Forex News
TD Securities strategists see limited scope for a sustained Canadian Dollar (CAD) rally after softer-than-expected September inflation data, despite hawkish signals from the Bank of Canada (BoC). They expect the next BoC rate hike in Q1 2027 and favour fading CAD strength through CAD/MXN. While they see few catalysts for an immediate US Dollar (USD) selloff, they also expect USD/CAD to struggle to sustain a break above 1.43 into year-end.
CAD struggles to sustain gains after softer inflation
"The September CPI report came in softer than expected at 3.1% y/y, up 0.1pp from August, as prices rose by 0.1% m/m (0.118 unrounded). That was 0.1pp below TD and the market consensus for 3.2%, but underlying details were also more constructive and spoke to limited breadth across Canadian CPI, with CPI-trim/median both slowing by 0.1pp to 1.8%/1.9%, respectively (market: 1.9%/2.0%)."
"USD/CAD has recovered some losses after taking heat from the hawkish BoC signal in Macklem's weekend interview. We continue to expect the next BoC hike in Q1 next year."
"As such, the bigger near-term risk is a repricing of the market's remaining 2026 tightening expectations, which we do not view as warranted by the current inflation or growth backdrop."
"While the USD has likely discovered a top, we do not see sufficient catalysts for an immediate selloff for the USD either."
"Data remains unfavourable for any sustained CAD rally. USD/CAD found a top at 1.43, and we prefer to fade CAD strength via CAD/MXN."
"As a result, we are not fundamentally constructive on CAD into year-end, but we also struggle to see a sustained break above 1.43 in USD/CAD, given that the last move to those levels occurred around Liberation Day in 2025 amid a different macro environment."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- EUR/USD trades lower as political unrest and fiscal concerns in France weigh on the Euro.
- The US Dollar and US Treasury yields stabilise following last week’s sharp correction.
- Traders expect the Fed and ECB to hold rates in October, while further hikes by year-end remain possible.
The Euro (EUR) trades on the back foot on Monday as political concerns in France weigh on the currency, helping the US Dollar (USD) pause last week’s correction. At the time of writing, EUR/USD trades around 1.1215, down 0.21% on the day.
Analysts at Rabobank observe that the Euro’s recent underperformance is unfolding against a fraught geopolitical backdrop, noting that “while the world grapples with the energy shock emanating from hot wars in Europe and the Middle East, French President Macron continues to grapple with political unrest at home.”
They highlight that “tensions ran high over the weekend as widespread protests erupted into rioting and looting, with images of the burning of the historic town hall in Limoges circulating on social media and about 1000 police officers reported injured,” underscoring how intensifying domestic instability in France is feeding into broader concerns over Europe’s political risk profile.
The US Dollar and US Treasury yields corrected sharply lower last week as an AI-led equity sell-off prompted traders to rotate into government bonds. However, both are showing signs of stabilisation on Monday. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.95 after falling to 101.58 last week. Meanwhile, the benchmark 10-year US Treasury yield stands near 5.10%, recovering from Thursday’s low of 5.03%.
On the monetary policy front, traders widely expect both the Federal Reserve (Fed) and the European Central Bank (ECB) to leave interest rates unchanged at their October meetings. However, expectations of additional rate hikes by year-end remain in place as inflation stays above both central banks’ respective 2% targets. Final data released on Friday showed that the Eurozone Harmonized Index of Consumer Prices (HICP) rose 3.8% YoY in September, while core HICP increased 2.5%.
However, ECB officials remain divided over the pace of further tightening. Some policymakers point to limited second-round effects from higher Oil prices and growing downside risks to economic growth, while others warn that persistent inflation could require additional rate hikes.
US inflation surprise keeps Fed on hold call intact
Economists at Deutsche Bank note that the latest inflation data have come in on the strong side, with “headline CPI rose +0.65% in September, taking the annual rate from 3.4% to 3.7%, while core CPI increased +0.33%, with its annual rate up two-tenths to 2.6%.” They add that “PPI was also stronger than expected on Thursday, and our economists’ current tracking for September core PCE is +0.36% month-on-month, or about 3.14% year-on-year absent revisions.”
According to Deutsche Bank, “these numbers have recently mattered for markets: the sharp rise in the September PMIs helped drive an almost 15bp increase in both 2yr and 10yr Treasury yields on September 23.” Even so, the bank says its economists “still expect the Fed to remain on hold at next week’s October meeting, allowing policymakers more time to assess the underlying inflation trend and the tightening in financial conditions from the recent rise in global yields.”
Euro FAQs
The Euro is the currency for the 20 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).
The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.
Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.
Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.
Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Brown Brothers Harriman's Ellias Haddad expects Japan’s September Consumer Price Index (CPI) to edge higher but remain below the Bank of Japan’s (BoJ) 2026 projection, limiting pressure for rapid tightening. With markets pricing minimal odds of an October hike and higher probability for December, Haddad sees USD/JPY likely trading in a 155.00–160.00 range in the near term as BoJ normalization remains gradual.
Limited BOJ tightening caps Yen
"Japan September CPI (Friday). Headline CPI is expected at 2.1% y/y vs. 1.9% in August, core CPI ex. fresh food is expected at 2.1% y/y vs. 1.7% in August, and core CPI ex. fresh food & energy CPI is expected at 2.3% y/y vs.1.9% in August."
"The BOJ is unlikely to crank up the pace of tightening with headline and core CPI ex. fresh food & energy tracking below its 2026 projection of 2.5%. The swaps curve price in less than 5% odds of a 25bps BOJ rate hike to 1.50% on October 30, and 80% probability of a hike on December 18."
"That leaves USD/JPY likely to trade within a 155.00-160.00 range in the near term."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Standard Chartered’s Christopher Graham discusses how Prime Minister Burnham is reopening debate on the UK’s long-term relationship with the EU ahead of next month’s UK-EU summit. Options range from closer cooperation within Labour’s red lines to potentially rejoining the customs union, single market or EU. Public regret over Brexit and evolving EU industrial policy are strengthening arguments for reintegration.
Burnham reopens debate on EU relationship
"The UK’s long-term relationship with the EU has returned to mainstream discussion as Prime Minister Burnham seeks to lay out the options around next month’s UK-EU summit."
"These could range from closer cooperation within Labour’s manifesto red lines to rejoining the customs union, single market or ultimately the EU itself."
"The renewed focus reflects both economic and political considerations."
"Public regret over Brexit has grown, while the economic case for closer integration has strengthened as the EU’s industrial policy evolves."
"Burnham may also sense an opportunity to capitalise on other parties’ current divisions and bring back pro-European voters to Labour."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
TD Securities economists Oscar Munoz and Eli Nir project that US headline Consumer Price Index (CPI) will rise 0.30% month-on-month in October 2026, slowing from September’s 0.65% gain, with gasoline and food still contributing. They expect core CPI to increase 0.21% and translate into a 0.24% rise in core Personal Consumption Expenditures (PCE) Price Index, as core goods and services inflation moderate and shelter cools.
TD sees softer but still solid CPI
"Following the release of the September CPI report, we are providing an early look into our October projection based on multiple assumptions which may evolve as the month progresses and more data becomes available — particularly for volatile segments like gasoline prices, hotel rates, and airfares."
"Headline inflation is expected to cool down in October, rising a still solid 0.30% m/m after a stronger 0.65% m/m September increase (CPI NSA index: 337.316 vs the market's current fixing at 337.250)."
"Our preliminary forecast for the October core CPI stands at 0.21% m/m (down from a firmer 0.33% gain in September), which would be consistent with a core PCE increase at 0.24%."
"Core goods prices likely lost some momentum on the back of a decline in used vehicle prices and cooling from apparel, recreation and IT goods. A pickup in household goods prices likely acted as a partial offset to the broad decline."
"Services inflation is projected to mean-revert following last month's broad-based increase. We look for shelter to throttle down — led by a reversal in OER — after an unexpected surge in the last report. Slowing inflation in transportation and recreation services is also expected to help tame price gains in the segment."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
- USD/CAD pauses its decline as softer Canadian inflation data limit gains in the Loonie.
- Softer core inflation reinforces expectations that the BoC will keep interest rates unchanged.
- Traders expect another Fed interest rate hike by December, keeping the US-Canada rate gap in focus.
USD/CAD pauses its decline on Monday after the Canadian Dollar (CAD) briefly strengthened to its highest level in a month at the weekly open. Softer-than-expected Canadian inflation data limit further gains in the Loonie, while the US Dollar (USD) stabilizes following last week’s correction from 18-month highs. At the time of writing, USD/CAD trades around 1.4091 after touching an intraday low of 1.4070, down nearly 0.35% on the day.
Statistics Canada reported that the Consumer Price Index (CPI) rose 0.1% MoM in September, following a 0.1% decline in August and falling short of the 0.2% increase expected. Annual inflation edged up to 3.1% from 3.0%, although it remained below the 3.2% forecast. The Bank of Canada’s (BoC) core CPI was unchanged on the month, while the annual rate eased to 2.2% from 2.4%.
The headline increase was largely driven by energy prices, which rose 19% YoY, including a 27.8% surge in gasoline prices. However, the details point to softer underlying price pressures, with the BoC’s preferred core measures hovering near the 2% target and suggesting limited spillover from higher energy costs into broader inflation.
The inflation report, combined with deteriorating labour market conditions after the Canadian economy shed 68,300 jobs in September, limits the scope for the Bank of Canada to raise interest rates. The central bank has kept its policy rate unchanged at 2.25% throughout this year.
In contrast, stronger-than-expected US inflation data released last week keep the Federal Reserve (Fed) on a tightening path as it seeks to return inflation to its 2% target. However, policymakers appear cautious about delivering back-to-back increases after raising the federal funds rate by 25 basis points in September to the 3.75%-4.00% range. The CME FedWatch Tool shows traders pricing in a 15% probability of a rate hike this month and an 89% chance of an increase by December.
The widening interest-rate gap between the United States and Canada could keep the US Dollar favoured over the Canadian Dollar. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.85 after falling to 101.58 last week.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.12% | -0.01% | 0.19% | -0.35% | -0.59% | -0.34% | 0.03% | |
| EUR | -0.12% | -0.13% | 0.07% | -0.46% | -0.71% | -0.49% | -0.09% | |
| GBP | 0.01% | 0.13% | 0.21% | -0.35% | -0.59% | -0.35% | 0.04% | |
| JPY | -0.19% | -0.07% | -0.21% | -0.51% | -0.85% | -0.52% | -0.12% | |
| CAD | 0.35% | 0.46% | 0.35% | 0.51% | -0.22% | -0.01% | 0.39% | |
| AUD | 0.59% | 0.71% | 0.59% | 0.85% | 0.22% | 0.24% | 0.63% | |
| NZD | 0.34% | 0.49% | 0.35% | 0.52% | 0.00% | -0.24% | 0.39% | |
| CHF | -0.03% | 0.09% | -0.04% | 0.12% | -0.39% | -0.63% | -0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Rabobank’s Global Daily notes Oil prices surged as reports of attacks on shipping in the Strait of Hormuz hit sentiment, before easing after President Trump waived Graham Act sanctions and tariffs on Russian energy. The analysts highlight that potential future sanctions on major buyers of Russian crude and gas could significantly disrupt trade and keep Oil volatility elevated.
Hormuz attacks and sanctions waiver
"Oil prices surged following further reports of attacks on shipping in the Strait of Hormuz, with Iran claiming that two tankers carrying up to 4 million barrels of crude were struck by marine mines."
"Following market close on Friday news emerged that President Trump is enacting a waiver of steep Graham Act sanctions and tariffs that were due to come into effect."
"Active Brent crude futures are down by $1.80/bbl at time of writing."
"Depending on how the calculation is performed, the top five buyers of Russian energy products are likely to include China, India, Turkey and the European Union."
"Of course, the imposition of Graham Act sanctions would also directly contradict recent efforts of the administration to reduce fuel prices ahead of the midterm elections."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Societe Generale strategists note USD/INR remains below 95 in Asia after a 1.9% rally last week, supported by Reserve Bank of India (RBI) measures for Oil importers and speculation curbs. They highlight reported US Dollar (USD) selling by state-run banks and warns RBI’s direct supply to Oil companies could be constrained. FX reserves have dropped sharply and Indian Rupee (INR) shorts in the Reuters poll are at multi‑month highs.
RBI tools, reserves and positioning
"The INR stays below 95 in Asia, after rallying nearly 1.9% last week thanks to the RBI measures (window for oil importers and curbs on speculation)."
"State-run banks were reportedly selling small amounts of dollar to nudge the pair below 95.0."
"Traders believe the RBI may turn more conscious of intervention size going forward as direct supply to oil companies could exhaust about $400m per day."
"FX reserves have come down by around $60bn in the last five weeks from the peak of $785.7bn."
"In the latest Asia bi-weekly Reuters FX poll, INR short positions rose to the highest level since early June."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
Brown Brothers Harriman’s Elias Haddad expects UK September Consumer Price Index (CPI) and August labour data to be pivotal for Bank of England (BoE) pricing, with markets already discounting a 25 bps hike to 4.00% in November and 100 bps over twelve months. Haddad argues the BoE may not need to tighten as much, citing spare capacity, near-neutral rates, and likely fiscal tightening, which weighs on the British Pound (GBP).
UK inflation and wages in focus
"UK September CPI (Wednesday). Headline CPI is expected at 3.4% y/y (BoE projection: 3.0%) vs. 3.1% in August, core CPI is seen at 2.8% y/y vs. 2.6% in August, and services CPI is projected at 3.6% (BoE projection: 3.6%) vs. 3.4% in August."
"Ahead of that, the UK August labor market data is due Tuesday. The policy-relevant private sector regular pay growth is seen at 3.0% y/y vs. 2.9% in July, matching the BoE’s Q3 forecast and supporting Governor Andrew Bailey’s comments last week that there is little evidence yet of inflation becoming embedded in wage-setting."
"The swaps curve price in 90% odds of a 25bps hike to 4.00% on November 5 and 100bps of tightening in the next twelve months. In our view, the BoE may not need to tighten as much as markets anticipate, which is a drag on GBP. The UK economy is operating below capacity, the policy rate is near the top of the BoE’s estimated 2% to 4% neutral range, and fiscal policy will likely turn more restrictive following the October 28 UK budget."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)
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