FX OVERVIEW
Escalating Middle East tensions and the attack on Saudi oil infrastructure drove a risk-off turn, lifting oil and supporting safe-haven demand for the USD, JPY and CHF. Higher oil also gave the CAD a near-term tailwind, while Europe’s fiscal stress weighed on the euro and sticky UK inflation supported sterling.
MAJOR PAIRS
AUDUSD — Risk aversion and a firmer dollar outweighed the RBA’s hawkish signal, leaving the pair down 0.4% and testing 0.7000. Bias remains lower below that level; a break of 0.6894 would expose further downside, while a close above 0.7000 could stabilize the pair.
USDCHF — Safe-haven demand favored the franc, taking the pair toward 0.8205 and briefly below the 50-day SMA at 0.8193. The bias is bearish below 0.8250; a sustained break under 0.8200 would put 0.8134–0.8100 in view.
EURUSD — French fiscal stress remains the dominant euro-specific drag: 10-year OAT yields moved above 5% and the French-German spread neared 175bp, while dollar demand limited the pair’s recovery. Bias is bearish; 1.1000 is the key downside reference, with resistance at 1.1270–1.1305.
GBPUSD — UK inflation repricing supported sterling: September CPI rose to 3.5%, core inflation held at 2.8%, and producer prices accelerated. The pair’s bias is higher near 1.3410; a break above 1.3408 would strengthen the case for a move toward 1.3562.
USDCAD — The Saudi oil-field attack lifted crude and supported the CAD, extending the pair’s six-day decline despite U.S.-Canada growth and yield differentials favoring the dollar. Near-term bias remains lower; support is cited at 1.3732, then 1.3481, with resistance at 1.4072–1.4113.
USDJPY — A more hawkish BoJ signal, falling U.S. yields and resilient Japanese exports pushed the pair to a one-week low near 157.70. Bias remains lower toward 157.00 and 155.52; a BoJ move toward rate hikes would reinforce yen strength.
USDCNY — The PBOC set its central rate at 6.7195, slightly above the prior fixing and well above the Reuters consensus of 6.6756. The fixing signals resistance to excessive yuan depreciation, but its small size and China’s underlying pressures leave the near-term bias cautious rather than decisively lower.
USDKRW — The won strengthened toward 1,323 as the Bank of Korea held at 3.0% and early-October exports surged 105.4% y/y, prompting exporter dollar sales. Bias favors further downside in USDKRW while export momentum and the BoK’s restrictive stance hold.
USDSGD — UOB sees a short-term bearish bias, with the pair near the lower end of its 1.2765–1.2785 range. A break below 1.2765 would open 1.2750; a move above 1.2805, particularly 1.2871, would invalidate that view.
USDINR — The rupee weakened to 94.91 despite RBI intervention as the oil shock and regional instability eroded support. Bias remains higher in USDINR while energy costs and external pressure persist.
USDIDR — The rupiah remained under pressure near 18,070, with external imbalances, food-inflation risks and the MSCI-related political dispute weighing on sentiment. The bias is higher in USDIDR absent near-term relief on those pressures.
USDMXN — The peso weakened past 18.5 amid concerns over Banxico’s dovish stance and stalled USMCA negotiations. Bias favors a higher USD/MXN while trade-policy uncertainty and inflation risk remain unresolved.
CENTRAL BANK WATCH
- BoJ: Governor Ueda and Deputy Governor Himino said inflation is approaching the 2% target, keeping a rate hike by December in play and supporting the yen.
- BoK: Held its policy rate at 3.0% and maintained a restrictive stance until inflation reaches target.
- RBA: Andrew Hauser warned that the inflation outlook is worse than expected, lifting the reported probability of a November hike to 45%. The signal has not yet offset the AUD’s risk-sensitive weakness.
- BoE: The inflation surprise has pushed markets toward a more hawkish path and delayed-cut expectations. Governor Bailey’s upcoming remarks are the next policy signal.
- ECB: A hold at the October meeting is expected, but elevated French yields are tightening financial conditions independently of policy rates. Fiscal stress could constrain the ECB’s options even with inflation above target.
- PBOC: The stronger-than-consensus central-rate setting points to a preference for orderly yuan trading, though it was only a marginal adjustment.
MACRO DRIVERS
- Geopolitics drove the risk premium: Middle East escalation lifted oil and triggered safe-haven demand, weighing on risk-sensitive currencies while supporting the USD, JPY and CHF.
- Europe’s sovereign-risk premium widened: French yields above 5% and a near-175bp French-German spread intensified fragmentation concerns and pressured the euro.
- Monetary-policy divergence remained important: BoJ hawkishness and UK inflation repricing supported the yen and pound, while markets weighed the Fed’s relative