Forex News

• GBP/USD climbs as softer PCE flips October odds toward hold.
• UK growth beats forecasts, supporting Sterling's recovery.
• ADP strength and resilient GDP keep Fed outlook data-dependent.

The Pound Sterling (GBP) posts solid gains versus the US Dollar (USD) on Wednesday, edging up 0.42% as the latest US inflation figures were below estimates, reaffirming New York Federal Reserve (Fed) President John Williams' comments that the Fed is in no rush to tighten monetary policy. This, along with solid growth figures in the UK, boosted GBP/USD to current spot prices near 1.3280.

Sterling rallies as cooler US inflation collides with stronger UK growth

On Tuesday, several Fed officials crossed the wires, with St. Louis Fed Alberto Musalem, Chicago Fed Austan Goolsbee, and Fed Governor Michael Barr delivering hawkish remarks ahead of the Core Personal Consumption Expenditures (PCE) Price Index release, which came in below estimates and caught investors off guard, after they had priced in a Fed October hike.

US core figures in August came in at 3% YoY, below estimates of 3.3% and were unchanged from July’s print. Headline PCE stood at 3.4% YoY, unchanged from the previous number and also below forecasts for a 3.7% jump.

Other data showed that the US economy grew 2.2% in the final reading for the second quarter of 2026, exceeding forecasts of 1.5%, while ADP jobs data showed private companies hired over 90K people in September, above the 70K forecast, indicating a solid labor market.

Against this backdrop, money markets shifted from expecting a rate hike to a hold for the October 28 meeting. The odds stand at 66% for a hold and nearly 34% for a rate hike, according to Prime Terminal.

The Greenback fell after the data, and the US Dollar Index (DXY), which tracks the buck’s performance versus six currencies, is down 0.08% to 101.29.

In the UK, the Office for National Statistics (ONS) reported that GDP improved to 0.5% QoQ in Q2, up from the expected 0.4%, following 0.4% growth in Q1. Although the news provides some relief for Pound buyers, traders' focus is on fiscal policy as they await Prime Minister Andy Burnham's Autumn Budget, as well as his openness to a potential “rejoin” of the European Union.

Money markets are pricing in near 33 basis points of tightening from the Bank of England towards the end of 2026 and more than 100 basis points by the end of the next year,

GBP/USD Price Forecast: Technical outlook

In the daily chart, GBP/USD trades at 1.3278, extending a bearish tone as the pair holds below the cluster of longer-term simple moving averages (SMAs) grouped around 1.3457 and under multiple broken trend-line levels now acting as overhead supply. The Relative Strength Index (14) at 36.5 hovers just above oversold territory, hinting that downside momentum remains in place but is no longer as aggressive as in prior sessions.

On the topside, initial resistance emerges at the downward trend-line break near 1.3318, with the more significant cap formed by the confluence of a resistance trend line around 1.3437 and the triple SMA cluster near 1.3457. Above that, the former upward support trend lines, now turned resistance at approximately 1.3536 and 1.3738, delineate the next barriers for any corrective bounce, while the absence of clearly defined nearby supports below the market leaves the pair vulnerable to further declines until a new base is established.

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

• Gold retreats after briefly rising above $4,200 following softer US inflation data.
• Softer PCE data and less hawkish Fed remarks reduce expectations of an October rate hike.
• The technical outlook remains bearish as XAU/USD trades below its key daily moving averages.

Gold (XAU/USD) reverses its earlier gains on Wednesday after briefly climbing above $4,200 in reaction to softer-than-expected US Personal Consumption Expenditures (PCE) inflation data. The initial move fades as the US Dollar (USD) trims its losses and US Treasury yields resume their advance. At the time of writing, XAU/USD trades around $4,166, although it remains above the seven-week low of $4,110 touched on Monday.

Data released by the US Bureau of Economic Analysis (BEA) showed that the core PCE Price Index rose 0.2% MoM in August, below the 0.3% forecast but above July’s 0.1% increase. Headline PCE inflation climbed 0.3% MoM, also below the 0.4% expected and up from 0.1% previously. On an annual basis, core and headline inflation held steady at 3.0% and 3.4%, respectively, both below market expectations.

However, stronger growth and employment figures overshadow the softer inflation readings. The US economy expanded at an annualized rate of 2.2% in the second quarter, above the 1.5% forecast and previous estimate. Meanwhile, ADP Employment Change rose by 90K in September, beating expectations of 70K and accelerating from 36K previously.

The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.27 after rebounding from 101.03. The benchmark 10-year US Treasury yield climbs back to around 5.27%, near the previous day’s peak of 5.29%, its highest level since 2007.

The data points to continued resilience in the US economy, giving the Federal Reserve (Fed) room to keep interest rates elevated as it works to bring inflation back to its 2% target. Still, the softer inflation figures reduce the likelihood of an immediate rate increase. Markets now see around a 37% chance of an October hike, down from 70% earlier this week, according to the CME FedWatch Tool.

Less hawkish remarks from New York Fed President John Williams on Tuesday also encouraged traders to scale back expectations of a rate increase as soon as next month.

“With the policy action we took at our September meeting, there is no need for urgency,” Williams said. He added that “if the economy evolves in a manner broadly consistent with my forecast, one further upward adjustment of the federal funds target range may be appropriate late this year to support a timelier return of inflation to target.”

The median projection released after the September meeting placed the policy rate at 4.1% for 2026, suggesting that officials still expect to raise rates once more this year. The prospect of further tightening remains a key headwind for Gold, leaving the metal on track to end September in negative territory.

Energy-driven inflation risks could ease as Middle East crude supplies show signs of recovery. Reuters reported that Saudi Arabia resumed tanker loadings at Yanbu after restarting its East-West pipeline, while Goldman Sachs estimated that Gulf Oil exports returned to their 2025 average over the past week. The US also announced that it would offer up to 40 million barrels from its Strategic Petroleum Reserve.

Attention now turns to Friday’s US Nonfarm Payrolls (NFP) report for further clues about the strength of the labour market and the Fed’s policy path.

Technical Analysis: XAU/USD remains vulnerable while below major SMAs

On the daily chart, XAU/USD keeps a bearish near-term bias as spot holds beneath the 50-day, 100-day and 200-day Simple Moving Averages (SMAs) clustered between roughly $4,287 and $4,538. The relative strength index (RSI) at 39 sits below its midline, while the Moving Average Convergence Divergence (MACD) indicator remains in negative territory, both hinting that downside momentum still outweighs recovery attempts despite the recent stabilization off the $4,100 region.

On the topside, initial resistance emerges at the 100-day SMA at $4,287, followed by the 50-day SMA at $4,322, with the broader bearish structure reinforced by the 200-day SMA near $4,538 and a horizontal barrier at $4,700. On the downside, immediate support is seen at the horizontal level of $4,100, ahead of a deeper floor around $4,000, where a break would open the way for an extension of the prevailing corrective phase.

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

Societe Generale analysts note China has unveiled targeted support measures, including a 25bp cut to the PBoC’s PSL rate and expanded relending quotas for innovation, technology, agriculture and small businesses. Mortgage subsidies for first‑time buyers of smaller homes were introduced, but these drip‑feed steps failed to excite equities.

Policy easing meets muted market reaction

"In Asia, China unveiled a fresh round of targeted support measures aimed at bolstering growth and stabilising key sectors including property, infrastructure and technology."

"The PBoC lowered the rate on its pledged supplementary lending facility by 25bp, dropping the one-year PSL rate to 1.50% from 1.75%."

"It also expanded relending quotas by CNY200bn for innovation and technology sectors and by CNY500bn for agriculture and small businesses."

"On the housing front, authorities introduced mortgage subsidies of up to five years for first-time buyers of smaller, lower-cost homes."

"Overall, these drip feed measures failed to excite equity markets as they fell well short of the broader measures announced back in September 2024."

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

TD Securities' Macro Research team expects the European Central Bank (ECB) to continue a measured tightening cycle, delivering a final 25bp hike in December and taking the deposit rate to 2.75%, which they see as mildly restrictive. They maintain a bullish EUR/USD year-end forecast, arguing that current market pricing overstates future tightening and that policymakers may soon push back against expectations.

TD sees final ECB hike in December

"We expect the ECB to deliver a final 25bp hike in December, taking the deposit rate to 2.75%, as resilient growth and persistent inflation pressures keep policymakers focused on returning rates to mildly restrictive territory."

"We maintain a bullish EURUSD year-end forecast and recently expressed the view via 3m risk reversal to fade the broad-based USD rally."

"OIS markets are currently pricing around 31bp of ECB tightening by end-2026 and close to 100bp cumulatively by end-2027, taking the terminal rate to nearly 3.5%, well above the 2.5% neutral rate referenced by several ECB policymakers."

"Neither we nor the broader consensus expect the ECB, or other major central banks, to validate the full extent of current market pricing."

"In our view, underlying economic data and inflation indicators remain broadly consistent with a measured tightening cycle aimed at moving policy into mildly restrictive territory."

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

• USD/JPY falls 0.30% on Wednesday as softer-than-expected US inflation weighs on the US Dollar.
• Core PCE inflation remains at 3% in August, below the 3.3% forecast, while private-sector employment rises more than expected.
• Markets scale back bets on an October Fed rate hike but increase expectations for a move in December.

USD/JPY falls 0.30% on Wednesday and trades around 156.80 at the time of writing, as the US Dollar (USD) comes under selling pressure following softer-than-expected United States (US) inflation data. The pair remains on the back foot as investors reassess the timing of a potential further tightening by the Federal Reserve (Fed).

The US Personal Consumption Expenditures (PCE) Price Index showed that annual headline inflation remained unchanged at 3.4% in August, below the 3.7% expected by markets. July's reading was also revised lower to 3.4% from the previously reported 3.7%.

The core PCE Price Index, which excludes volatile food and energy components and is closely watched by the Fed as a measure of underlying inflation, remained steady at 3% YoY, below the 3.3% market forecast. July's reading was also revised down to 3% from 3.3%. On a monthly basis, headline PCE rose 0.3%, while core PCE increased 0.2%.

The softer inflation figures add to stronger US economic data. Automatic Data Processing (ADP) reported that private-sector employment increased by 90K jobs in September, exceeding expectations for a 70K rise and accelerating sharply from the 36K increase recorded in August after revision.

US economic growth also delivered an upside surprise. Annualized Gross Domestic Product (GDP) growth for the second quarter was revised higher to 2.2%, from the previous estimate of 1.5% and above the 1.5% expected. The revision means that economic growth accelerated from the 2.1% pace recorded in the first quarter, reversing the slowdown indicated by the previous estimate.

The softer inflation readings prompt markets to reconsider the timing of the Fed's next rate hike. According to the CME FedWatch tool, investors now assign around a 35% chance to a rate increase in October, down from nearly 51% a day earlier and 71% a week ago.

This repricing weighs on the US Dollar and adds downward pressure on USD/JPY. The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, falls 0.21% on Wednesday to trade around 101.20, after touching an intraday low of 101.03 immediately following the PCE release.

However, markets are not abandoning expectations for further monetary tightening. Instead, investors appear to be shifting the expected timing of the Fed's next move toward the end of the year. The chance of a rate hike in December rises to nearly 60%, from 49.4% a day earlier. Persistent expectations of another Fed rate increase could therefore provide some support to the US Dollar and limit the downside in USD/JPY.

USD/JPY technical analysis

In the one-hour chart, USD/JPY trades at 156.84, retaining a bearish near-term bias as it holds below both the 100-period simple moving average (SMA) at 157.59 and the 200-period SMA at 157.58. The pair is retreating from recent highs, and the Relative Strength Index (14) around 42 suggests fading bullish momentum but not outright oversold conditions, hinting that sellers still have the upper hand while any rebounds would likely be capped by the clustered moving-average resistance overhead.

On the topside, immediate resistance is located at the 200-period SMA at 157.58, followed closely by the 100-period SMA at 157.59, creating a dense supply zone before the horizontal barrier at 158.00 and a stronger cap near 159.00. On the downside, initial support emerges at 156.50, with a deeper floor at 155.50, and a clear break under these levels would open the door to a more pronounced downside extension in the coming hours.

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