Forex News

Here is what you need to know on Wednesday, October 21:

Fİnancial markets remain relatively quiet midweek amid a lack of key macroeconomic data releases. Although the British Pound shows some volatility following the inflation data, it struggles to make a decisive move in either direction against its peers.

The UK's Office for National Statistics (ONS) reported that annual inflation, as measured by the change in the Consumer Price Index (CPI), rose to 3.5% in September from 3.1% in August. This print came in higher than the market expectation of 3.4%. The core CPI, which excludes volatile food and energy prices, rose by 2.8% following the 2.6% increase recorded previously. Additional details of the report showed that the Retail Price Index increased by 3.9% on a yearly basis, as anticipated. After gaining about 0.5% and reaching its highest level since mid-September above 1.3400 on Tuesday, GBP/USD trades flat near 1.3370 in the European morning on Wednesday. EUR/GBP trades marginally lower on the day below 0.8400, while GBP/JPY stays virtually unchanged at 211.50.

The US Dollar (USD) Index closed in negative territory on Tuesday as risk flows dominated the action in financial markets following the bullish opening seen in Wall Street. Early Wednesday, the USD Index clings to small gains but stays below 102.00, while US stock index futures gain between 0.1% and 0.5%. After the closing bell, SpaceX announced a 161% revenue growth for the the third quarter, driven by a ninefold growth in its artificial intelligence business, as per CNBC. Tesla will report third-quarter earnings figures after the closing bell on Wednesday.

Iran's Foreign Minister Abbas Araghchi said that indirect negotiations with the US are continuing through intermediary countries. Araghchi further explained that Washington agreed to Iran's seven-day proposal but sought to add several additional conditions, although he declined to disclose their details. Araghchi also reportedly demonstrated that the US cannot be trusted in the negotiation process. Following Tuesday's volatile action, crude Oil prices edge higher on Wednesday, with the barrel of West Texas Intermediate (WTI) rising about 1% on the day.

Brent swings as Middle East negotiation headlines are challenged

Analysts at Deutsche Bank note that yesterday’s Oil trade was dominated by headline-driven volatility around Middle East negotiations. They point out that Brent “dropped from around $112 to $106 in the early London afternoon after several unconfirmed reports indicated that Qatar and Pakistan had put forward a proposal that could potentially revive talks aimed at ending the conflict in the Middle East.”

However, Deutsche Bank adds that the move quickly reversed as the narrative shifted. “Later, Brent crude started to climb again, as the story was discredited by a diplomat involved in negotiations.” Citing Bloomberg, they highlight that “while talks to reach a deal are ongoing, reports that the negotiating sides were close to a solution were false,” helping Brent retrace much of its earlier decline.

USD/JPY extends its sideways grind at around 158.00 in the European morning on Wednesday. Japanese Finance Minister (FM) Satsuki Katayama said on Wednesday that the government is coordinating closely with the Bank of Japan (BoJ) and there is no major divergence on inflation outlook and policy. Earlier in the day, the data from Japan showed that Exports and Imports rose by 16.7% and 18.9%, respectively, on a yearly basis in September. Both of these figures fell short of analysts' forecasts.

EUR/USD continues to fluctuate in a relatively tight range above 1.1200 for the third consecutive day on Wednesday. European Central Bank (ECB) President Christine Lagarde is scheduled to deliver a speech later in the day.

Gold stays on the back foot after closing marginally lower on Tuesday and closes in on $4,100 early Wednesday.

Danske Research Team notes US equities ended modestly higher, with the S&P 500 up 0.3%, Nasdaq flat and Russell 2000 outperforming. Sector performance showed a defensive bias, led by healthcare, while tech, industrials and communication services lagged on concerns about the AI investment cycle. The VIX fell toward 17, suggesting easing market anxiety, though strong AI-related earnings later challenged this rotation.

Defensive sectors lead while AI trade swings

"US equities ended yesterday modestly higher, although the headline performance masked another rotation beneath the surface. The S&P 500 gained 0.3%, the Nasdaq was flat, while the Russell 2000 outperformed with a 1.7% advance."

"Sector performance again had a defensive tilt, with healthcare leading the gains, while tech, industrials and communication services struggled amid lingering concerns over the AI investment cycle."

"The VIX declined further to 17.3, having approached 20 last week, pointing to a gradual easing in market anxiety."

"After hours, and overnight developments challenge yesterday's rotation story though, as strong earnings have brought the AI trade back into focus."

"SpaceX and Super Micro Computer both delivered results exceeding of expectations, with their shares rising 8% and 16%, respectively, in after-hours trading."

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

• GBP/USD wavered around 1.3475 after failing to break one-month highs at the 1.3400 level on Tuesday.
• UK inflation grew beyond expectations in September, strengthening the case for a BoE rate hike next month.
• The increase in UK Government borrowing might have offset the positive impact on the Pound.

The British Pound (GBP) wavered against the US Dollar (USD) on Wednesday following the release of stronger-than-expected UK Consumer Price Index (CPI) figures and a further increase in UK government debt. The GBP/USD hit session lows at 1.3364 before picking up again to the 1.3375 area, and keeps consolidating the last few days' gains after failing to find acceptance above 1.3400 on Tuesday

UK Consumer Price Index (CPI) rose 0.4% in September, according to data from National Statistics, an inch below August’s 0.5% growth but above market expectations of a 0.3% increase. Year-over-year (Y-o-Y), CPI Growth accelerated to 3.5%, from 3.1% in August, also above the 3.4% market consensus.

The core CPI, which strips off the influence of volatile food and energy prices, has also grown above expectations to a 2.8% Y-o-Y rate, beyond the 2.7% market consensus and following a 2.6% Y-o-Y increase in August.

UK government borrowing increased further in September

Alongside inflation data, National Statistics revealed that the UK’s Public Sector Net Borrowing increased to GBP 24.52 billion in September, from GBP 17.25 billion in August. These figures might have stirred old concerns about the elevated UK public debt, putting some bearish pressure on the Pound.

Wednesday's data follows an unexpected decline in the ILO Unemployment Rate on Tuesday, which fell to its lowest level in more than a year. This, coupled with the bright Gross Domestic Product (GDP) data released last week, has cemented market expectations that the Bank of England might hike interest rates at its November 5 meeting.

The US Dollar is showing a moderately stronger stance on Wednesday, with the Dollar Index (DXY) trimming some losses following a five-day selloff. Investors have already priced in a pause at next week’s Federal Reserve (Fed) monetary policy meeting, while concerns about the high Oil prices amid the uncertainty surrounding the Middle East conflict keep channeling safe-haven demand into the Greenback.

Commerzbank’s Antje Praefcke notes that the Dollar faces limited upside in coming days as markets await the Federal Reserve and ECB meetings next week. A December Fed hike is priced in, but no further tightening is expected by Commerzbank. With only second-tier US data and Middle East risks not adding fresh support, Praefcke expects relatively stable EUR/USD and sees little reason for significant Dollar gains.

Fed path and risk sentiment constrain Dollar

"For October - that is, next week - a rate hike by the Fed is generally no longer expected. Instead, a hike in December is already priced in. Furthermore, the market still sees a chance that another hike could come by the middle of next year. Our experts, however, do not foresee any further hikes after December. If the Fed delivers a hawkish pause next week, the dollar could gain some ground, at least in the short term. Any deviation from a restrictive stance - which would cause the market to revise its expectations downward, especially for next year - is likely to put the dollar under pressure."

"Only second-tier macroeconomic data is on the agenda this week. Furthermore, the resilience of the US economy is now well known and, in my view, already priced in. Even with strong data, the dollar is therefore unlikely to gain much ground."

"And what about the Middle East conflict? Yes, the dollar typically strengthens during periods of heightened risk aversion. However, there is currently no additional impetus coming from the Middle East that would drive the dollar higher in its role as a safe haven. In my view, an easing of the conflict would actually be likely to lead to a sustainable, notable correction in the dollar - something we could see yesterday in response to unconfirmed rumors about an agreement, when the oil price and the US dollar dipped shortly."

"The bottom line is that, in the short term, I see little reason for the dollar to gain significant ground."

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

• The British Pound reflects volatile moves after the UK CPI data release, but remains broadly steady.
• In September, both headline and core UK CPI grew at a faster-than-expected pace.
• Strong UK job data and CPI figures could boost hawkish BoE bets.

The British Pound (GBP) reflects topsy-turvy moves against its peers, but remains broadly flat, after the release of the hotter-than-expected United Kingdom (UK) Consumer Price Index (CPI) data for September. Against the Japanese Yen (JPY), the British currency is almost flat at around 211.45.

The Office for National Statistics (ONS) has reported that the headline CPI grew by 3.5% Year-on-Year (YoY), faster than 3.4% estimates and the August reading of 3.1%. In the same period, the core CPI – which excludes the volatile components of food, energy, alcohol and tobacco – also grew stronger by 2.8% YoY vs. estimates of 2.7% and the previous release of 2.6%.

On a monthly basis, inflationary pressures rose by 0.4%, faster than expectations of 0.3%, but slower than the prior release of 0.5%.

On Tuesday, the UK labor market data for three months ending August also came in better-than-projected. The duo of strong job data and hot CPI figures will likely boost expectations of an interest rate hike by the Bank of England (BoE) in the November policy meeting. So far this year, the BoE has held interest rates steady at 3.75%.

BoE Monetary Policy Committee (MPC) member Megan Greene also warned of upside inflation risks on Tuesday, citing that second-round inflation effects could start materializing.

BoE’s Greene flags stalled wage disinflation, keeping GBP rate hike risks alive

BoE’s Greene scores 7.4/10 on the FXS Speechtracker, exactly in line with Greene’s historic average, signaling a consistent tone rather than an escalation in rhetoric. The emphasis that wage disinflation has stalled at levels above those consistent with 2% inflation, alongside a belief that policy should proactively lean against second-round effects, marks a clearly hawkish bias for GBP.

Greene’s view that the risk of second-round inflation effects is greater than previously thought, even as forward-looking data point to pay growth closer to 3.5%, reinforces the case for keeping policy tight. References to surprising economic resilience and labor market slack potentially having peaked suggest limited downside growth risks, supporting a narrative of sustained GBP support as markets price in a slower path to future rate cuts.

On Tokyo front, investors await the National CPI data for September, which is scheduled for Friday.

The United Kingdom (UK) headline Consumer Price Index (CPI) climbed 3.5% over the year in September, compared to a rise of 3.1% in August, the data released by the Office for National Statistics (ONS) showed on Wednesday. 

Markets predicted a 3.4% growth in the reported period. The UK inflation reading was well above the Bank of England’s (BoE) 2% inflation target.

The core CPI (excluding volatile food and energy items) rose 2.8% year-over-year (YoY) in the same period, compared to August’s 2.6% print and came in above the forecast of 2.7%.

Meanwhile, the monthly UK CPI arrived at 0.4% in September versus an increase of 0.5% reported in August, beating the market consensus of 0.3%.

GBP/USD reaction to the UK CPI inflation data

Hotter UK CPI inflation report fails to boost the British Pound (GBP). At the time of writing, the GBP/USD pair is trading 0.08% lower on the day to trade at 1.3373.

This section below was published at 02:00 GMT as a preview of the UK Consumer Price Index (CPI) inflation data.

• UK CPI is expected to accelerate to 3.4% YoY in September from 3.1% in August, the hottest level since December last year.
• Core inflation is also seen accelerating as the impact of high energy prices spills over into the broader economy.
• These figures might provide the BoE with the definitive argument to tighten its monetary policy at November’s meeting.

The United Kingdom (UK) Office for National Statistics (ONS) is expected to release September’s Consumer Price Index (CPI) on Wednesday at 06:00 GMT. These figures will be accompanied by the Producer Price Index (PPI) and the Retail Sales report.

Consumer inflation figures are expected to be closely watched by investors to shed more light on the outcome of the Bank of England’s (BoE) next monetary policy meeting. Some BoE officials, including Governor Andrew Bailey, have flagged the need to hike interest rates to tame inflationary pressures, although they have been vague about the timing of the next move. If UK inflation data confirms market expectations, it might cement hopes of a rate hike in November, which would increase speculative demand for the British Pound (GBP).

What to expect from the next UK inflation report?

The market consensus anticipates a 0.3% increase in consumer inflation in September, down from August’s 0.5% rise, but with the year-on-year rate accelerating to 3.4% from 3.1% in the previous month.

Core inflation, which excludes the volatile energy, food, alcohol and tobacco components, is also seen accelerating, although at a more moderate pace. September's Core CPI is seen picking up to a 2.8% pace from 2.6% in August, adding to evidence that the impact of the energy shock stemming from the Middle East conflict is spreading through the broader economy.

Crude prices have risen more than 10% so far in October and have appreciated nearly 50% since July. The barrel of Brent Oil trades at five-month highs above $108.00 at the time of writing, and is unlikely to return to pre-war levels anytime soon, given the ever-growing entanglement among regional powers. The scenario points to high inflation pressures for a protracted period of time and the risk that central banks will fall behind the curve if they fail to react promptly.

Against this backdrop, the Bank of England has been one of the few major central banks that have not tightened its monetary policy in 2026. Some BoE officials have called for an interest rate hike, and Governor Bailey expressed his frustration with above-target inflation at the International Monetary Fund (IMF) summit in Bangkok last week, which fuelled investors’ confidence in some monetary tightening before year-end.

Recent UK data has endorsed those views. The ILO Unemployment Rate, released on Tuesday, reflected a resilient labour market, despite a decline in vacancies and a larger-than-expected increase in claimants. Last week, monthly Gross Domestic Product (GDP) came in as a positive surprise, growing unexpectedly in August, amid a strong performance of the industrial sector. All this sets a favourable scenario for a quarter-point rate hike at next month’s meeting.

How will the UK Consumer Price Index report affect GBP/USD?

The British Pound is showing one of the strongest performances among the major currencies this week. Bright UK data has boosted confidence in the economic outlook and has eased concerns about the cost of the tax-relief measures promised by Prime Minister Andy Burnham’s cabinet. 

Analysts at Commerzbank assess that recent economic data “gives the Bank of England room to raise rates without running the risk of putting additional pressure on an already weakening economy (...) Also takes some pressure off the Chancellor, who remains committed to reducing the budget deficit.”

“How this can be achieved while at the same time providing relief to households and businesses facing high energy costs should become clearer when the budget is presented at the end of the month,” says Commerzbank in a note.

With those concerns in the rearview, at least for now, strong UK data and rising hopes that the BoE will finally hike rates in November remain the key Pound drivers this week. In contrast, the US Dollar languishes as investors pare back bets of back-to-back Federal Reserve (Fed) hikes, and the Euro suffers as protests in Paris turn violent, forcing the government to impose curfews in several cities.

From a technical perspective, the GBP/USD 4-hour chart shows an immediate bullish trend, confirmed by the successful break of the downtrend resistance line from the late August highs, which was retested on Monday. Momentum indicators are supportive, with the Relative Strength Index (14) above 60, although the Moving Average Convergence Divergence (MACD), practically flat around zero, suggests that the uptrend is still frail.

Bulls’ conviction is likely to be challenged in the area between Friday’s high at 1.3370 and the September 22 high near the 1.3400 area. A confirmation above those levels would bring the 61.8% Fibonacci retracement of the August-October downtrend, at 1.3467, and the previous support zone just above 1.3470 (September 2 and 4 lows), into focus.

On the downside, the confluence of the mentioned trendline and the previous range top, around 1.3295, is keeping bears away for now. A reversal below that level would expose the year-to-date lows in the 1.3140 area.

• EUR/USD weakens to around 1.1225 in Wednesday’s early European session.
• French official will tap its military to help maintain order at planned protests coming weekend.
• Negative outlook for the cross prevails below the 100-day SMA, with bearish RSI momentum.
• The initial contention level is seen at 1.1185; the immediate resistance level to watch is 1.1252.

The EUR/USD pair trades on a softer note near 1.1225 during the early European trading hours on Wednesday. French turmoil and fiscal concerns weigh on the Euro (EUR) against the US Dollar (USD). Traders await the speeches from European Central Bank (ECB) policymakers later in the day, including President Christine Lagarde, Philip Lane, Joachim Nagel and Piero Cipollone.

France will reinforce police with troops and mount a huge security operation for more protests planned on Saturday as the government acknowledged failures in its response to last weekend's violence, per Reuters. French Prime Minister Sébastien Lecornu also said there would be fresh curfews “where the situation requires it.”

"The worries in France are not going away anytime soon," said Tommy von Brömsen, FX strategist at Handelsbanken. "The bearish view on France will stay for a while longer, and there's much more euro weakness to be priced in,” Tommy added.

Last week, the Federal Reserve (Fed) Chair gave no preview about whether he feels more interest rate hikes will be needed or when.

"I don't prejudge meetings," said Warsh during the IMF annual meeting in Bangkok. "I don't believe in saying now what I might do at the meetings that we have in the balance of this year,” he added.

Euro seen consolidating as UOB keeps EUR/USD in defined range

Strategists at UOB Group maintain that EUR/USD remains in a sideways pattern over the near term. Referring back to their latest update from last Friday, when spot was at 1.1215, they reiterate that the Euro “has likely entered a range-trading phase, and for the time being, it is likely to trade between 1.1160 and 1.1280.” UOB continues to “hold the same view for now,” underscoring a preference for consolidation rather than a directional call at this stage.

Warsh flags investment surge and AI focus but avoids pre-committing on policy

Fed Chair Warsh delivered a moderately constructive but cautious message, with the FXS Speechtracker score at 5.6/10, slightly softer relative to the historical average of 6.1/10 and consistent with a balanced tone. The admission of being "over-scarred from the global financial crisis" underscores a persistent bias toward risk management and financial stability, even as Warsh highlights structural growth and an investment surge driven by "good policies" and refuses to pre-judge upcoming FOMC decisions. The emphasis on AI as a near-term demand-side force and a tool to improve data confidence, alongside plans for an AI field hearing and new Fed task forces, points to a forward-looking stance that could eventually reshape expectations for the Dollar if productivity and inflation dynamics shift.

The FXS Fed Sentiment Index was unchanged, moving 0.00 points to a still-elevated level of 127.51, signaling that the speech left the perceived policy stance firmly in hawkish territory despite the non-committal language on future meetings. The combination of a flat FXS Fed Sentiment Index and a slightly lower FXS Speechtracker score suggests markets see no immediate shift in the Fed reaction function, with Warsh’s crisis-scarred caution and focus on financial stability risks reinforcing expectations for a vigilant, data-dependent path rather than a clear dovish pivot.

Technical Analysis: EUR/USD keeps a bearish vibe below key resistance levels

In the daily chart, EUR/USD maintains a bearish near-term bias as spot remains capped beneath the 20-day Bollinger simple moving average and the 100-day simple moving average (SMA). Price is also holding below the upper Bollinger band, reinforcing the idea of a market contained within a broader downside structure. The Relative Strength Index (14) at 39.6 sits in bearish territory but above oversold thresholds, hinting at persistent selling pressure rather than exhaustion.

On the downside, the October 19 low of 1.1185 acts as an first support level for the cross, followed by the lower limit of Bollinger band at 1.1115. A clear break below this level would likely open the path for the 1.1000 psychological level and then the May 12, 2025 low of 1.0951. 

On the bright side, initial resistance level is located at the 20-day Bollinger SMA around 1.1252, en route to the upper boundary of Bollinger band near 1.1390. Any follow-through buying above the mentioned level could pave the way to the 100-day SMA at 1.1460. 

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

• The Australian Dollar gains further against the US Dollar as RBA’s Hauser warns of upside inflation risks.
• RBA’s Hauser said that the monetary policy is effective, but the inflation outlook remains deteriorated.
• The US Dollar is under pressure as the Fed will likely leave interest rates steady this month.

The Australian Dollar (AUD) extends its winning streak against the US Dollar (USD) on Wednesday, trading 0.26% higher at around 0.7015 in the early European trade. The Aussie pair strengthens following warnings from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser, earlier in the day, that the “inflation outlook appears worse than forecast and slightly above expectations”.

“Inflation has remained elevated for an extended period,” RBA Hauser said. She added, “Quarterly trimmed mean likely to exceed expectations.” Hauser further added, “Monetary policy effective, but inflation outlook deteriorates.”

RBA Hauser’s warning that price pressures could remain at elevated levels might prompt expectations of another interest rate hike by the central bank in the near term.

Meanwhile, the US Dollar trades with caution while the Federal Reserve (Fed) has entered a blackout period ahead of the policy decision later this month. The Fed is highly anticipated to leave interest rates unchanged in the range of 3.75%-4.00%.

AUD/USD Technical Analysis

In the daily chart, AUD/USD trades at 0.7014, holding just above the 20-period exponential moving average (EMA) at 0.6995, which suggests a mildly constructive near-term tone while the pair respects underlying trend support. Two upward-sloping support trend lines starting around 0.6904 and 0.6903 reinforce the notion of a gradually rising base, while the Relative Strength Index (14) at 50.96 stays close to neutral, hinting at balanced momentum rather than an impulsive move in either direction.

On the topside, immediate resistance appears at the nearer downward trend line starting from 0.7020, with a more significant barrier at the higher descending trend line drawn from 0.7138. On the downside, initial support is located at the 20-period EMA at 0.6995, ahead of the clustered rising trend-line supports around 0.6904/0.6903, where buyers are likely to defend the broader corrective advance.

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

UOB strategists Quek Ser Leang and Lee Sue Ann highlight that EUR/USD extended modest gains as the US Dollar (USD) weakened on softer Treasury yields and better risk sentiment. Near-term, they see the Euro (EUR) trapped in a narrow intraday range, while the 1–3 week view keeps the pair in a broader consolidation band, with a 1–3 month corrective recovery potentially stretching above the 21-day EMA.

Euro stuck in well-defined ranges

"24-HOUR VIEW: Our view of range-trading yesterday was incorrect, as EUR briefly rose to a high of 1.1260 and then pulled back to close at 1.1236 (+0.23%). The brief advance did not lead to any increase in upward momentum, and we continue to expect EUR to trade in a range today, most likely between 1.1205 and 1.1255."

"1-3 WEEKS VIEW: Our most recent narrative was from last Friday (16 Oct, spot at 1.1215), when we indicated that EUR “has likely entered a range-trading phase, and for the time being, it is likely to trade between 1.1160 and 1.1280.” We continue to hold the same view for now."

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