on Friday and is widely expected to maintain its policy rate at 1.25%. Japan’s latest inflation figures support the case for further tightening. September inflation excluding fresh food accelerated to 2.1% annually from 1.7%, while the measure excluding fresh food and energy rose to 2.4% from 1.9%.

BoJ Governor Kazuo Ueda’s remarks will be closely watched as markets increasingly expect a rate hike in December. Ueda recently said that “underlying inflation is near the 2% target.” He also warned that “if the policy rate isn’t adjusted properly, market concerns about inflation risks could raise long-term rates.”

However, support for the Japanese Yen (JPY) from further tightening expectations remains limited by Japan’s relatively low interest rates and concerns over its heavy debt burden. The BoJ’s gradual approach may do little to narrow the interest rate gap with other major economies, as energy-driven inflation risks linked to the Middle East conflict keep other central banks hawkish.

On the UK side, attention turns to Wednesday’s Budget, with traders watching how the government balances support for the economy with the need to maintain fiscal discipline. Any changes to taxes and spending could influence the British Pound (GBP) ahead of the Bank of England’s (BoE) November 5 policy decision, with traders fully pricing in a 25-basis-point rate hike.

Deutsche Bank economists Sanjay Raja and Maui Brennan note that, coming into the Autumn Budget, their “baseline assumption was that the Chancellor would tap into the fiscal rule flexibilities, using financial transactions via public financial institutions (the so-called PuFins), to boost investment spending via a two-stage approach: a GBP 8bn expansion in the coming Autumn Budget, followed by an equal increase in the Spending Review due next year.”

However, they point out that “headlines from the FT over the weekend… suggest that Chancellor Healey will do more in the Autumn Budget, adding around GBP 20bn in investment over the next five years,” implying a materially more aggressive deployment of PuFins than previously envisaged.

Societe Generale strategists highlight Brazil’s election surprise, with Lula securing a fourth term and triggering expectations of sharp Brazilian Real (BRL) losses. They see unwinding of long BRL positions and stress key resistance levels around 5.20–5.31 for USD/BRL. The bank’s economists project a shallower easing cycle and higher-for-longer Selic rates.

Real slump risk after Lula victory

"Lula wins fourth term as President after surprise defeat of Bolsonaro 51.8% vs 48.2% in election runoff. BRL set for sharp losses, unwind of MXN rotation trade of past two weeks. BCB set for shallower easing cycle, SG economics write-up. USD/BRL resistance 5.20/5.24/5.31."

"For our economists, the victory of Lula means fiscal consolidation is likely to remain gradual, leaving debt concerns unresolved and supporting a higher-for-longer interest-rate outlook. Lula begins his fourth term facing a significantly more conservative Congress, with the political right strengthening its presence in both chambers. This points to a more challenging legislative environment and limits the administration's ability to pursue ambitious policy initiatives."

"They expect a shallower easing cycle by the central banks, with the Selic rate ending 2027 at 12.25% and remaining above market expectations through 2028."

"The unwinding of long positions spells trouble and a painful slump in the real in the coming days. A 2SD drop would deflate BRL to 5.25, a 3SD pummeling would drive the currency below resistance at 5.31 towards 5.33. Beyond that, we’re looking at levels closer to 5.40."

"USD/BRL decline has stalled after carving out a higher low at 4.94, compared with the May low of 4.88. The pair attempted to break above the 200-DMA last month but encountered strong resistance near 5.20/5.24, making this an important hurdle. If USD/BRL overcomes this zone, a larger rebound cannot be ruled out, with the next projections located at 5.31 and 5.39."

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

• USD/CAD returns above 1.4000 after bouncing from five-month lows near 1.3960 on Friday.
• The US Dollar trims losses ahead of the Fed's decision, while lower oil prices are weighing on the CAD.
• The pair is showing initial signs of bottoming after depreciating 2% over the previous two weeks.

The US Dollar (USD) is trimming some losses against the Canadian Dollar (CAD) on Monday as investors brace for the US Federal Reserve (Fed) monetary policy decision, due on Wednesday, while lower Oil prices hurt the commodity-sensitive Loonie. The USD/CAD pair is trading at 1.4023 after bouncing from Friday’s lows at 1.3968 lows on Friday although the broader trend remains bearish, after a nearly 2% selloff over the previous two weeks.

The Greenback is trading higher against its main peers in a calm session on Monday, as investors shift their focus back to the Fed's monetary policy decision. The bank is widely expected to leave rates on hold after having hiked them in September, but the high inflation risks have fuelled expectations of a second quarter-point hike in December.

The Bank of Canada (BoC) will also release its monetary policy decision on Wednesday, but a quarter-point rate hike has already been priced in by the market.

Beyond that, Oil prices have dropped about 2% from Friday’s highs, increasing pressure on the Loonie. The barrel of Brent Oil trades around $110.30 as of writing, down from Friday’s highs near $ 113.00. News that Qatari negotiators have arrived in Tehran to try to de-escalate the conflict with the US has been welcomed by the market, while US President Trump has discarded any new attacks on Iran before the mid-term elections, which contributed to easing pressure on prices.

Technical Analysis: Friday's "Hammer" candle hints at a potential bullish reversal

USD/CAD trades at 1.4018, with the pair showing a capped tone, yet with recent price action showing a "hammer" candle on Friday, a figure often anticipating a bullish reversal. Momentum indicators in the daily chart, however, are still at negative levels. The Relative Strength Index (14) remains below 40, with the Moving Average Convergence Divergence (MACD) well within negative territory, altogether reinforcing the idea that rallies could struggle.

Bulls remain capped below Thursday's high, at the 1.4040 area, which closes the path towards the October 19 low and October 21 high in the 1.4080 area.

On the downside, initial support is clustered around the September 17 and 18 lows in the 1.3975 area and the 61.8% Fibonacci retracement of the September - October rally, at 1.3965. Further down, the September 2 high, near 1.3940, and the 78.2% Fibonacci retracement, at 1.3874, would come into focus.

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

Commerzbank’s Thu Lan Nguyen expects the upcoming US midterm elections to have a limited impact on FX markets, even if they shift the balance of power in Washington. With Trump relying heavily on executive orders in trade and foreign policy, political risks to the US Dollar are unlikely to fade after the vote. These policies could undermine the Dollar’s global dominance and expose investors to renewed spikes in hedging costs.

Midterms seen as FX non-event

"Despite the likely shift in the balance of power in Washington, there are indeed good reasons to expect relatively little to change for FX markets, at least in the short to medium term."

"In other policy areas that are important to Trump, such as foreign and trade policy, he has in any case relied primarily on executive orders recently."

"The risks to the dollar stemming from erratic US policymaking are therefore unlikely to disappear even in the event of a Democratic victory in the midterms."

"We have often emphasised that trade and foreign policy are precisely the areas that probably pose the greatest risks to the dollar. This is because they arguably have the greatest potential to undermine the dollar’s dominance as the world’s leading reserve and transaction currency."

"USD investors should therefore be prepared for the possibility that hedging costs could once again rise sharply at any time, even after the midterm elections."

"A Congress politically opposed to the next president would increase the risk of legislative gridlock. By contrast, if the president and Congress are politically aligned, the scope for more far-reaching changes in fiscal and economic policy would increase."

"Whether such changes would ultimately be positive or negative for the US dollar, however, cannot yet be determined."

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

• The Indian Rupee slumps against the US Dollar at the start of the Fed’s policy week.
• Investors expect the Fed to leave interest rates unchanged in the 3.75%-4.00% range.
• Elevated oil prices continue to keep the Indian currency under pressure.

The Indian Rupee (INR) extends its losing streak against the US Dollar (USD) for the third trading day on Monday. The USD/INR pair jumps to near 95.25 as the Indian currency faces pressure due to elevated oil prices.

On Monday, the MCX Crude Oil contract expiring on November 19 recovers to near Rs. 9,672 after a gap down opening. The crude oil price is close to its recent highs of Rs. 9,828 posted on Friday.

Currencies from economies, such as India, which rely heavily on oil imports to meet its energy demands, tend to underperform in a high oil-price environment.

What is keeping oil prices elevated?

According to TD Securities, crude prices remain biased higher in the near term, with analysts warning that “we expect crude oil will remain skewed to the upside in the near term as escalation risk ahead of Israeli elections and US midterm elections remains elevated.” They note that “recent Houthi strikes have seen risk premium pricing in the market increase, while persistent tanker attacks by Iran appear to have been successful in reducing some Hormuz flows,” reinforcing the geopolitical premium embedded in current pricing.

US Dollar trades lower at start of Fed decision week

The US Dollar trades lower at the start of the week amid caution ahead of the Federal Reserve’s (Fed) monetary policy announcement on Wednesday, and preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditures (PCE) Price Index data for September due on Thursday.

Analysts at Royal Bank of Canada think the Fed will keep policy steady at this week’s meeting, with the “Fed expected to hold the fed funds target range unchanged on Wednesday after hiking for the first time since 2023 in September.” While the September move marked a resumption of tightening, RBC notes that “FOMC members continue to signal that more hikes will follow, but comments after the last decision suggest a gradual approach.” In terms of the projected path, the bank reiterates that “we expect two 25-basis-point rate hikes ahead before the end of Q1 2027.”

Beyond the Fed’s monetary policy and key economic data releases, investors will pay close attention to Q3 earnings of hyperscalers, including Amazon, Alphabet and Microsoft.

The impact of guidance from hyperscalers regarding their spending plans on Artificial Intelligence (AI) infrastructure would be significant on the US Dollar and US Treasury Yields. In past quarters, hyperscalers issued a substantial amount of debt to fund their AI spending plans, which resulted in a significant jump in US bond yields.

The guidance on AI spending plans would also have a notable impact on the Indian Rupee, given India is known as anti-AI trade in global markets.

Technical Analysis: USD/INR recovers towards 20-day EMA

On the daily chart, USD/INR trades at 95.25, extending its recovery move towards the 20-day Exponential Moving Average (EMA), which is at 95.37. The Relative Strength Index (RSI) has shown a V-shaped recovery to near 46.25, reflecting strong demand for the pair at lower levels.

On the topside, initial resistance is located at the 20-day EMA at 95.37, and a daily close above this barrier would help alleviate current selling pressure and open the way to higher levels. On the downside, the 95.00 handle is the immediate support, with June 25 low at 94.16 remaining the key cushion level.

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

United Overseas Bank’s (UOB) Quek Ser Leang and Lee Sue Ann highlight that USD/JPY’s sharp fall has generated strong downside momentum. While intraday price action is expected to consolidate between 156.50 and 157.50 after oversold conditions, the 1–3 week view still favours further declines toward supports at 156.00 and 155.50, with longer-term risk skewed to additional weakness toward January’s 152.08 low.

Dollar-Yen pressured after sharp slide

"24-HOUR VIEW: USD plunged last Thursday. When it was at 156.60 on Friday, we highlighted the following: “While deeply oversold, the decline could extend to 156.00 before stabilisation can be expected. The next support at 155.50 is likely out of reach for now.” USD then declined to 156.06 and rebounded. USD closed little changed at 156.86 (+0.06%). The immediate downward pressure appears to have eased. Today, we expect USD to consolidate, most likely between 156.50 and 157.50."

"1-3 WEEKS VIEW: After the steep decline in USD last Thursday, we highlighted last Friday (23 Oct, spot at 156.60) that “the rapid increase in downward momentum suggests USD is likely to decline further.” We added, “support levels are 156.00 and 155.50.” We will continue to hold the same view as long as USD holds below 157.80 (no change in ‘strong resistance’ level)."

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

ING's Chris Turner notes that resilient Eurozone PMIs contrast with France's weak growth and persistent fiscal challenges. Despite Moody's decision to maintain France's credit rating and narrowing EUR/USD swap differentials, he expects high energy prices and a lingering risk premium to weigh on the Euro. ING sees EUR/USD upside capped at 1.1250–1.1270, with support at 1.1180 vulnerable this week.

Risk premium keeps euro constrained

"Friday's release of flash October PMIs for the eurozone remained surprisingly resilient and pointed to some decent third-quarter growth figures. The exception was France, however, where weak growth is hardly going to help the country's fiscal malaise. Separately, OAT-Bund spreads have narrowed this morning after Moody's maintained France's Aa3 rating on Friday."

"While welcome news in the short term, we will need to see concrete and material progress on the French budget over the coming months to take pressure off the euro. That seems unlikely, and high energy prices are hardly helping."

"And while the recent 10bp narrowing in EUR/USD two-year swap differentials might make the case for a slightly higher EUR/USD, we see plenty of justification for a 1-2% risk premium to stay in the euro."

"We favour 1.1250/70, capping EUR/USD upside in the near term, and see the 1.1180 support level as vulnerable this week."

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

• Japanese Yen reflects weakness against its peers at the start of the Fed-BoJ policy week.
• Both central banks are expected to leave interest rates unchanged.
• Investors will also focus on US flash Q3 GDP, PCE Inflation and earnings of hyperscalers.

The Japanese Yen (JPY) trades lower against its major currency peers on Monday. In the European trade, the US Dollar (USD) is up 0.35% at around 157.36 against the Japanese currency.

The USD/JPY pair gains as the US Dollar claws back its early losses and turns positive. As of writing, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.12% higher to near 101.87.

The Greenback gains as investors turn cautious ahead of the Federal Reserve (Fed) monetary policy announcement on Wednesday. According to the CME FedWatch tool, the Fed is almost certain to leave interest rates steady in the 3.75%-4.00% range, which makes the monetary policy guidance a key catalyst for the US Dollar’s outlook.

This week, investors will also pay attention to the preliminary Q3 Gross Domestic Product (GDP) and Personal Consumption Expenditure (PCE) Price Index, and Q3 earnings reports of Amazon, Alphabet and Microsoft are key notable released this week.

What to expect from BoJ?

Analysts at Brown Brothers Harriman (BBH) note that the BoJ is “widely expected to keep rates on hold at 1.25% and assess September’s 25bps hike before tightening again.” They recall that in September, BoJ Governor Kazuo Ueda “warned that rapid rate hikes could unsettle asset prices,” while also cautioning that “it could take some time to confirm that 2% inflation is entrenched.”

Even so, BBH argues that “firmer underlying inflation leaves scope for a more hawkish Outlook report, lifting BoJ rate expectations in favor of JPY.” Reflecting this shift in sentiment, they highlight that “the swaps curve price in 75% odds of a 25bps BoJ rate hike to 1.50% at the December 18 meeting and nearly 75bps of tightening in the next twelve months.”

USD/JPY Technical Analysis

In the daily chart, USD/JPY trades at 157.38, retaining a mildly bearish near-term bias as spot remains capped beneath the 20-day exponential moving average (EMA) at 157.71. The pair has slipped back under this short-term trend indicator, suggesting topside pressure is fading, while the Relative Strength Index (RSI) at 46.96 drifts below the midline, hinting at a loss of bullish momentum rather than outright oversold conditions.

On the topside, immediate resistance is located at the 20-day EMA at 157.71, and a sustained break above this barrier would be needed to ease the current capped tone and reopen the path toward higher levels. On the downside, the absence of nearby technical supports in the dataset leaves the pair vulnerable to further slippage, with traders likely to watch for emerging horizontal floors or fresh moving average levels to gauge whether the corrective phase extends.

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

Deutsche Bank strategists highlight Brazil’s surprise election, with President Lula winning a fourth term after trailing in the first round. A Tokyo-listed ETF tracking Brazilian equities fell sharply, and the Real is indicated lower via derivatives. They stress that a rightward shift in Congress should constrain fiscal loosening, making Lula’s ability to establish a credible fiscal path crucial for Brazilian assets.

Lula win reshapes fiscal expectations

"In Brazil, President Lula pulled off a remarkable and genuinely market-moving comeback overnight, winning a record fourth term by 51.8% to 48.2% against Flávio Bolsonaro, despite having lost the first round 45.1%-47.0% three weeks ago."

"It is the first time since Brazil returned to direct presidential elections in 1989 that the first-round runner-up has gone on to win the runoff. The result wrong-footed a market that had increasingly priced a Bolsonaro victory."

"A Tokyo-listed ETF tracking Brazilian equities fell around -15% in Asian trading, with the real also tracking a -10% decline according to derivatives. Bolsonaro had been viewed as the more market-friendly candidate and, after right- and centre-right parties increased their Senate share from 47% to 63% in the first round, investors had been anticipating a better chance of fiscal consolidation."

"Lula, by contrast, has promised an adjustment without yet specifying how it will be delivered. The important medium-term point, however, is that the rightward shift in Congress remains even after Lula's victory, which should constrain the administration's ability to pursue a materially looser fiscal agenda."

"So once the immediate election premium and Bolsonaro's challenge to the result are digested, the bigger question for Brazilian assets will be whether Lula can use that congressional constraint to establish a credible fiscal path. That matters, especially with debt concerns already keeping rates high."

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

The US Dollar (USD) maintains a well-supported stance across global FX markets as traders anticipate the Federal Reserve will keep the Fed funds rate steady at 3.75–4.00% at its upcoming policy meeting on Wednesday. With futures markets pricing in just 10% odds of an October rate increase, investors’ focus has rapidly shifted to the underlying resilience of US economic growth and persistent price pressures. Driven by projections of strong Q3 real GDP expansion near 3.2% annualized and accelerating core PCE inflation, institutional strategists at Brown Brothers Harriman (BBH) and TD Securities view the expected policy pause not as a dovish pivot, but as a tactical prelude to further monetary tightening in December that will preserve the Greenback's yield advantage.

BBH sees Fed pause underpinning the ongoing US Dollar strength

Elias Haddad at Brown Brothers Harriman (BBH) expects the Federal Reserve to leave interest rates unchanged at 3.75–4.00% this week, noting that calls for patience among key Fed officials match market pricing of just 10% odds for an October hike. However, with Q3 GDP projected to expand at a 3.2% annualized pace and September core PCE accelerating to 3.1% yearly, Haddad argues that booming private sector activity and persistent inflation risks will keep the US Dollar firmly supported while a December rate hike is virtually fully priced in.

"The FOMC is expected to keep the Fed funds target range steady at 3.75-4.00% after raising rates 25bps in September. Calls for patience from several key Fed officials support a pause. Futures market imply only 10% odds of a hike this week, with a December 9 rate increase virtually fully price in... Overall, robust US economic activity and rising price pressures argue for additional Fed funds rate hikes, offering ongoing USD support... Headline PCE is seen rising 0.5% m/m... and quicken to 3.6% y/y... Real GDP growth is anticipated to rise 3.2% annualized... driven by consumer spending and AI-related business investment."

TD Securities expects October hold to pave way for December rate hike

Oscar Munoz and Eli Nir at TD Securities project that the Fed will maintain its policy rate at 3.75-4.00% in October, validating current market expectations while refraining from aggressive new forward guidance. They emphasize that pausing in October actually raises the probability of a rate hike in December, with potential for a larger 50 basis points (bps) move if inflation data stay firm. TD Securities maintains a hawkish cycle outlook, expecting two further rate increases in December and March to combat sticky price pressures.

"We expect the FOMC to keep rates on hold this week despite rising inflation risks. The chance of a surprise hike is higher than normal, but we believe they will prioritize patience and wait until December. A hold in October will make a December hike all the more likely. After the upside surprise in September CPI, inflation risks are still pertinent... We expect the Fed to hike two more times (December and March). Inflation remains above target while risks are growing."

Key Takeaway

The widely expected FOMC decision to hold rates at 3.75–4.00% reflects tactical patience rather than a dovish turn, maintaining a highly supportive backdrop for the US Dollar. While BBH points to accelerating PCE inflation (3.6% year-on-year) and robust Q3 GDP growth (3.2% annualized) driven by AI investment as key drivers keeping the Greenback well-bid, TD Securities emphasizes that an October pause elevates the likelihood of subsequent tightening in December and March, ensuring that the US Dollar's interest rate advantage remains firmly intact into the coming year.

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